RSS unit Laghu Udyog Bharati to MSME Min: Bringing retailers, traders under MSMED Act distractive, destructive, inappropriate for MSMEs

Ease of Doing Business for MSMEs: Union Minister Nitin Gadkari last week announced that the MSME Ministry has issued an order to include retailers and wholesale traders under the MSME classification to extend the benefits of priority sector lending (PSL) to them.

Since then several MSME associations have sent their representations to the Ministry expressing their concern about the expansion of MSME definition fearing dilution of the sector.

The latest in line is RSS-affiliated industry body Laghu Udyog Bharati. In its press statement, the MSME body observed that the decision is “distractive, destructive, and inappropriate for Micro, Small & Medium Industries.”

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The statement noted that the Small-Scale Industry Ministry was initially formed by the then Vajpayee Government in 1999 to promote manufacturing amongst the small scale industry and said that it is crucial to stick to its original purpose and focus.

It cited access to capital to be the top reason. “With the new provision of inclusion of retail and wholesale traders, the available funds of PSL will get divided and result into contraction of MSMI funding. This will further put MSMI into deep crisis of cash crunch,” said the industry body’s official statement.

“Bankers normally favour high-value lending instead of offering smaller credit to a large volume of enterprises. Hence, they would prefer to meet their targets under priority sector lending from wholesale traders and retailers, especially those who deal with high-value items such as car dealers and distributors etc,” Govind Lele, All India General Secretary, Laghu Udyog Bharati told Financial Express Online.
He added that, “We are not against traders or retailers. No manufacturer can be against the trading community because they are the ones who ultimately help in delivering products to consumers. However, traders should be given benefits relevant for their sector rather than mixing them up with manufacturers.”

The statement added the move will lead to contraction of the manufacturing sector, resulting in closure of several micro and small units which will in turn have a negative impact on job creation. It will also lead to an increase in rise of sectors such as import, repackaging, and assembling sectors which will be contradictory to government’s programmes such as Make in India, Vocal for Local, Atmanirbhar Bharat Abhiyan amongst others. “All these programmes are commendable but in this case, the strategy of the government is contradicting its own policies,” said Lele.