New Delhi, Dec 27 (IANS) Micro, small and medium enterprises (MSMEs) will emerge as the hub of economic activity in India if the government earmarks 10 percent of its purchases from the sector and relaxes bank rates for it, an industry body has said.
“The government is expected to take a decision soon to make it compulsory to source a minimum of 10 percent of its purchases from the MSMEs sector,” said Associated Chamber of Commerce and Industry of India (Assocham) president Swati Piramal.

“A favourable decision will empower MSMEs to strengthen themselves monetarily,” Piramal said in a statement Sunday.

According to Assocham, the MSME segments such as auto and ancillary industries, pharma, finance and IT and IT-enabled services stood to gain the most if the government decision is favourable.

The chamber noted that there are about 13 million SMEs in the country, manufacturing about 8,000 products and accounting for 60 percent of India’s exports.

“Some of them are so big that they produce up to 80 percent of the total volume of that particular product produced in India,” Assocham said.

It said the MSME sector had significantly contributed to the current growth momentum, adding that this was because it started picking up and grew around 38 percent in the past six months.

“This momentum will continue and the MSME segment will gradually come out of regulations, paving ways for banks and financial institutions to broadbase and widen their credit offtake to MSMEs at relaxed rates of interests,” it said.

“This will further activate MSMEs to acquire a focused attention from policy makers to increase its contribution to manufacturing as well as exports.”

The chamber also maintained that the MSME sector would benefit from the new goods and service tax (GST) regime expected to be rolled out late next year.