 "India has made manufacturing more complicated, says CEA Nageswaran")
India’s manufacturing sector has become overly complicated for small and medium enterprises (SMEs) due to burdensome regulations, particularly those related to land use, according to Chief Economic Advisor (CEA) V Anantha Nageswaran.
Speaking at an event organised by the India Exim Bank, Nageswaran stated that this issue would be highlighted in the Economic Survey set to be released on January 31. “Land is subject to so many regulations that enterprises are not able to use it fully. Any law-abiding SME will not be able to utilise even 20-30 per cent of the land on the ground floor. We have made manufacturing more complicated,” he said.
Nageswaran explained that restrictive parking norms and other regulations force manufacturing units to build on stilts, limiting optimal land use. “India has the lowest per capita land availability among the G20 countries, and it is a scarce resource,” he added.
MSME challenges and credit access
The CEA also addressed the challenges faced by micro, small, and medium enterprises (MSMEs), particularly in light of changes introduced through Section 43B of the Finance Act. This provision mandates that payments due to MSMEs are eligible for tax deductions only if the payment is made within 15 days or within the agreed contractual period.
Nageswaran highlighted that while the government introduced this measure to ensure timely payments to MSMEs—given their dependence on working capital—larger firms have been pushing for its rollback.
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He also emphasised the need for banks to base credit decisions on earnings potential rather than relying solely on collateral, which smaller firms often lack. “There is room for greater access to credit if banks focus on earnings-based decisions,” he said.
Agriculture and export growth
Describing agriculture as a “sector of the future,” Nageswaran underscored its geostrategic importance in a world increasingly focused on food security. “Reallocating land to sectors within agriculture that are performing well is crucial,” he noted.
On export growth, Nageswaran said that while policy can act as a facilitator, the private sector must take the lead. “Export growth is a function of external demand. Exports are a consequence of private sector action. Policy should not be an impediment and should aim to make things easier where possible,” he said.