Central packages to help SMEs, says CII

Micro, Small and Medium Enterprises (MSMEs), hit hard by the ongoing global economic downturn, would benefit from the two fiscal stimulus packages announced by the government in December and January, with features like excise duty reduction and incentives across the sectors, according to a survey by the industry body Confederation of Indian Industry (CII).

The reduction in Central Value Added Tax (CENVAT) by 4 per cent followed by interest rate cut of 0.5 per cent for small and 1 per cent for micro enterprises by public sector banks, export support by interest subvention of 2 per cent, reduction in lock in period under Credit Guarantee scheme from 24 to 18 months and additional plan expenditure of Rs 20,000 crore, would have a beneficial impact for the MSMEs, the CII survey found.

The initiatives taken in the first stimulus package like reduction in repo, reverse repo and cash reserve ratio by the Reserve Bank of India (RBI) and extension of the credit guarantee from Rs 50 lakh to Rs 1 crore would contribute towards easing the liquidity for the MSMEs.

Also, steps taken as part of the second stimulus package, which includes restoration of duty entitlement pass book (DEPB) rates prior to November 2008 till 31 Dec 2009, duty drawback benefits for certain products like bicycles, agricultural hand tools, and specified category of yarns with retrospective effect from September 1,2008, would help in easing liquidity for the MSMEs.

"The last few months have witnessed a series of initiatives being announced by the government and the RBI as part of the stimulus package supplemented with announcements by the Indian Banks Association (IBA), for the MSMEs," said Chandrajit Banerjee, director general of CII . The intent is to help the MSMEs with additional liquidity, in the midst of the current economic crisis, he added.