SME policy: Why we are lagging behind China?

Add caption With the country's economic growth slowing down, China is doubling down its policies to support its small business sector. Last year, a preferential income tax policy was introduced to provide a corporate income tax rebate to low-income SMEs. Similarly, another measure exempted such SMEs from value-added or business tax. Recently, it was announced that more funds would be released to banks and they, in turn, must lend on to SMEs meeting certain criteria. These kind of measures clearly show the firm commitment and genuine political will of the Chinese leaders to promote their SME sector. Like India, China has no such investment limit in case of SMEs. The definition is a bit complex instead. The criteria of classifying SMEs are formulated by the government agency in charge of enterprises under the State Council of China, according to a number of factors including, employees, annual revenue and total assets. However, the main emphasis is placed on earning of revenue by a firm. Indian SMEs have long been demanding for a revenue-based classification and it is surprising that our policy makers are always turning a blind eye to this demand. Another area where China stands out is in its special strategic emphasis on preparing, monitoring and implementing SME related policies. The State Council Leadership Group, headed by the Vice Premier of the State Council, with members from several departments, including ministries of agriculture, IT, science and technology, human resource, and China Development Bank and People's Bank of China, plays a key role in this field. Compared to this, I think we have a lot of scope of improvement in this respect. Particularly, we clearly lack a coordinating effort in this direction. Efficient bureaucracy is yet another asset of China and it has made the life of small business owners in the country extremely easy. Officials at all levels are disciplined and punctual, and the government maintains a close relation with the bureaucracy in policy implementation, and I think these are the two key factors that our government should stress on if it wants to increase the ease of doing business in India. In addition, China's high quality infrastructure like good roads, uninterrupted power, water supply, etc. has helped a lot its SME sector to prosper, and, needless to say, Indian SMEs are far away from such level of facilities. I don't think it will be fair to compare India and China in every respect, but as per as improving the business ecosystem for SMEs is concerned, I think we certainly have a lot to learn from our neighbor. I invite your opinions. Please share your insights with our readers.

___________________________________________________________________________
 Please comment on my blog to my Email ID: rajindarvij@gmail.com "Democracy means- A government of the people, by the vote of the people, by the money of the people, and for the welfare of the people". Thanks