Urging banks to simplify the process of giving loans to small enterprises, Minister for Finance, Labour & Employment, Dr Haseeb Drabu today said entrepreneurs fail not because of bad business model but due to social and domestic compulsions.
The Finance Minister was speaking at the opening ceremony of Mudra Protsahan Abhiyaan here at SKICC. The campaign is going to be held at 50 locations across the country. The ceremony was also attended by Minister of State, PMO, Jitendra Singh, Principal Secretary, Finance, Navin Kumar Choudhary and J&K Bank chairman, Parvaiz Ahmad.
Pointing to a woman in the audience whose infant kid started crying in the middle of the promotional ceremony, the Finance Minister said the state of the woman reflects the state of an aspiring entrepreneur who has to factor in both the financial and domestic compulsions before starting their entrepreneurial ventures.
“Like the difficulties of that woman, the financial institutions need to recognise the difficulties faced by a fledgling entrepreneur. There is passion of entrepreneurship and compulsion of domesticity which financial institutions need to factor in,” Dr Drabu said.
Describing small-scale industries as the backbone of the country’s economy, Dr Drabu said various schemes have been devised since independence to address the issue of financing the micro industry but with little success.
“Mudra will try and restore balance by helping a banker understand where the intervention is required. There are millions of small enterprises in India which contribute 46 percent to manufacturing output and 44 percent to exports, yet they get only eight percent credit while their credit-to-GDP ratio is less than three percent,” he said.
Urging the financial institutions to evolve their credit system in light of new technology, Dr Drabu said the Mudra scheme covers up for their lack of functioning. “The scheme is the indictment of the failure of banking sector because Prime Minister Narendra Modi had to intervene himself to get banks to lend loans at small interest rates through Mudra,” he said.
Dr Drabu said the Mudra scheme doesn’t subsidise or give free loans to aspiring entrepreneurs but it will leverage the current banking infrastructure and technology so that the government is not burdened and enough traction is generated to create viable entrepreneurship.
“Once there is access to credit for an aspiring entrepreneur, next step would be the demand for credit. Mudra will provide access to credit by leveraging positions. The scheme will create securities in the mind of young entrepreneurs which will allow him to take risks that forms the basis of entrepreneurship. If risk mitigation is done, you will find a lot of appetite,” he said.
The Finance Minister said that bringing in subsidies and tax waivers erode the culture of entrepreneurship, “Entrepreneurs must be allowed to bloom in a competitive culture form the word go. J&K is used to a certain culture of exemptions which will not sustain in the long run. The enduring theme of economic policy should be to manage the finances and address the issues of social value system,” he said.
Dr Drabu said the introduction of Goods and Services Tax regime is generating a certain degree of resistance because people were adopted to the old regime of indirect taxation, “People used to do certain way of business but they must adapt to the change in taxation system. As a policy, GST is meant to change national value system,” he said.
Speaking on the occasion, MoS in PMO, Dr Jitendra Singh said the Government of India under the leadership of Prime Minister Narendra Modi is committed to strengthen the small scale industries across the country, “Our government has got the political will and resolve to initiate bold reforms to streamline the economy and we have done so in the form of GST and demonetization,” he said.
The MoS in Prime Minister’s Office said the Central government is committed to change the fortunes of the underprivileged in the country, “Soon after being sworn in, PM Modi stated that his government will work for the welfare of the poorest of the poor. Schemes such as Mudra and Jan Dhan Yojna will go a long way in improving the financial state of the poor in the country,” he said.
Earlier, a short film was screened on the Mudra scheme and how it is going to change the culture of entrepreneurship across the country. The J&K Bank also showcased some success stories of the scheme from Kashmir Valley. On the occasion, sanction letters for loans availed under Mudra for various entrepreneurial ventures were handed out to the aspirants by Dr Drabu and Dr Singh.