Centre Includes Retail And Wholesale Under MSMEs, To Benefit 25 Mn Traders

The Union government on Friday announced fresh guidelines to include wholesale and retail trades as micro, small and medium enterprises (MSMEs) in a move that is expected to benefit as many as 25 million traders battered by the Covid-19 pandemic.

MSME Minister Nitin Gadkari said the decision would make such traders eligible for finance under priority sectors classified by the Reserve Bank of India (RBI).

“The government has received various representations and it has been decided to include retail and wholesale trades as MSMEs, and they are allowed to be registered on the Udyam Registration portal. However, benefits to retail and wholesale trade MSMEs are to be restricted to priority sector lending only,” according to an official release.

This means that apart from getting the priority sector lending tag, these traders will not get any other benefit that small businesses otherwise get from the government.

The Udyam portal provides a single-page registration, consumes less time, and simplifies the process of registering any enterprise under the MSME category.

In the past, wholesale and retail trading activities were classified as MSMEs, but were excluded in 2017 as they did not cater to manufacturing activity. Currently, central schemes such as the capital subsidy scheme and SFURTI (Scheme of Fund for Regeneration of Traditional Industries) are aimed at supporting traditional industries.

Traders’ associations welcomed the move. “The pandemic-affected traders will now be able to restore their businesses by obtaining necessary finances from banks, which had earlier denied the same,” said Praveen Khandelwal, secretary general, Confederation of All India Traders.

A section of small businesses, however, expressed their concerns.

According to Anil Bharadwaj, secretary general of Federation of Indian Micro, Small and Medium Enterprises (FISME), the concern here is once retail and wholesale traders get included in the priority sector lending category under MSMEs, bankers may prefer them to give loans in the place of small manufacturing units, thereby increasing competition for the limited funds.

“Banks will always opt for less risky businesses to give their funds, and retail and wholesale trades are less risky than manufacturing, which can have an impact on the overall sector. Although the order says retail and wholesale trades will be treated as MSMEs only for priority sector lending, manufacturing MSMEs feel that once trading gets registered, they could also get preference in government procurements, etc. These concerns shouldn’t be brushed aside,” Bhardwaj said.

N K Mishra, professor in the Department of Economics at Banaras Hindu University (BHU), said that in the short term, the move would definitely help businesses. “But, the concern is whether it will be broad based or those retail and wholesale traders who already have access to banking finance will corner all the benefits,” Mishra said.

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor