Centre includes retail and wholesale under MSMEs, to benefit 25 mn traders

Source: The Business Standard and PIB

Relevance: MSME sector and its growth are important for the Indian Economy.

What is the news?

Minister of MSME and Road Transport and Highways announced revised guidelines for MSMEs with the inclusion of Retail and Wholesale trades as MSMEs. The Ministry also confirmed that the revised guidelines will benefit 2.5 Crore Retail and Wholesale Traders.

Benefits of the move:

• Retail and wholesale trade was left out of the ambit of MSME. So they are not able to get loans under priority sector lending. With the recent inclusion, they are now able to get the benefit of priority sector lending under RBI guidelines.
• With the revised guidelines, the retail and wholesale trades will now be allowed to register on Udyam Registration Portal.
  • The Udyam portal provides a single-page registration, consumes less time, and simplifies the process of registering any enterprise under the MSME category.

However, benefits to retail and wholesale trade MSMEs are to be restricted to priority sector lending only. 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. For instance,

About the wholesale and retail trading:

• In the past, wholesale and retail trading activities were classified as MSMEs. But they were excluded in 2017 as they did not cater to manufacturing activity.

Concerns with the move:

• 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. Further, some experts also suggest that retail and wholesale traders who already have access to banking finance will corner all the benefits. 
• Manufacturing MSMEs feel that once trading gets registered in the Udyam portal, in the future they could also get preference in government procurements, etc.