Tisa feb 2020 final

PUBLISHED SINCE 1988
In This Issue
Cover Story
Budget 2020-2021: The Larger picture
DEFEXPO 2020 - Lucknow
TAX KORNER - Fresh Compliance
Japanese Low Carbon
Technologies
Budget
PUBLISHED SINCE 1988
01TISA
2020FEB 01TISA
VOLUME NO X ISSUE NO.II FEBRUARY 2020

Who is eating my cheese?
It is absolutely amazing that after all these decades of industrial growth and economic
understanding, the media and many among us, still seem to believe in the role of the
“mai-baapsarkar”,asthemaindriverofeconomicgrowthandemploymentgeneration.
This is despite the fact that the Government is the single-biggest drain of national
resources, not only in the humongous amounts of money eaten away in outright
corruption but also through the appropriation of national resources. Not merely this, in
order for the corruption machine to work, in this country at least, the spending results in
substandardpublicworksandinfrastructure.
Add to this, the drain due to the colossally inefficient working of public sector banks wit public sector companies in
civilanddefencesectorsgobblingawaynationalresources.
TheBudgetassolution
It is, therefore, a good sign that the Narendra Modi Government has not only visibly cut down on big-ticket
corruption but seems to be in right earnest about disposing off public sector units which are bleeding the Indian
public, like Air India and diluting its share-holding in the Life
InsuranceCorporation.
However, it has not mustered the courage to privatise public sector
Banks and has contented itself by merging thoroughly inefficient
Banks with the not-so-inefficient, Those who accuse the Government
of selling the family jewels are barking up the wrong tree. It is more
likescrapsalesandwilltakeahugeburdenoffthebacksofcitizens.
No one has stated this more clearly than PM Modi himself.
“Government has no business to be in business, PM must accept
th
reality:NarendraModi”readtheE.Theadlineof7 June,2012.
VisibleGreenShoots
Nirmala Sitharaman's Budget this year must not be seen in isolation. It is an extension of all the steps this
Government has been taking after the Budget of 2019-20, when the Government first seemed to have been alerted
to a real crisis of economic confidence, with a plummeting GDP and rising unemployment. The cover story on the
Budgetdealswithwhatitportendsfortheeconomyandtheunmistakabledirectionliberalisationistaking.
In the meantime, the green shoots economists are fond of talking about are already visible. Activity in India's
manufacturing sector shot up to a near eight year high in January, the first month of the new decade. The IHS Mark it
India Manufacturing PMI rose from 52.7 in December to 55.3 in January. Meanwhile, there is a definite surge in the
January 2020 GST collection with gross GST revenue collection of ₹ 1,10,828 crores. The total number of GSTR 3B
ReturnsfiledforthemonthofDecemberupto31stJanuary,2020is83lakh(prov).
Let's keep our fingers crossed and our shoulders to the wheel to make this a great decade for India.
Dr. M R Khambete
President’s Message
03TISA
2020FEB

DEFEXPO 2020
16
19
04 TISA
2020FEB
TSSIA NEWS
Japanese Low Carbon
Technologies
(compressed Air System)
COSIA NEWS
Seminar on Energy
Conservation in
MSME Industries
COVER STORY
Budget 2020-2021
The Larger picture
33
TAX KORNER
Extra compliance
Burden on the
Assessees for
TDS And TCS.
CA P.P. Jayaraman

45
49
50
MANAGEMENT
KALEIDOSCOPE
05TISA
2020FEB
Raj Aphale
38
ECONOMY
Bank-Centric Monetary
Policy: Missing The Bigger
NBF picture
Mr. B. L. Chandak VOLUME NO X ISSUE NO.II FEB 2020
Errata : In Last Issue Please Read Volume No X Issue No.I
instead of volume IX Issue No.XI Dec 2019

06 TISA
2020FEB
TSSIA Member, Mahape, Navi
Mumbai based IdeaForge
Technology Private Limited,
India's largest manufacturer of
Unmanned Aerial Vehicles
(UAVs) and Larsen andToubro
Ltd. (L&T),India's multinational
engineering conglomerate and
the largest private-sector
defence company, have entered
into an MoU to offer drones and
alliedsystemsfordefenceuse.
Both the companies will
combine their strengths to offer
hi-tech, integrated drone
solutions to enhance security
and surveillance. They will
also offer anti-drone solutions
to counter the threat of
malicious or unintended
usageofdrones.
"L&T and IdeaForge... have
entered into an MoU to offer
drones and allied systems for
defence use," the company
said in a filing to the BSE. "The
MoU involves collaboration
on technology, products,
deployment and go-to-market
strategies,"itsaid.
DroneTechnology
The MoU involves collaboration
on technology, products,
deployment and go-to-market
strategies. It will unlock the full
potential of unmanned systems
in security, surveillance and
protectionsolutions.
With the ever-increasing
adoption of drone technology,
the L&T - IdeaForge partnership
will redefine the landscape of
unmannedsystems.
"We are teaming as partners of
choice to provide indigenously
developed unmanned systems
forIndianandglobalmarkets.
We are confident that this
alliance will create a successful
'Make in India' collaboration
b e t w e e n a d i v e r s i f i e d
engineering conglomerate and
a young, technology-driven
company for across-the-range
offerings," J D Patil, whole-time
director and senior executive
vice-president (defence and
smart technologies), L&T,
said.
DefExpo grows bigger
andbetter
The main theme of the Expo
is 'India: The Emerging
Defence Manufacturing Hub'
and the focus is on 'digital
transformation'ofDefence.
TSSIA member IdeaForge – Flying High
DEFEXPO 2020

The DefExpo is Asia's biggest
arms show and one of the
largest defence Exhibitions in
the world with more than
925Exhibitors. It was held in the
largest Indian State of Uttar
th
Pradesh between February 5
th
and 9 with the first three days
meant for those in the field and
the last two letting in the
generalpublic.
The Defence Expo 2020 is
Lucknow's first such event, on a
mammoth scale and the stakes
are set high, as the expo will
have over 925 exhibitors
showcasing their top-of-the-line
d e f e n c e a n d m i l i t a r y
equipment. It was inaugurated
by Hon'ble Prime Minister of
India Narendra Modi at
VrindavanYojnainLucknow.
Serious about defence
manufacture
Uttar Pradesh was chosen in
2018 to set up one of the two
Defence Industrial Corridors in
India, along with Tamil Nadu.
The six nodes identified for the
Uttar Pradesh Corridor are in
Kanpur, Lucknow, Aligarh, Agra,
Jhansi and Chitrakoot. Uttar
Pradesh has emphasised its
encouragement of MSMEs
participation in Defence, along
with large defence equipment
manufacturers and Defence
PSU's.
TheDefExpooffers:
● Indian Defence Industry an
opportunity to showcase its
capabilities and promote its
exportpotential.
● It's a great opportunity for
m a j o r f o r e i g n O r i g i n a l
Equipment Manufacturers to
display their latest innovations
andcapabilities.
● It offers to both Indian and
f o r e i g n c o m p a n i e s , a n
opportunity to collaborate and
serve the Indian Defence
Industry to promote the “Make
inIndia”initiative.
● Facilitates Business-to-
Business interaction, as well as,
Government to Government
meetingsandsigningofMOUs.
Thebigboysarethere
The exhibition has 925
exhibitors, out of which 150 are
foreign defence equipment
07TISA
2020FEB
11TH BIENNIAL DEFEXPO
IN LUCKNOW Raghunandan Jagdish
DEFEXPO 2020

manufacturers while 775 are
home-grown.
One of the biggest attractions at
the Defence Expo is the F-21
Fighter Jet brought in by
American aerospace giant,
LockheedMartin.
European aircraft manufacturer,
Airbus, is showcasing its latest
militar y equipment and
technologies right here at the
venue. Airbus' exhibit includes
the models of C295 aircraft- a
tough and reliable aircraft,
AS565 MBe Panther, the H145M
andtheH225Mhelicopters.
Indian Defence Research and
Development Organisation
(DRDO), is showcasing some
500 products from various fields
oftechnology.
SettingoutforDefExpo
There was a lot of good-natured
ribbing about the fact that the
location of the DefExpo is
following whoever is the
DefenceMinister.
It was at Goa when Manohar
Parrikar was the Defence
Minister, shifted to Chennai
when Nirmala Sitharaman took
over and is now at Lucknow
with Rajnath Singh, former Chief
Minister of Uttar Pradesh and
now Defence Minister having
takencharge.
Some idea of the rush to
Lucknow was evident when
three days before DefExpo,
flight tickets touched an
astronomical Rs. 18500 to Rs.
20000 and an almost similar
tariff for hotel rooms at
Lucknow.
With the Prime Minister,
Defence Minister, Chief of
Defence Staff, the Army, Navy
and Air Force Chiefs, the heads
of Defence PSU's there was a
huge buzz even before the show
began.
Let me say the Defence
Exhibition Organisation and the
Uttar Pradesh Government have
done a splendid job of
organisation.
The entire set-up over more than
30 acres, arrangements for
entry, the security arrangements
which were unobtrusive but
efficient, the layout of the
Exhibition, into seven halls plus
inauguration centres and
different convention centres etc.
wastopclass.
Less Hype but more
results
I b e l i e v e c l o s e t o 1 2 4
M e m o r a n d u m s o f
Understanding were signed at
the end of the two days. I myself
could get in, close to 150
business meetings, so from a
r e t u r n o n i n v e s t m e n t
perspective I had not only
nothing to complain, but
everythingtofeelhappyabout.
Unlike previous Exhibitions I
could not this time spot a single
empty stall. All stalls were not
only occupied; there was a
steadyhumofactivity.
Transformation in Defence was
the theme and that India was
opening itself up. The idea was
to attract the best from the
world and see what India could
buy and secondly to convince
foreign manufacturers to come
and make in India for export to
theworld.
Defence technology is
rapidlychanging
India is wanting to change and
upgrade everything from
outdated fighter jets to
08 TISA
2020FEB
DEFEXPO 2020

09TISA
2020FEB
submarines. The U.S. and China
have already incorporated
technologies like artificial
intelligence and augmented
reality in their militar y
capabilities.
It is inevitable that when the
PLA is downsizing its Army and
upscaling technology, India has
no option but to go down the
s a m e r o a d . F o r e i g n
manufacturers of sophisticated
defence equipment can smell a
goodopportunityhere.
D o m e s t i c a n d f o r e i g n
companies at the 11th biennial
Defence Expo in Lucknow, Uttar
Pradesh see the adoption of AI,
3D printing, advanced materials
like titanium aluminide,
augmented reality, cloud and
mobile analytics in defence
increasing.
Bloomberg Quint (7-2-2020)
quotes the Prime Minister
Narendra Modi, speaking at the
inauguration of the expo, as
saying that his Government
aims to add at least 25 products
based on AI in the next five
years.The Defence Ministry has
earmarked an initial amount
ofRs.100crores.
“We are global leaders in terms
of information technology and
IT-enabled services,” says JD
Patil, whole-time director, and
senior executive vice-president,
defence,atLarsen&ToubroLtd.
“This is an initiative that will
capturethatalongwithwhatwe
do otherwise and we see this as
a great opportunity for the
industry.”
The global market for artificial
intelligence in the military is
expected to grow threefold
between 2016 to 2025 to
$18.82 billion, according to an
EYreport.
The World appears
impressed
It was not only the organisation
of the Exhibition which was
i m p r e s s i v e . I n
previous Exhibitions
there was a kind of
top-down approach
in which the Defence
P u b l i c S e c t o r
Companies ruled the
roost.
Next in the pecking
order came the large
defence corporates. But this
time there was a perceptive
difference with MSMEs being
treated with circumspection and
respect.
Both the attitudinal change and
the quality of organisation was
also apparently having an effect
on the foreign companies who
wererepresented.
Quite a few of the foreign
company representatives I
spoke to were definitely
impressed saying if this was the
trend, they would continue to
participateinfuture.
It augurs well for our defence
exports that the Defence
Ministers of 53 nations turned
up for the Exhibition, a number
ofthemfromAfricanNations.
The security arrangements were
superb and unobtrusive.
Nobody was waving any guns
around nor were there any
restrictions on the use of
m o b i l e s o r o n t a k i n g
photographs, as happened in
oneoftheearlierexhibitions.
The Defence Research and
Development Organisation
(DRDO) had a huge pavilion
showcasing the best of what
DEFEXPO 2020

10 TISA
2020FEB
they do; quite a few of them
showcased for the first time in
public things like the Anti-
satelliteweapons(ASAT)which
are space weapons designed to
incapacitate or destroy satellites
for strategic military purposes,
a s w e l l a s , U n m a n n e d
AutonomousVehicles(UAVs).
The Army, Air Force and the
Navy put up a show where they
showcased w h a t i s t h e
indigenisation
they are looking
for.
The In-charge of
the Government
D e p a r t m e n t
which deals with
standardisation
took pains to
explain what the
Forceswanted.
The Public Sector
Units were also
pretty open this
time and spoke
to the MSMEs
w i t h a l o t o f r e s p e c t
showcasing the stuff they could
buy from them as part of the
supplychain.
A l l o f t h i s w a s h u g e l y
encouraging compared to the
past.
The feeling I get is that everyone
is beginning to understand that
there is a regime change and a
huge technology wave coming.
That this is about as far as the
old-schoolmentalitywilltakeit.
There are consequent changes.
Along with the 60 per cent offset
deals, there are also offset deals
of 20 or 30 percent for
collaborationwithMSMEs.
In the end, the take aways
for me were:
● The Government really
seems responsive and
serious of “Make in India -
make for the World”
● The Public Sector Units
truly seem to be opening
up and want to tie up with
MSMEs
● Foreign Companies are
a l s o q u i t e o p e n t o
collaborating with Indian
companies including us
MSMEs
● The Defence Exhibition
Organization (DEO) is
doing a great job
[Raghunandan Jagdish is the
Managing Director of Nandan GSE
Pvt Ltd, Navi Mumbai and is a
COSIAmember.
They manufacturer equipment for
Aviation, Defence, Material
Handling and Proudly Make in India
andDeliverworldwide.
Y o u c a n v i s i t t h e m a t
www.nandan.co.in]
DEFEXPO 2020

An awareness cum Training
Program on Japanese Low
C a r b o n T e c h n o l o g i e s
(Compressed Air System) was
th
held on Saturday, 25 January,
in the MIDC Industrial Area at
Dombivli,nearMumbai.
It was organized by The Energy
and Resources Institute (TERI) &
I n s t i t u t e f o r G l o b a l
Environmental Strategies (IGES)
in association with the Thane
S m a l l S c a l e I n d u s t r i e s
Association (TSSIA), Kalyan
Ambernath Manufacturers
Association (KAMA), Addl.
Ambernath Manufacturers
Association (AAMA) and the
Chamber of Small Industries
Association(COSIA)
Objectives:
 To generate awareness about
energy efficient technologies
from Japan viz. compressed air
systems for the industrial sector,
SMEsandotherconsumers.
 To explore possibilities of
strengthening Indo-Japan
co-operationthroughJITMAP
Introduction
The session started with an
introduction by Pawan Kumar
Tiwari, Fellow, Industrial Energy
Efficiency & Sustainable
Technology of TERI in which he
invited Industry Associations to
link up as Dialogue Partners so
a s t o b e t t e r s e r v e t h e
technological and related
financial issues of their
members.
TechnicalSession-1
The main presentation on Low
JAPANESE LOW CARBON
TECHNOLOGIES
(COMPRESSED AIR SYSTEM)
TSSIA NEWS
11TISA
2020FEB

Carbon Technologies with
reference to Compressed Air
Systems was given by Mr.
Tsukasa Saito, Fellow, Kansai
Research Centre of the Institute
of Global Environmental
Strategies. He was assisted by
Ms. Mika Tachibana, Researcher,
Disaster Reduction and Human
RenovationInstitution,Kobe.
His talk embraced every aspect
of compressed air system. How
to monitor it, what pressure to
maintain, what should be the
size of the line etc.
reflecting Saito San's
lifelong experience
a n d i n t i m a t e
knowledge of the
field.
He identified himself
as essentially a
C o m p r e s s o r
Engineer though his
suggestions for
i m p r o v e m e n t s
wouldrangeoverthe
w h o l e s y s t e m ,
i n c l u d i n g
TransformersandPumps.
He was also clear that Japanese
Technology was not to be
directly transplanted but to be
suitably modified and applied to
theIndiancontext.
Ain a broader context, he spoke
about more than 45 Industries
he had visited and that he was
still getting used to Indian
culture, its approach to problems
andtheirsolution.
There was awareness of the
need to conserve energy at the
upper levels of management, he
said, but very little of it seems to
have percolated at the level of
those actually handling the
equipment.
He spoke of the need for what in
Japan is called “Small Group
Activities” which is a bottom-up
approach to problem solving in
teams, by structurally searching
for the root causes and
eliminatingthem.
TechnicalSession-2
With the assurance of power
'availability' in India, the focus
now is shifting to the power
quality. Reliability of power is
extremely critical, especially in
modern power-electronics
driven industrial and commercial
businessenvironment.
Reliability is a function of Power
quality which practically is the
absence of any power events
that affect functioning, life and
efficiency of electrical network
and its equipment. Good 'Power
Quality' in a network is the
electric power that drives an
electrical load and the load's
ability to function properly. The
performance of electrical and
electronic devices is directly
affected by the power quality
levelinafacility...
And who better to do that than
Rajen Mehta of Efficienergi
Consulting Pvt. Ltd. Rajen is
regarded as one of India's
foremost experts on Power
Quality and related subjects.
After completing his
masters from the US,
Rajen co-founded a
specialist product
company and led the
development of an
array of indigenous
solutions to improve
power quality in
electricalnetworks.
Poor Power Quality
affects the facility and
its functioning in
more ways than one
would usually think.
Nuissance Trippings, component
failures, hardware reboots,
software 'glitches ', Transformer
overheating and losses,
Penalties due to Harmonics,
reduced equipment life span;
Flicker & Visual irritation …and
many such events are a result of
poorPowerQuality.
The losses range from penalties
to significant indirect effects
such as faster ageing of
equipment like Motors, failure of
Capacitors, PCBs or other
sensitive electronics, loss of
12 TISA
2020FEB
TSSIA NEWS

production time and quality
i s s u e s i n a u t o m a t e d
manufacturingandmanymore.
The indirect economic losses
due to poor PQ are hardly
accounted.
Another clear takeaway from
the short session was that the
problems of poor power quality
could not be laid at the
doorsteps of the power
companiesalone.
Q&ASession
There was a intriguing Q & A
session, which given the fact,
that both speakers had spoken
on Technical issues was pointed
andclear.
T s u k a s a S a i t o s p e n t
considerable time carefully
understanding specific issues
through the interpreter and
responding to the satisfaction of
theentrepreneurs.
We round of this report to give
o u r r e a d e r s a b r i e f
understanding of what JITMAP
is all about. There are literally
thousands of industries who
could benefit from what
JITMAPhastooffer.
JITMAP
India's headline Paris pledge
was to reduce the emission
intensity of its gross domestic
product [Green House Gas
(GHG) emissions per unit GDP]
by 33-35 per cent over 2005
levels by 2030. Our industrial
sector consumes 58% of the
totalenergyconsumption.
Adoption of Low Carbon
Te c h n o l o g i e s ( L C T ) i n
theindustrial sector can hence
contribute significantly to
accelerate India's efforts to
reach targeted reduction of GHG
emissions.
Japanese Companies are
globally renowned for their LCT
products and hence it is a no-
brainer that technology transfer
between Japan and India will be
mutuallybeneficial.
JITMAP is a bilateral, multi
stakeholders' platform to
facilitate dissemination
information and supports LCT
technology transfer from
Japanese to Indian companies
throughmatchmaking of related
organisations
The Need for a
technology transfer
platform
Despite the potential for transfer
of LCT technologies it remains
largelybecause:
 O f t h e I n f o r m a t i o n /
Knowledgegap
 Lack of access to top decision
makers
Higherupfrontcost
 Maintenance/after sales
services
TechnologyProviders
IGES-TERI have worked on the
f o l l o w i n g t e c h n o l o g i e s
provided by leading Japanese
Companies
13TISA
2020FEB
TSSIA NEWS

Matchmaking
The Institutute for Global
Environmental Strategies
(IGES), Japan and The Energy
and Resources Institute (TERI),
India have been working
together to promote Japanese
LCTs in India through business
matchmakingby:
 Arranging business meetings
withstakeholders
 Facilitating on-site feasibility
studies
Implementingpilotprojects
 On-site and in-house capacity
building
 Outreach & dissemination
events (Workshops, seminars,
forums)
Online Information / Knowledge
sharing Comprehensive
information on available
technologies, financing options,
policies in India and Japan and
database of 40 feasibility
studies across multiple sectors
demonstrating energy savings
by LCT implementation is
availableonhttp://jitmap.org
S H R E E E N T E R P R I S E SS H R E E E N T E R P R I S E S
R E A L E S T A T E
C O N S U L T A N T
Industrial,
Commercial
& Land
We deal in
Sheds,Plots
*
*
*
*
Contact:
Agriculture Lands and Plots
Vishwanath P Bhoir,
9321121114,7798280508
Email:
vishwanath.p.bhoir@gmail.com
We also deal in Residential &
14 TISA
2020FEB
TSSIA NEWS

The importance of energy
conservation
Despite the often-erratic supply
and the high cost of power in
many parts of the country,
particularly Maharashtra, many
MSMEs show a disconcerting
lack of awareness on the need to
conserve energy use, both from
t h e p o i n t o f e c o l o g i c a l
awareness and even from the
more selfish view-point of cost-
cutting.
COSIA as an apex Small Industry
Association is keenly aware on
bothcounts.
Hence the awareness and
s e n s i t i z a t i o n p r o g r a m
" A d v a n t a g e s o f E n e r g y
C o n s e r v a t i o n i n M S M E
Industries ", held on 10-01-2020
in Nagpur, which was organized
by the Chamber of Small
Industry Associations(COSIA-
Vidarbha Chapter), is one in a
series of such programs being
organized by COSIA in various
industrialareas.
COSIA-Vidarbhaonaroll
It was inaugurated by Ninad
Jaywant, Honorary Secretary
COSIA, who had specially come
down from Thane, along with
Sudarshan Shende, Director,
Vithoba Group who was the
GuestofHonour.
Chief Guest Ninad Jaywant
lauded the activities of the
Vidarbha Chapter, which has
created an annual calendar of
v e r y u s e f u l e v e n t s f o r
entrepreneurs in Nagpur and the
largerVidarbhaarea.
It has grown and become a vital
catalytic presence for industries
of this region, in a short span of
just a little more than a year, he
said.
He congratulated Chairman
M a y a n k S h u k l a f o r h i s
unobtrusive but focused efforts
which have led to this growth of
COSIA'sVidarbhaChapter.
Sudarshan Shende, the young
Director of the Vithoba Group
said such awareness programs
are very much needed for the
progressofMSMEIndustries.
COSIA Seminar on Energy
Conservation in MSME Industries
16 TISA
2020FEB
COSIA NEWS

The entrepreneur's
k n o w l e d g e a n d
sensitization are the keys
to technical upgradation
andcostcutting.
It is equally important to
be socially responsible in
terms of statutor y
compliances which are
aimed at ecological
conservation,hesaid.
A n e x h a u s t i v e
p r o g r a m i n 4
sessions
Welcoming the guests and
participants, Chairman Mayank
Shukla, appealed to the
participants to “energise”
themselves to get the maximum
outoftheprogram!
The exhaustive program was
dividedintoseveralsessions.
The first session on electrical
conservation in Electrical
systems was addressed by Arun
Radke, an eminent BEE certified
Energy Auditor and a prominent
formerindustrialist.
He spoke on optimum utilization
of power in transformers,
m o t o r s , p o w e r q u a l i t y
improvement and proper
lightingsystem.
The second session on Energy
Conservation in Mechanical
Systems was conducted by
Ar vind Bhalerao, a BEE
accredited Energy Auditor, who
gave some useful tips on
efficient use of power in
mechanical systems like
compressors, furnaces, material
handling systems, power
transmissions and use of proper
insulationinheattransfer.
The third session on Solar Power
generation systems was covered
by Sudhir Budhe of Business
Algorithms. He explained
in detail about Solar PV
s y s t e m s f o r p o w e r
generation and Industrial
solarheatingsystem.
The last session detailed
various Government
schemes to promote
energy Conservation and
e n c o u r a g e n o n -
conventional energy
generation by way of
offering Incentives and
subsidies was presented
by a young talented BEE
certified Energy Auditor
Pranav Ambaselkar, who also
moderated the Panel Discussion
and questions and answer
session.
The program was attended by
more than 70 participants.
Prominent among those present
were Chander Khosla, Amar
Vazalwar, Ms. Priti Rai, Ashutosh
Das, Shri. Punekar and Subroto
Guha.
The inaugural session of the
program was compered by CA
Julfesh Shah, whose couplets
which were apt for the occasion
was appreciated by the
gathering. He also proposed a
formalvoteofthanks.
17TISA
2020FEB.
COSIA NEWS

EDII's- Services for
MSMEs
The Vidarbha Chapter of the
Chamber of Small Industry
Associations (COSIA) held an
interactive meeting of various
Industr y Associations of
Vidarbha with Entrepreneurs
Development Institute of India
t h
(EDII) Ahmedabad on 10
January,2020.
The meeting was convened by
the energetic Chairman of the
Vidarbha Chapter of COSIA,
Mayank Shukla, along with Core
Committee Member CA Julfesh
Shah.
Addressing the representatives
of local associations, Ms. Kruti
Thakkar,In-charge,Maharashtra
Region of EDII, said that EDII is
an organization working for the
development of industries in the
MSME sector, through the
Corporate Social Responsibility
(CSR) funds of the corporate
sector.
They carry out activities, such as,
promoting Health Check-Up
camps, especially for industry
labour, sensitization seminars /
workshops for industry related
awareness and labour safety
relatedprogrammes.
MSMEs require hand
holding -particularly in
crisissituations
Speaking on the occasion,
Chairman Mayank Shukla said
that the Indian MSME landscape
is vast, with varying contours. In
order to ensure its progress,
there has to be coherent
strategies and a conducive
environment for growth and
expansion.
EDII has taken the onus of such
developmental tasks by directly
getting involved in designing
and executing projects and
expanding their outreach by
replicating efforts through a
series of institutions, across
differentStates,hesaid.
CA Shah appreciated the EDII for
ensuring the sustenance of
efforts of these organizations,
by instituting cadres of resource
persons. He further said that
MSMEs have added a distinct
pace to economic growth,
generating employment,
augmenting cross border trade
andnurturingentrepreneurship.
“India has taken some major
steps to strengthen this sector.
However, these businesses
generally operate on small
budgets and face the threat of
immediate collapse when crisis
strikes. At such times, they find it
difficult to resort to capital-
intensive measures to bail
themselves out of crises and
thus very often nosedive
sharply.
To avoid such eventualities, it is
important to make available
professional services to guide
them through their journey and
ensure that they enhance their
c o m p e t i t i v e n e s s a n d
productivity”,CAShahsaid.
COSIA urges EDII to
promote MSMEs in
Vidarbha
Ninad Jaywant, Hon. Gen.
Secretary of COSIA, Chairman
Mayank Shukla and CA Shah
presented an appeal letter to
EDII to promote and streamline
various initiatives for the
development of MSMEs in
VidarbhaRegion.
Representatives of various
MSMEs Associations like MIDC
Ind. Association, Laghu Udyog
Bharti, SARATHI, Vidarbha
Plastic Ind.Association,
Electronic Zone Association, VIA
Lady Entrepreneurs Wing,
Indian Institute of Foundry
(Vidarbha), etc. attended the
meeting.
COSIA -INTERACTION
with EDII Meeting of
Industry Associations
of Vidarbha
with EDII
18 TISA
2020FEB
COSIA NEWS

COVER STORY
The Economic survey 2019-20
was tabled by the Union
Minister for Finance & Corporate
A f f a i r s , S m t . N i r m a l a
Sitharaman in the Parliament. Its
aim apparently is to attempt to
craft a framework of policies
that can foster wealth creation
inIndia,whichinturn,wouldset
the economy firmly on an
upward growth trajectory. The
themeis:
 Enabling markets
 Promoting 'pro-
business' policies and
 Strengthening 'trust' in
the economy.
The Survey emphasizes 'Ethical
Wealth Creation' as the root of
economic activity, and key to
India becoming a $ 5 trillion
economy by 2025. India was a
dominant economic power
globally for more than three-
fourths of known economic
history, through intent and
design. The ideas of wealth
creation are rooted in India's old
andrichtradition.
It stresses the importance of
open markets as a means to
wealth creation and boosting
economic activity through
increased investment. India's
pasteconomicdominanceisdue
to the 'Invisible Hand of the
Market' supported by the hand
of 'Trust'. It draws a parallel to
more modern times when
economic liberalisation
commencing in the 90's was
unleashed by allowing a free
hand to market forces by
displaying a Trust which had
been completely absent in the
socialisteconomytillthen.
The Survey identifies several
levers for furthering Wealth
Creation,whichare:
 Cultivate Entrepreneurship at
the grassroots, such as, new
firmcreationinIndia'sdistricts;
 Promote 'pro-business' policies
that unleash the power of
Economic
Survey
2019-20
The Economic survey 2019-20 was tabled
by the Union Minister for Finance & Corporate
Affairs,Smt.Nirmala Sitharaman in the
Parliament.
19TISA
2020FEB

COVER STORY
competitive markets to generate
wealth, as against 'pro-crony'
policies that favour existing
privateinterests;
 Eliminate policies which
restrict markets through
unnecessary Government
interventions.
 Integrate 'Assemble in India'
into 'Make in India' to focus on
labour intensive exports and
thereby create jobs on a large
scale;
 Create fintech enabled large,
efficient Banks, proportionate to
the size of the Indian economy
and track the health of the
shadowbankingsector;
 Use privatization to bring in
efficiency. The Survey provides
careful evidence that India's
GDP growth estimates can be
trusted.
The Economic Sur vey
outlines four strategies on
how India can create 4 crore
well-paid jobs by 2025 and 8
crorejobsby2030.
1) Specialisation at large
scale in labour-intensive
sectors, especially network
products.
2) Focus on enabling
assembling operations at
mammoth scale in network
products.
3) Export primarily to markets in
richcountries.
4) Trade policy must be an
enabler.
Exports of network products can
provide one-quarter of the
increase in value addition
required for making India a $5
trillion economy. The perfect
integration of "assemble in India
for the world" with "Make in
India" initiative can help the
country to become a $5 trillion
economyby2025
What's in Budget 2020
forMSMEs?
What does the Economic Survey
havetosay?
The Economic Survey tabled by
the Finance Minister Nirmala
Sitharaman listed a detailed
analysis of the measures
undertaken to support the
MSME sector. The Survey said
that the government has taken
measurestoensure:
Bettercreditflow,
Technologyup-gradation,
 Ease of doing business and
 Market access to the sector.
The initiatives and the status of
these initiatives are as follows:
 In-principle approval for loans
up to Rs 1 crore within 59
minutes through an online
portal. About 1,59,422 number
of loans have been sanctioned
involving Rs 49,330 crore. Out
of this, Rs 37,106 crore has been
disburseduptoOctober2019.
 Interest subvention of 2% for
all GST registered MSMEs on
incremental credit up to Rs 1
crore. SIDBI has received and
settled a claim of Rs 18 crore
from 43 banks/NBFCs for the
period from November 2018 to
March2019.
 All companies with a turnover
more than Rs 500 crore to be
mandatorily on TReDS platform
to enable entrepreneurs to
access credit from banks. So far,
329 companies have registered
themselves on the TReDS
portal.
 All central public sector
undertakings (CPSUs) to
compulsorily procure at
least 25 per cent of their
total purchases from
MSMEs. CPSUs have
procured goods and
s e r v i c e s w o r t h R s
15,936.39 crore from
59,903MSMEs.
 Out of the 25 per cent
procurement mandated from
MSMEs, 3 per cent has been
r e s e r v e d f o r w o m e n
entrepreneurs. During 2019-
20, procurement has been done
from 1,471 women-owned
MSMEs to the tune of Rs 242.12
crore.
20 TISA
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21TISA
2020FEB
COVER STORY
 All CPSUs must mandatorily
procurethroughGeMportal.
A total of 258 CPSUs / CPSVs
have been onboarded /
registered on the GeM portal
and a total of 57,351 MSME
sellers and service providers
have been registered on the
portal.
 Twenty Technology Centres
(TCs) and 100 Extension Centres
(ECs) to be established at the
cost of Rs 6,000 crore. So far, Rs
99.30 crore has been released
for setting up of these TCs and
Ecs.
 The Government to bear 70
per cent of the cost for
establishing a pharma cluster.
Four districts of Solan, Indore,
Aurangabad and Pune have
been selected for pharma
clusters and developing of
commonfacilities.
 Returns under eight labour
laws and 10 Union Regulations
tobefiledonceayear.
 Establishments to be visited by
an Inspector will be decided
through a computerized random
allotment. A total of 3,080
i n s p e c t i o n s h a v e b e e n
conducted and all inspection
reports have been uploaded on
ShramSuvidhaportal.
What does Budget 2020
doforMSMEs?
Finance Minister Nirmala
Sitharaman presented the Union
Budget 2020 in Parliament and
announced a range of schemes
and measures for micro, small,
and medium enterprises
(MSMEs)andsmallbusinesses.
 The Govt shall launch a Digital
Platform for the protection of
Intellectual Property Rights
which shall facilitate seamless
applications.
 FM has allocated Rs 99,300
crores for education sector in
FY21 and Rs 3,000 crores for
skilldevelopment.
 Government has also allowed
sourcing funds via foreign direct
investment (FDI) and external
commercial borrowings (ECBs)
in education which could
boost research infrastructure
acrossinstitutes.
 Working capital credit remains
a major issue for MSMEs. It is
proposed to introduce a Rs.900
crores scheme to provide
s u b o r d i n a t e d e b t f o r
entrepreneurs of MSMEs. This
subordinate debt to be provided
by banks would count as quasi
equity and would be fully
guaranteed through the Credit
Guarantee Trust for the Medium
andSmallEntrepreneurs.
 More than five lakh MSMEs
having benefited earlier, the
Reserve Bank has been asked to
extend the Debt Restructuring
window for micro, small and
medium enterprises by a year to
March31,2021
 An app-based invoice
financing loans product will be
launched. This will obviate the
problem of delayed payments
and consequential cash flow
mismatchesfortheMSMEs
 Tax Audit for MSME shall be
required in case the turnover
exceeds Rs.5 Crore which was
earlier Rs.1 Crore. However, this
benefit can only be availed by
those MSME whose total cash
transaction does not exceed 5%
ofthetotaltransactions.
 Necessary amendments will
b e m a d e t o t h e Fa c t o r
Regulation Act 2011 to enable
N o n - b a n k i n g f i n a n c i a l
companies (NBFCs) to extend
invoice financing to the MSMEs
through TReDS thereby
enhancing the economic and
financialsustainability.
TReDS is an institutional
mechanism to facilitate the

22 TISA
2020FEB
trade receivable financing of
micro, small and medium
enterprises (MSMEs) from
corporate buyers through
multiplefinanciers.
 The Minister mentioned
creating a unified procurement
system on public procurement
p o r t a l G o v e r n m e n t e -
Marketplace. “This will create a
great opportunity for MSMEs.
There are 3.24 lakh vendors
already on the GeM platform
and we are targeting Rs 3 lakh
croreturnover,”shesaid.
 Stressing the aspiration to
make every district an export
hub, in order to achieve higher
export credit disbursement, a
new scheme NIRVIK is being
launched which provides for
high insurance cover, reduction
in premium for small exporters
and simplified procedures for
claimsettlements.
 The commerce and industry
ministry are working on the
scheme also called the Export
Credit Insurance Scheme (ECIS)
under which the insurance
guaranteed could cover up to
90% of the principal and
interest. and will include both
pre-andpost-shipmentcredit.
At present, the Export Credit
Guarantee Corporation provides
credit guarantee of up to 60%
loss.
Among other measure
likely to give a boost to
MSMEs:
 The Budget 2020 proposes to
boost the manufacturing of
mobile phones, electronic
equipment and semiconductor
packaging. The Finance Minister
said this could also be used to
u p l i f t m e d i c a l d e v i c e s
manufacturing.
 A National Technical Textiles
Mission is also announced in the
Budget 2020, which will have a
four-year implementation
period and an outlay of Rs 1,480
crore.
 In January 2020, Union
MSME minister Nitin Gadkari
hadsaidhisdepartmentplansto
set up five parks to manufacture
low-cost medical devices in the
country.
 Sitharaman said a National
Logistics Policy will also be
released to create a single
window e-logistics market and
makeMSMEscompetent.
What does it all add up
to?
It is billed as a Budget for
entrepreneurs and MSMEs,
Finance Minister Nirmala
Sitharaman's contains a large
COVER STORY

number of announcements to
spur MSME sector's growth. We
delve deeper into the key
numbers and see how they fare
comparedtolastyear.
 The allocation this year
stands at an all-time high of Rs
7572 crore - an increase of 8%
from the FY 2019-20 figures of
Rs7011.29crore.
 While the allocation under
Prime Minister Employment
Generation Programme's
(PMEGP) has been raised from
Rs 2327.10 crore last year to Rs
2500 crore this year, other credit
schemeshavetakenahit.
Whatisslashed?
 Interest Subsidy Eligibility
Certificate - whose earlier
budgetary allocation stood at Rs
30.89 crore in 2018-2019, has
this year got a nil share. The
Credit Support Programme
earlier had a share of Rs 597
crore but was this time allocated
only Rs 100 crore - a cut of
83.25%.
 The allocation to a very useful
scheme for MSMEs - Interest
S u b v e n t i o n S c h e m e f o r
Incremental Credit to MSMEs
though extended for another
year – has been cut from Rs 350
crore to Rs 200 crore - a 42.86%
drop.
 The total allocation to the
many sub-schemes under its
'Market Promotion Schemes'
section that previously stood at
Rs 127.63 crore last fiscal has
now been reduced to Rs 74.63
crore-adropof41.53%.
 Marketing Assistance Scheme
( M A S ) , a s c h e m e u s e d
e x t e n s i v e l y b y M S M E s
witnessed a dip from its earlier
figure of Rs 10.03 crore to Rs
0.04 crore. Similarly, the
International Cooperation
Scheme, a scheme by the MSME
Ministry to facilitate MSMEs to
b e c o m e i n t e r n a t i o n a l l y
competitive, saw a reduction in
its outlaythistime. Thescheme's
earlier figure of Rs 30 crore has
now been reduced to Rs 20
crore.
 The MSME Fund that in 2019-
2020 stood at 100 crores, now
sees a 50% reduction. However,
the allocation for Fund of Funds
has gone up from Rs 100 crore
to Rs 200 crore. This has pushed
up the total allocation for
'Entrepreneurship and Skill
Development' from Rs 479.91
croretoRs556.47crore.
 Technology Upgradation and
Quality Certification Schemes'
has been reduced from its earlier
figure of Rs 755.78 crore to the
new figure of Rs 683.91 crore.
A S P I R E ( P r o m o t i o n o f
Innovation, Rural Industry
Entrepreneurship) whose
previous share stood at Rs 50
crore, has been slashed by Rs 30
crore.
 Credit Linked Capital Subsidy
and Technology Upgradation
Scheme has been reduced to Rs
653.91 from the previous figure
ofRs705.78crore.
Whatisraised?
 Among Budgets which went
up, Development of Khadi,
Village and Coir Industries
continued to be at the centre of
attention, with major heads
seeingasubstantialrise.
The allocation for Scheme Fund
for Regeneration of Traditional
Industries (SFURTI) has been
increased from Rs 125 crore to
Rs 464.85 crore. Also, Coir Vikas
COVER STORY
23TISA
2020FEB

Yojana has increased from Rs
70.50 crore to Rs 103.87 crore
and outlay for Khadi Grant (KG)
has been hiked from Rs 308.51
to Rs 383.60 crore, an increase
of24.34%.
 Under 'Infrastructure
Development Programmes'. The
total outlay for the sub-
schemes, earlier standing at Rs
921.29 crore has now been
hiked to Rs 1460
crore, an increase
of 58%. Under the
s a m e h e a d ,
'Infrastructure
Development and
Capacity Building'
programmes have
been hiked from
the last Rs 419.57
crore to Rs 801.70
croreforFY20-21.
 f o r t h e
'Establishment of
New Technology
C e n t r e s ' , t h e
government has
increased the total
outlay to Rs 200
crore for net fiscal
from Rs 125.12
crore.
I t s a l l d o w n t o
implementation
Writing in the Economic Times
on 8-2-2012 Arun Singh says
out of 27 million ''commercially
visible” entities which employ at
least one labour and operate out
of a permanent structureover
99% are Micro, Small and
Medium Enterprises (MSMEs)
which contribute 35% to GDP
and employ 25% of non-farm
workforce.
Large entities, which constitute
around 1% all entities in the
country, also contribute around
30%toGDP.
This shows that the contribution
of MSMEs to overall growth is
low. MSMEs need three crucial
growth enablers. Access to
finance has emerged as the
single largest enabler for
growth, followed by the cluster
development and access to
markets.
The core challenges that MSMEs
requiring external finance face
i n c l u d e h i g h c o l l a t e r a l
requirements, high interest
rates and complex application
procedures.
On the other hand, banks have
raised concerns over compliance
towards documentation,
regulatory adherence and
financial discipline followed by
MSMEs.
 It is in this context, the
proposals made in the Union
Budget 2020-2021
to amend 'Factor
Regulation Act,
2011' to extend
invoice financing
t o M S M E s v i a
N B F C s a n d
recommendations
for app-based
invoice financing
l o a n p r o d u c t s
assume significant
importance.
 These initiatives
will boost 'Supply
Chain Finance'
penetration in
India which stands
at significantly less
than 1% of GDP
c o m p a r e d t o
around 12% of
GDP in countries that are similar
insizetooureconomy.
S u p p l y c h a i n f i n a n c e
circumvents the problems faced
in traditional lending by
leveraging on the credit history
oflargefirms.
 The scheme to provide
subordinate debt, which will be
considered as quasi-equity, for
entrepreneurs of MSMEs is also
COVER STORY
24 TISA
2020FEB

expected to fill up the white
spaceinMSMElending.
 The 'Niryat Rin Vikas Yojana
(NIRVIK)' scheme to provide
h i g h e r e x p o r t c r e d i t
disbursement, enhanced
insurance cover and reduced
premium for small exporters
aims at activating an important
leveroftheMSMEgrowth
wheel i.e. participation in Global
ValueChains(GVCs).
 In addition, the proposed
extension of hand holding
s u p p o r t t o M S M E s f o r
technology upgradation, R&D,
b u s i n e s s s t r a t e g y, e t c .
will increase the likelihood of
MSMEs exporting more,
increase their competitiveness
and improve their long-term
financialprospects.
The million-dollar Q is, will
these schemes be followed
through till successful
execution and they deliver
the intended benefits?
Making sense of the Budget
The expectations before the
Budget Presentation on
February 1, 2020 were huge.
This was in spite of most
economists cautioning that Ms.
Nirmala Sitharaman simply did
not have the kind of resources
needed to be thrown at the
huge problem of economic
slowdown and the resultant job
losses India was facing, at the
precise time, when nearly a
million job-seekers have started
entering the job market each
year.
Writing in the Indian Express of
rd
3 February, 2020 Pratap Bhanu
Mehta says “The things that it
will take to fix the economy
cannotbedoneintheBudget.
N o w t h a t t h e
Budget has been
presented and has
been analysed and
torn apart by many
e c o n o m i s t s ,
financial experts
and top CEO's,our
job as we see it is
to make sense both
of the Budget and
what it means to
MSMEs.
The Budget can be
criticised for its
lack of boldness.
But in a way, that is
the most honest
thingaboutit.
It is an admission
ofdefeat”.
In a sense that can be used by us
M S M E s t o g e t a t r u e
understanding of what we can
or cannot expect from the
Budget.
There is also an argument here
for mental clarity and to get out
of a kind of psychological
COVER STORY
25TISA
2020FEB

dependence on the “mai-baap
sarkar” and learn to depend on
ourselves.
Whatlieswithwhom?
The first thing to be clear about
is that much of what we
entrepreneurs want, or are
affected by, lies with the State
Governments, not the Central
Government,suchas
 LandforourIndustries
 Power,streetlights,drainage
 Roads,Statehighways
 Labourlaws,ESIShospitaletc
Yet a Municipal or State
Government Budget is a total
non-event, as far as, most
entrepreneurs are concerned.
Most Associations hardly think
of even making a representation
about their problems or what
they want before a State Budget
ispresented.
What lies with the Central
Government & partly in the
Budget which can affect us
directlyare:
DirectTaxes
 Indirect Taxes, mainly GST on
GoodsandServices
 C r e d i t f l o w / Te r m s &
Conditions/InterestRatesetc
 MSME Preference/Payment
terms of Public Sector/Defence
Undertakingsetc.
What do entrepreneurs
want?
While things are nowhere near
ideal, anyone who has been an
entrepreneurinthe70'sand80's
will testify that things are far
better on most counts. But we
are now an aspirational society
and want to measure ourselves
byglobalstandards.
While there are 100's of things
on our wish list, we list those
most crucial for our enterprises
to be competitive on the world
stage:
 A level playing ground in
terms of lower interest rates and
better credit flow which much of
the developed world enjoys but
which we MSMEs certainly
don't.
 Faster payments from PSUs /
Defence PSUs and enforcement
in case of delayed payments
beyond45days.
 World class logistics set-up,
airways, railroads, highways,
inland waterways, ports etc. to
slash costs and make ourselves
morecompetitive.
 A far better, speedy legal
system for enforcing our rights
andcontracts.
 Sensible labour laws which
will be crucial in a fast-changing
technologicallandscape.
What do all Indians want
Governmenttodo?
 Ensureruleoflaw
 Getoutofbusiness
 Concentrate on health &
education which will be crucial
for our success in the 2st
century.
 Focus on internal and external
security which is becoming
critical
 Ta k e u p l a r g e - s c a l e
infrastructural projects such as
roads, highways, dams, inland
waterways, ports, bridges,
which are transformational in
changing the rural landscape,
p r o v i d i n g e m p l o y m e n t ,
improving skills, ushering in
prosperityetc.
 Areas of national importance
as in certain areas of Defence,
Satellites/Rockets/Space &
Planetary missions, scientific
researchetc.
COVER STORY
26 TISA
2020FEB

 Encourage and regulate the
growth of technology which in
itself has already become a
st
huge game-changer in the 21
century.
How to judge a budget
on3counts?
It is important to keep in mind
that the Budget can look and
seem different to different
people depending on your
expectation and the criteria one
employstojudgeit.
Writing in the Indian Express on
February 2, 2020 former
F i n a n c e M i n i s t e r P.
Chidambaram assesses the
Budget - numbers, speech and
proposals - under three heads:
marksmanship, underlying
philosophyandreforms.
“PoorMarksmanship
So many things had been done,
under pressure, after the last
Budget was presented in July
2019, it is unfair to hold the FM
to the budget estimates (BE) of
2019-20.
Yet, it must be recorded that she
failedonanumberofheads:
 Against a projected growth of
GDP of 12 per cent (in nominal
terms), the GDP will grow by
only8.5percentin2019-20.
The estimate for 2020-21 is 10
percent.
 Against a Budget Estimate of
3.3 per cent, the fiscal deficit
will be 3.8 per cent in 2019-20
and projected to be 3.5 per cent
in2020-21.
 Against an estimated net tax
revenue collection of Rs
1 6 , 4 9 , 5 8 2 c r o r e , t h e
Government will be able to
collect only Rs 15,04,587 crore
beforetheendofMarch2020.
 Against a disinvestment target
of Rs 1,05,000 crore, the
exercise will yield only Rs
65,000crorethisfinancialyear.
 Against the intent to incur a
total expenditure of Rs
27,86,349 crore in 2019-20, the
Government will spend only Rs
26,98,552 crore despite
additional borrowing of Rs
63,086crore.
No underlying philosophy
It is a matter of grave doubt if
the BJP government has an
u n d e r l y i n g e c o n o m i c
philosophy at all. One has to
glean its philosophy from the
numerous acronyms that were
thrown at the people in the last
six years. Basically, their guiding
principlesappeartobe
 Self-reliance,
 Protectionism,
 Control, bias in favour of
traders (as against producers
andconsumers),
 Aggressive taxation and faith
ingovernmentexpenditure.
Did Budget 2020-21 signal a
change in the thinking of the
government?
The answer is 'No'. In fact, the
FM did not spell out her
government's thoughts on the
macro-economic crisis faced by
the country. Nor did she say if
her government thought the
slump was due to structural
factorsorcyclicalfactors.
It appears that the Government
continues to be in denial; the
Government is in denial that the
e c o n o m y i s d e m a n d -
constrained and investment-
starved. Being in denial, the
Government has refused to look
at serious reform measures or
propose solutions to the twin
challenges”
COVER STORY
27TISA
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The government's idea of
'reforms' is to give small dollops
of tax relief to tax payers. It was
the corporate sector a few
months ago; in this Budget,
relief of Rs 40,000 crore has
been given to personal income
tax payers. The FM also yielded
to the pressure of the corporates
and scrapped the Dividend
DistributionTax.
There is no gainsaying the fact
that DDT was an efficient tax
and stopped all evasion of tax
ondividendincome.Iamcertain
there will be loss of revenue on
abolitionofDDT.
In the bargain, the FM has
introduced two tax regimes (one
with exemptions and one
without exemptions) and
complicated the personal
income tax structure with
multiple rates the same mistake
the government made when it
introducedGST.
Givinguponreforms
The FM outlined three themes
and under each theme there
were several segments and
m a n y p r o g r a m m e s . F o r
example, under the theme
Aspirational India, she
identified three segments, and
under each segment she
announcedmanyprogrammes.
In the same vein, she devoted
nearly an hour to elaborate on
the other two themes -
Economic Development of All
andCaringSociety.
When she was done, I lost count
of the number of themes,
segments and programmes.
Listening to the speech and
reading the text later, I did not
find anything that would
amount to a structural reform in
any sector. I wonder what
happened to the labours of the
ChiefEconomicAdviser.”
Isthismedicineenough?
T h i s w a s a g e n t l e b u t
devastating take-down of the
Budget. Chidambaram's
criticism is analytical, factual
and it is difficult not to agree
withhimthatthereis:
 General denial of the crisis
s i t u a t i o n o f e c o n o m i c
slowdownwearein.
 Multiplicity of actions starting
from July 2019 after the last
Budget, including dramatic
slashing of Corporate tax rates
and a vast number of schemes
announced, all of which
unfortunately depend on
effective implementation by a
largely rotten self-serving
bureaucracy.
None of the actions by
themselves or taken together
seem to address the immediate
p r o b l e m o f e c o n o m i c
slowdown.
What is the true nature
ofthedisease?
While most pandits in the
newspapers and national
television can speak for hours
on what is wrong with the
actions being taken or stress the
more obvious fact that there is
shortfall in demand, few seem
to be able to put their finger on
exactly what is wrong with our
economy.
One man who hit the alarm
button a long time ago is, Dr
Rathin Roy, Director, National
Institute of Public Finance and
Policy, and a former member of
the Prime Minister's Economic
Advisory Council who had
cautioned about a “silent fiscal
crisis” in India, suggesting that
the Government's tax revenues
during the year were likely to fall
quite short of what the budget
hadestimated.
COVER STORY
28 TISA
2020FEB

 Year-after-year Government is
simply not able to collect the
taxes it projects it will collect
and the shortfalls are large, as
much as 0.7% of the GDP this
year.
 Secondly, the Government is
simply not able to disinvest in
Public Sector Units despite
grand targets. The figures of the
shortfall are provided in P.
Chidambaram's critique quoted
earlier.
This is a structural problem, not
a cyclical one. What this does
year-after-year, is to create a big
hole in the revenue side which
the Government has to then
scramble to fill up, by massive
borrowing or cutting down
expenditure in the middle of an
economicslowdown.
That seems easy enough to
understand, but what is worse,
says Rathin Roy, is that now
Government is not borrowing to
fuel demand in the economy
w h i c h w o u l d b e
understandable, but is just
trying to make up for the
shortfall in tax collection and the
f a i l u r e t o m e e t t h e
disinvestment target. With a
lower expenditure to GDP ratio
in the revised estimates, the
Budgethasactuallycontracted.
T h e G o v e r n m e n t s e t a
divestment target of Rs 2.1 lakh
crore for FY21 compared with Rs
1.05 lakh crore target for the
ongoing financial year but off-
loading shares in the LIC will be
no easy task with the process
likelytotakemorethanayear.
The current fiscal plan, however,
depends on the Government
achieving its total disinvestment
target which seems highly
u n l i k e l y g o i n g b y p a s t
performance. What he is
suggesting:
 G o v e r n m e n t h a s t o
acknowledge that there is a
slowdown which it has avoided
doingsointhebudget.
 He doesn't think simplistically,
as some do, that the slowdown
is the result of demonetisation
ortheGST.
 The growth rate which has
come down precipitously over
the last 4 years from 8 to 7 to 6.1
and now to 4.8 is likely to have
bottomed out, though he is
unwilling to go by the upswing
of PMI to 55.3, to assert that
recoveryisinfullswing.
 He thinks we need to get back
to not just 6% GDP growth rate,
but 7% consistently over 10
years, to be able to ensure
employment and participation
inmeaningfuleconomicactivity.
 Sources of domestic demand
that were powering the
economy over the last 18 years
havefizzledout.
More than concentrating on
how to revive the auto industry,
consider how we can get
health, education and low-cost
housing going, how we can get
textile Industry making for
Indians and for India, rather
than importing shirts from
BangladeshandVietnam.
 The reason for shortfall in
consumer demand could be that
peopleare
a) Simply not having enough
cashtospend
b)Donothavejobs
c) Hefty demand over the last
decade for airlines, FMCG is
diminishing and people want to
s p e n d o n g o o d h e a l t h ,
education,lowcosthousingand
therearenotenoughavenuesor
d) that consumption demand is
simplyleakingthroughimports.
 The past is no guide to the
future. We need to change the
pattern and composition of our
growth and improve export
performance to touch 7 to 8%
GDPgrowthconsistently.
An old mindset cannot
delivernewsolutions
Pratap Bhanu Mehta points out
several areas of accumulated
weaknesses:
COVER STORY
29TISA
2020FEB

 Recommending greater
spending to pump up demand is
fine except that the fiscal deficit
of the Centre and the States
combined leave little room for
manoeuvre.
 Having rubbished MNREGA
a n d t h e a d m i n i s t r a t i v e
machinery delivering it, it is
difficult for the Government to
now use it to put money in the
hands of people in the rural
areas.
 We need tremendous capital
investment to build the massive
infrastructure this country and
the economy requires but we
are in the present crisis precisely
because the huge financing of
infra expansion over 15 years
was done without a sustainable
financial plan or strong
financinginstitutions.
Take the Il & FS crisis, for
example. In any case, the
spending on infrastructure will
only deliver returns over time,
not the short-term boost we
nowwant.
 This could still be addressed
except that we have financial
crises staring us in three very
important sectors. The power
sector, the real estate sector and
theBankingsector.
 The integrity of India's data is
for the first time under a cloud
with a former CEA having
alleged that the GDP was
overstated by almost 2.5%.
Data on unemployment remains
underacloud.
AnIndustryView
Writing in the Indian Express on
th
5 February 2020, Naushad
Forbes, engineer, businessman
and Co-chairman of Forbes
Marshall, India's leading steam
engineering and control
instrumentation company
essentially says that the Budget
has no immediate measures to
stimulate the economy or
address the slowdown. There
are words of wisdom here which
a responsive Government
shouldpayheed.
It harks back to protectionism
and contains provisions that will
increasebureaucraticcontrol.
 “When companies are in
trouble, they tend to flail around
and do too much. This is almost
always disastrous. Instead, a
stressed company should do
less.
Doing less requires focus - using
one's resources for only a few
essential things, leaving the rest
for happier times. This need to
focus also helps concentrate the
l i m i t e d m a n a g e m e n t
bandwidth.
COVER STORY
30 TISA
2020FEB

So, we end up with a multiplier
effect - directed resources with
betterimplementation.”
 Out of the rambling Part A he
finds a) Incentivising States to
implement the 3 Model Laws
Agricultural Laws passed by the
Union Government in the last 3
years and b) Disinvestment in
LIC to be sensible. The rest he
feels could have been left for
happiertimes.
 “Part B, on the tax changes,
was more focused and useful -
this includes the section on
simplifying personal income tax
by lowering rates and removing
exemptions, reducing one level
of the treble taxation of
dividends, extending tax
concessions for employee share
purchases and attempting to
reducetaxlitigation.”
 It was not the Budget we
needed, he says and there are
fourreasonsforthiscriticism.
 First, and most importantly,
the seriousness of the current
slowdown needed to be
addressed directly. In private
meetings with industrialists, the
finance minister and prime
minister have shown strong
awareness of the current
economic crisis and an
openness to hear inputs on
what can be done. That was not
apparentintheBudgetspeech.
 Perhaps the government
believes its own Economic
Survey — that the slowdown is
only cyclical, the corner has
been turned, and things will get
better on their own from now
on. Or, it believes that a public
recognition of our economic
stresswillspoilthenarrativeofa
vibrantIndianeconomy.
 A clear public recognition of
the current economic distress
would have been a huge
enabler of radical steps to set
things right. That should have
been the message of the first
few of the 160 minutes of the
financeminister'sspeech.
 Second, the Budget should
have focused on two immediate
measures to stimulate the
economy. To contain the official
deficit, the government has
delayed paying its dues. The
Union government owes some
Rs 3,00,000 crore (1.5 per cent
of GDP) to private and public
enterprises, beneficiaries of
s o c i a l s e c t o r s c h e m e s
(MGNREGA beneficiaries for
e x a m p l e ) , a n d s t a t e
governments.
 Recognising these liabilities,
letting the deficit expand by this
a m o u n t t h r o u g h e x t r a
borrowing, and paying them in
full would have pumped
liquidity into the economy and
been a stimulus like no other.
Besides, this is money the
government will have to pay at
some point; paying it in this
financial year will make
containing next year's deficit
simple.
 T h e o t h e r i m m e d i a t e
challenge in the economy
pertains to Non-Bank Financial
Companies (NBFCs) and is
directly connected with the real-
estate sector. Rampant
u n f i n i s h e d a n d u n s o l d
inventory is choking the wider
economy, and NBFC woes are
affecting consumption more
generally. Some action has been
taken, but it is too little and too
tentative to keep the wider
economyfromdraggingdown.
 Third, this Budget comprises
some genuinely bad things.
Chief among them is a further
increase in protectionism.
Import tariffs on many items
have been increased. Imports
COVER STORY
31TISA
2020FEB

COVER STORY
under the purview of FTAs are to
be reviewed for adherence to
the rules of origin - with the
threatofhigherduties.
In order to protect products
made by MSMEs, which are of
“good quality”, import tariffs
have been increased. This may
seem logical, but it is not. Who
will decide if the quality is good?
How will such products
be selected? Who will
judge adherence to rules
oforigin?
The authors of the
Budget seem to have not
read their own Economic
Survey, which makes a
strong case for free trade
and shows that India has
clearly benefited from
F TAs. Ever y major
exporter is a major
importer.
We should learn from our own
history since 1991 — engaging
with the world leads to a bright
future. After progressively
opening up from 1991 to 2016,
we appear to have decisively
reversed course. The Budget
continues this retrograde
direction.
 Fourth, the Budget's arithmetic
rests on doubling the budgeted
revenue from disinvestment
from Rs 1 lakh crore to Rs 2 lakh
crore. Half of this is to come from
“strategic sales” - we still
hesitate to use the word
privatisation. Listing LIC could
also raise a big part of the target
- and, this will probably happen.
But at the end of 10 months this
year, we have raised only Rs
18,000 crore, less than the 20
per cent of the Rs 1 lakh crore
target.
No mention was made of what
will change to result in such an
increaseinrevenues.
 This brings me to my final
point. A great new book by Vijay
Kelkar and Ajay Shah, In Service
of the Republic, says we must
b u i l d t h e i n s t i t u t i o n a l
infrastructure for the complex
economy we are. But we rely on
the discretion of politicians and
bureaucrats.
 If we judge the Budget from
this standpoint, it fails on most
counts. One hundred and
twenty minutes of the 160-
minute speech were all about
programmes - a scheme for solar
pumps here, a National Forensic
University there, five tourist
a r e a s t o b e d e v e l o p e d
somewhereelse.
 All this requires Government
capacity to implement, a
capacity that has been
demonstrably absent. The few
improvements - reducing
exemptions in income tax, for
e x a m p l e - h a v e b e e n
outweighed by many increases
in discretionary power. This
amounts to an increase in
bureaucratic power — more
g o v e r n m e n t , n o t m o r e
governance.
 The last page of
Kelkar and Shah's book
has telling sentences:
“The private sector is
fearful of the arbitrary
power wielded by
officials, and does not
speak up. There is no
voice, but there is an
exit in the form of
reduced investment.”
T h i s B u d g e t h a s
missed the core issue
facing the economy
today.”
There cannot be a better note to
end on, than what Naushad
Forbeshassaid.
There is a phrase “voting with
your feet” which means
showing one's approval or
disapproval of something
through one's presence or
absence. We may need to add a
phrase “voting with your cash”
which means showing one's
approval or disapproval of the
e c o n o m i c p o l i c i e s a n d
business environment by
investingor notinvesting!
32 TISA
2020FEB
COVER STORY

A) 0.1% Tax Collection at
Source (TCS) on sale of goods
more than Rs. 50 lacs in a
financial year [Section 206 C (1)
(H)]
This is applicable only to sellers
whose turnover is more than
R s . 1 0 C r o r e s i n t h e
immediately preceding
financial year. That is, if your
turnover is Rs. 10 Cr or above in
F.Y 2019-20, then you are
liable to collect TCS in F.Y 2020-
21.
The TCS @ 0.1% is required
only on the sales above Rs. 50
lacs and therefore it will apply
on amounts above Rs. 50 lacs
only. So, if there is a sale of Rs.
60 lacs, TCS is required to be
made, only on Rs 10 lacs. If
there is no PAN No. of the
buyer, then TCS has to be at
1%.
Further this will not be
applicable if the sales are made
to Governments, Local
authorities like Municipalities,
Consulates etc and any other
personasmaybenotifiedlater.
TCS at 0.1% and 1% etc are not
going to help the Government
collect substantial tax
amounts. It is simply a measure
to track transactions which is
anyway getting captured
through other data collection,
like remittances, online portals
andGSTreturns.
So, this will end up as an
additional, unnecessary
compliance burden for
assesses.
This is a tedious task for
MSMEs and will require all
businesses to file periodical
returns, in addition to the
TDS returnsbeingfilednow.
BUDGET 2020-21
‐ P.P. Jayaraman C.A
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Hopefully, exports
sales will be out of this
a m b i t a n d a
notification in this
re ga rd i s s h o r t l y
expected from the
CBDT.
TCS on foreign tour
p a c k a g e a n d
foreign exchange.
(Section206(1G).
Any authorised dealer remitting
funds abroad under the
Liberalised Remittance Scheme
(LRS) of RBI or a seller of an
overseas tour program
package, shall collect TCS of 5%
from the remitter or the buyer, if
the amount is more than Rs.7
lacs(approx.USD10000).
This section will not apply if the
remitter or the buyer is already
deducting TDS under any other
provisions of this Act for the
amount involved in the
transaction.
C)TDSu/s.192forsalary
This will create a lot of
confusion as individuals are
given options for availing of
e x e m p t i o n s , s t a n d a r d
deductions and deductions
under Chapter VI A (various
sections 80 C etc.,) vis-a -vis the
rateoftax.
Whether the option of
alternatives can only be
exercised at the time of
deduction of tax by employer or
at the time of filing of return
r e m a i n s t o b e s e e n a s
clarifications are expected on
thisfromCBDTsoon.
D) TDS ON DIVIDENDS ON
S H A R E S A N D M U T U A L
FUNDS(Section194)
On abolition of DDT (Dividend
distribution Tax), this new TDS
p r o v i s i o n h a s b e e n
reintroduced in the Income Tax
Act to deduct TDS @10% on
dividend paid to shareholders
in excess of Rs. 5000. This is a
tedious task for Corporate India
fortheTDScompliance.
E) TDS ON CONTRACTS TO
INCLUDE EVEN CONTRACT
MANUFACTURING AS PER
SPECIFICATION WITH SUPPLY
OF GOODS FROM RELATED
PARTY(194C).
The section is proposed to
modify the definition of “work
“to include manufacturing or
s u p p l y i n g a p r o d u c t
according to the requirement
or specification of a customer
by using material purchased
from such customer or its
associate concerns, as per
clause (b) of sub section
(2) of Section 40 A
,simply called related
party as per section 40
A(2)(b).
T h e r e w a s n o
requirement earlier to
deduct TDS unless the
customer himself
supplied the material
for manufacturing to
hisownspecifications.
Now it is proposed to make TDS
mandatory, if the party who
supplies the material is in any
way related to the customer as
persection40A(2)(b).
F) T D S @ 2 % F O R
TECHNICALSERVICES(194J)
Till now the TDS used to be
deducted @ 10% on all
technical or professional fees.
Now there is a distinction being
made between technical
services and professional
services. Technical services are
now liable for TDS @ 2% and
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34 TISA
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p r o f e s s i o n a l
services @10%.
Now this will lead
to litigation as to
what is technical
service and what
is professional
service.
M o r e
clarifications are
expected on this
from CBDT very
soon.
What generally used to happen
was that in case of technical
AMCs (Annual Maintenance
contracts) there used to be
some grey area whether TDS
deduction was to be made @
1% or @ 2% as contracts u/s.
194 C or @ 10% as fees under
section194J.
The department used to have a
view that only qualified /
experienced technicians could
do the job of AMCs and
therefore the same is liable for
TDS u/s. 194 J @ 10% and not
u/s. 194 C @2% or 1% as the
case may be. Now by trying to
clarify this issue, it will pave the
way for a new line of litigation;
whether it is technical service or
professionalfees.
G)TDS ON E COMMERCE
PARTICIPANTS (SECTION 194
O).
For supplies made to E
Commerce operators above Rs
10 lacs, the participant
businesses (actual material
suppliers) are liable for TDS @
1%.
This is to be deducted by the E
commerce operator from
p a y m e n t s m a d e t o t h e
p a r t i c i p a n t b u s i n e s s e s
supplying the goods or
provisionofservices tothem.
If PAN No. of the participant
business is furnished, the TDS
has to be at the rate of 5%
instead of the normal 20% (206
AA).
No TDS is to be made by the E
Commerce operator, if the gross
turnover of sales of the
p a r t i c i p a n t w i t h t h e E
commerce operator is less than
Rs. 10 lacs during the financial
year and the participant has
furnished his PAN No. or
Aadhar number to the E
commerceoperator.
H ) T D S O N D I V I D E N D S
REMITTED ABROAD (SECTION
195).
Now that dividends are made
taxable, remittances of
dividend abroad are now
taxable and therefore, in my
opinion, the same is liable
forTDSu/s.195.
I) DUE DATE FOR TAX
AUDIT (44 AB & OTHERS)
AND DUE DATE FOR
FILING OF RETURN OF
I N C O M E M A D E
INDEPENDENT OF EACH
OTHER
Earlier the due date of tax
audit and filing return of
income used to be the
th
samelike30 September.
Now the same has been
changedasfollows:
The due date of tax audit report
th
filing is 30 September and the
due date for filing of return of
st
income is 31 October. This is
done to facilitate filing of return
for the assessee where the
department is planning to auto-
fill the Return with the details
furnished in the tax audit
reports.
J) Tax audit limit of turnover
increasedtoRs.5Crores.
The requirement of tax audit
currently is when the turnover
exceeds Rs 1 crore for business
and Rs. 50 lacs for profession.
Now it is proposed to increase
the turnover limit to Rs. 5 crores
for business andkeep it
unchanged at Rs. 50 lacs for
professions.
The limit of turnover for the
requirement of TDS for
individuals and HUFs under
various sections of the Income
TaxActwillstillcontinueatRs.1
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35TISA
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crore or Rs. 50 lacs for business
and Profession respectively,
even though the limit for tax
audit has been increased to Rs 5
Crores for business and at Rs.
50lacsforprofession.
This is due to the fact that all
these TDS sections had the
wording “person required to
get his accounts audited u/s. 44
AB “and since the turnover
limits thereof has now been
increased for business from Rs.
1 Cr to Rs 5 Cr, all these TDS
sections have been amended to
say that “TDS is to be made if
the turnover exceeds Rs. 1 Cr in
business or Rs. 50 lacs in
profession”.
So, for TDS the provisions still
continue with the turnover as
perearlierAct.
K)FacelessAppeals
A f t e r t h e s u c c e s s f u l
introduction of faceless
Assessment, the Government is
now set to introduce faceless
Appeals.
In order to impart greater
efficiency, transparency and
a c c o u n t a b i l i t y t o t h e
assessment process, a new
faceless assessment scheme
h a s a l r e a d y b e e n
introduced.
It is proposed to amend
the Income Tax Act so as
to enable Faceless appeal
on the lines of Faceless
assessment. This may
save some time of the
p r o f e s s i o n a l s a n d t h e
Commissioner of Income Tax
(Appeals) who need not attend
hearings but can decide based
ononlinesubmissions.
T h i s c a n h a v e s o m e
disadvantages also, as the
Commissioner of Income Tax
(Appeals) may not be able to
appreciate or understand the
arguments of the appellants
when only the papers have
been submitted and no
personal appearance of
representative or appellant is
there.
L) “VivadseVishwas‟scheme
Under the proposed “Vivad se
Vishwas‟ scheme, a taxpayer
would be required to pay only
the amount of the disputed
taxes and will get complete
waiver of interest and penalty,
provided he applies and pays
by31stMarch,2020.
Those who avail the
s c h e m e a f t e r
s t
31 March, 2020
will have to pay an
additional amount
f o r w h i c h t h e
scheme will be
open till 30-6-
2020. The appeals
n e e d t o b e
withdrawn in order to apply for
the scheme. In the case of those
whose cases where appeals or
disputes are for penalty or
interest itself, then they only
need to pay 25 % in the first
phase and 30% in the second
phaseofthepenaltyorinterest.
M) Instant PAN through
Aadhaar
In order to further ease the
process of allotment of PAN, a
system will be launched under
which PAN shall be instantly
allotted online on the basis of
A a d h a a r, w i t h o u t a n y
requirement for filling up
detailedapplicationforms.
N) Personal Income Tax and
SimplificationofTaxation
In order to provide significant
relief to the individual
taxpayers and to simplify the
Income-Tax law, the Finance
Minister has proposed to bring
a new and simplified personal
income tax regime, wherein
income tax rates will be
significantly reduced for the
individual taxpayers who
forego certain deductions and
exemptions.
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O) Dividend Distribution Tax
abolished
Currently, companies are
required to pay Dividend
Distribution Tax (DDT)@
20.556% on the dividend paid
toitsshareholders.
Now after the amendment, the
companies would not be
requiredtopayDDT.
The dividend shall be taxed
only in the hands of the
recipients at their applicable
rate.
However, TDS will have to be
deducted by the dividend
paying company when
dividend paid is in excess of Rs.
5000 to the shareholder u/s.
194oftheIncomeTaxAct.
P)Section80M
Sec 80 M is re-introduced in the
Income Tax Act whereby the
company receiving the
dividends from any other
domestic company, if they
distribute dividend to its own
shareholders, they will get
deduction to the extent of the
dividendsodistributed.
To explain this further, if
Company A gets a dividend of
Rs. 10 lacs from company B
and in case company A
distributes at least Rs. 10 lacs
to its own shareholders, then
there will be no tax payable on
the amount of dividend
received, while computing the
incomeofcompany.
80 M is negative for loss
making companies and also for
companies who do not in turn,
distribute dividend to its share
holders These provisions will
be applicable for all dividends
witheffectfrom1-4-2020.
Q) PENALTY FOR FALSE ENTRY
IN BOOKS OF ACCOUNTS
(Section271AAD)
This is a very serious penalty
levied and will have lot of
repercussions for business
communityasawhole.
This new section is being
inserted with effect from
1.4.2020 ( AY 2020-21) to
provide that if it is found that
the books contain a false entry
or that any entry has been
omitted which is relevant for
the computation of his total
income, he shall be liable for a
penalty of a sum equal to the
aggregate amount of such
falseandomittedentries.
These include false invoice,
false piece of documentary
evidence or invoice in respect
of supply or receipts of goods
or services or both without
actual supply or receipt of such
goods or invoice in respect of
supply or receipt of goods or
services or both, to or from a
personwhodoesnotexist.
The “without actual supply or
receipt of goods “is already
being penalised under GST Act,
by denying the input tax credit
(ITC)onsuchbills.
R)CHARITABLETRUSTS
All Charitable trusts which are
existing and registered with
income tax department will
again have to apply for
renewal of their existing
registration online and these
willbeprovisionallyrenewed.
This is applicable for both trust
registration and for 80 G
registration. For new and
others who are not registered
and are willing to get
themselves registered, all
applications will have to be
done online within three
months from 1-6-2020 i.e.
st
latestby31 August,2020.
So much for what seems to be
of immediate relevance
immediately after the Budget.
More on the confirmations and
clarificationsinMarch2020!
CA JayaramanP.P.
[The author is a Practicing
Chartered Accountant of Thane
and can be reached at
ppjcaoffice@gmail.com]
TAX KORNER
37TISA
2020FEB

38 TISA
2020FEB
Monetary Policy -
Limitations
There was a time when the
c o m m o n m a n n e i t h e r
understood nor was interested
in understanding economics or
policy making, even if it affected
hisverylivelihoodandlife.
All that is changing and it is
important that entrepreneurs
understand enough to be able
to make sense of policy
measures and offer praise,
criticismorsuggestions
Take Monetary Policy for
example. Monetary policy is the
overall policy laid down by the
Central Bank, which is the
ReserveBankofIndia.
The primary objective of the
monetary policy is to maintain
price stability while keeping in
mindtheobjectiveofgrowth.
It involves management of
money supply and interest rate
toachievethese.
The RBI's frequent shifts in
policy relating to bank lending
ratesoverthelast25years
Starting with Prime Lending
Rate (PLR)in1994.
 Followed by Benchmark
Prime Lending Rate (BPLR) in
2003
 Base Ratein2010
 The Marginal Cost of funds-
based Lending Rate (MCLR) in
2016andnow
 External Benchmarking
s how i t s l i m i t a t i o n s i n
formulating an effective policy
framework which can lead to
price stability with better
economicperformance.
- B L Chandak
BANK-CENTRIC MONETARY
POLICY: MISSING THE BIGGER
NBF PICTURE
ECONOMY

SPEED
Target Customers
Eligibility
Those who seek finance
New to SIDBI: upto 1 crore`
Existing: upto 2 crore`
3 years vintage
2 years cash profits / stable
sales
No operating losses
Greenfield allowed with
co-borrower
for purchase of machinery
from OEMs but do not
get an attractive rate of
interest
Quick turnaround time
Loan sanction within
3 days of submitting
information / documents
Quick Sanction
Other Aspects
Repayment period of 2-5
years
Rol-9.25%-9.70% p.a. as
per internal rating
Leased premises- Right to
Access required
Pvt. Lease also covered
subject to conditions.
Machines purchased
from identified OEMs
Expanding in same
line of business
Key Attractions
100% finance based
on FD between 20%to
25%(interest bearing)
Attractive Rol
No promoters’
contribution
Coverage
Application
One-page application
Standard KYC checks
and due diligence
Simplified scoring
model
Quick Disbursement
Short set of Loan
documents
Disbursement within
4 days of sanction
Direct payment to
OEM
1 & 2,Dhanalaxmi Residency,
Near Hotel Tip Top Plaza, LBS Marg,
Thane (W),400604. Tel: 022-68483800
Contact us at :
39TISA
2020FEB

W o r k i n g a t c r o s s
purposes
Forget market rates, even banks'
lending rates are often not in
sync with market rates and
sometimes contrary to the
intention of the monetary policy
(MP). Often, interest rate cuts
end up in token rate cuts by
banks. Even this token cut does
not percolate to all the players in
the system. In fact, most Banks
are not interest rate fixers; they
are only interest rate followers.
There is very little relation
between the policy rate and
prevailing market rates for
majorityofthebusinesses.
All of this creates uncertainty in
the crucial channels which
Monetary Policy is intended to
influence:
 Aggregate credit flows and
volumeofcurrencyincirculation
 Moneymultiplierand
 Movement of market interest
rates
Widespread slowdown, acute
market illiquidity, wide-spread
delays/defaults in trade credit
based B2B payment system,
severe financial stress in the
farm and MSME sectors and
i n s t a b i l i t y i n f i n a n c i a l
intermediaries and markets
show the failure of Monetary
Po l i c y. T h e i n e f f i c i e n t
performance of Banks in their
roles as the providers of credit
negatively impact the Savings-
Investment-Growthcycle.
Credit flows and interest rates
provided by Banks to firms and
sectors are not in line with their
actual credit needs and risk
profile. Excess liquidity with
banks and severe liquidity jam
across businesses show
inefficient credit intermediation
by banks. RBI's bank centric
monetary policy leads to flawed
understanding and adverse
outcome.
Historically, some of the adverse
outcomes of Monetary Policy
during the 2000s, include sub-
BPLR lending surging to 77% of
bank credit in 2008, massive
circular flow of funds between
Banks and corporates by way of
surge in big-ticket bank loans
and corporates' fixed deposits
with Banks (compounded
annual growth rate (CAGR) of
39.5% during the 2000s) and
excessive financialization of
c o r p o r a t e s . O v e r
financialization impacts capex
and increases risk of instability
inthefinancialsystem.
ThegamesBanksplay
RBI's financial stability report of
June 2014 found that top-10
corporates' financial income
was more than top-10 banks'
treasuryincomeinFY12-13.
These are clear signals of
ECONOMY
40 TISA
2020FEB

Monetary Policy which on the
faceofitistotallyoutoflinewith
marketconditions.
Very low sub-BPLR rates and
high interest-bearing bulk
deposits offered interest
arbitrage opportunities to
corporate, which in simple
words means there was a lot of
money to be made simply by
exploiting the difference in
interest rates. Capex was
impacted.
It seems RBI's big data relating
to interest rates, deposits, funds
and credit flows and banking
operations was of little use as
inputs in policy-making or
taking corrective actions against
abnormal funds flows and
anomalous developments in
financialsector.
Further, persistently inade-
quate flow of funds to
MSMEs, perverse credit
structure favouring consump-
tion, over production and
capacity expansion (capex);
non-synchronised working of
banks & borrowers and excess
statutory liquidity ratio (SLR)
investment, continue to be a
drag on the economy.
The present solvency or liquidity
and payments crisis in non-
banking financial companies
(NBFCs) and housing finance
companies (HFCs) businesses
and poor health of banks make
the financial stability and
ecosystem more vulnerable
thaneverbefore.
One may wonder why in the last
25 years, despite a series of
well-considered moves based
on recommendations of
different expert committees on
Monetary Policy and RBI's
experience, the use of models
and big-data analytics have not
workedtothedesiredlevel?
There are even contrary after-
effects! Crucially, Monetary
Policy basically being Bank-
centric misses out critical
financial variables, which
undermines Monetary Policy
Transmission affecting growth
andfinancialstability.
MissingFactors
A Monetary Policy framework
which is focused on the Banks
misses the bigger and real
pictureofnon-bankfinance.
A rough calculation of working
capital (WC) requirement of
9.43 million firms/companies,
which filed income-tax and
service-tax returns for FY13-14
shows that Banks meet only one
thirdoftheirWCneeds.
Further, bank finance is minus-
cule in case of farm and the
unorganized sectors. Prof R
Vaidyanathan says, “The
unincorporated or non-
corporate sector has the largest
share of national income,
manufacturing activities,
services, savings, investment,
taxes, credit market, employ-
ment and forex earnings. Yet it is
little understood, dismissed as ‘
un-organised', 'informal' or
'residual'sector.
It is important that the nature
androleofthissectorisexplored
to see how it impacts the
economy.”
ECONOMY
41TISA
2020FEB

In short, Bank finance forms a
very small base (far less than
one-third) of aggregate Working
Capital needs of businesses in
the country. The non-banking
channels like trade credit,
finance firms / NBFCs, money-
lenders, and businesses' own
capital are the predominant
sourceofbusinesscredit.
Non-Bank Finance:
M o n e t a r y Po l i c y ' s
Step-son
Bank-centric Monetary Policy
lacks an integrated view of the
Credit System as the operational
dynamics and ecology of Bank
finance and Non-Bank finance
aredifferent.
We cannot build an integrated,
stable and effective Monetary
Policy framework only on the
narrow base of Bank credit
while ignoring the role of non-
bankfinance.
Trade Credit (TC) - Signifi-
cance and Links with
WorkingCapital
(WC)fromBanks
TC or business-to-business
(B2B) credit sales the world over,
is the single largest and most
common source of short-term
business credit. In terms of
credit intermediation and
supply chain financing, TC is
much bigger than WC from
banks.
It is too large, interconnected,
inclusive and critical for
monetary policy transmission to
ignore.
According to the Association of
Chartered Certified Accoun-
tants, London, TC supports
almost half of B2B transactions
globally. Wilson, N. (Trade
Credit in the UK Economy- 1998-
2012) finds that “stocks and
flows of TC are typically twice
the size of those for bank credit
intheUK.”
TC for Wal-Mart is about eight
times its share capital. A study of
9,600 companies in India by
Dun & Bradstreet found that the
share of account payables to
total liabilities of these compa-
nies was 12.3%, whereas short-
term bank credit was 8.6% for
FY2011.
RBI's annual sample studies of
ECONOMY
42 TISA
2020FEB

financials of non-government,
non-financial public limited
companies show that sundry
creditors and short-term bank
credit averaged around 12%
and 10% respectively, of the
total liabilities of these compa-
nies over the 1991-2010
period.
Trade Credit is crucial for
MSMEs
Only 5-10% MSMEs have WC
from banks. TC is the prime
component in the WC manage-
ment of MSMEs. The predomi-
nance of business communities
like Marwaris in trade and
industry is due to community TC
financingsinceages.
Credit multiplier and widening
or deepening of circulatory
Working Capital stream
dependsupon:
 Re-intermediation of Bank
creditandsuppliers'creditand
 Intermediation of firms' own
WC funds through the Trade
CreditChain.
Agglomerative credit chain
effects of millions of day-to-day
commercial transactions on
macro credit aggregate, credit-
based payment system and
output are of systemic propor-
tion.
Credit velocity is dependent
upon the length, depth and
strength of the credit chain
which itself is dependent on the
sequential TC creation and its
circulation by firms along the
supply chain. TC and bank credit
form interdependent links in the
creditchain.
Working capital from banks
ultimately travels and
transforms into TC. A firm's
bank credit need is greatly
determined by the volume
and tenure of its receivables
and payables. Therefore,
bank -centric credit and
liquidity analysis is an over
simplification.
Dysfunctional Trade
Credit
Trust and confidence are the
foundation of a sound TC
system.
Changes in credit culture from
one of religious or ethical
commitment to honour debt, to
increasingly indifferent and
opportunistic behaviour of trade
debtors in delaying or default-
ing on their trade dues impact
theTCecosystem.
These tendencies are accentu-
atedby:
Illiquidityconditions
 Indifferent societal
attitude to credit indiscip-
line
 Weakening of TC's
informal institutional
environment (business
conventions or practices in
inter-firmdealings)and
 Lack of coordinated
actions by industry bodies
against such opportunistic
behavior.
These impact transactional and
environmental trust and
confidenceinTCflows.
As such, the underlying quality
of TC in terms of volume, tenure
and general availability have
weakenedinrecentyears.
A fall in TC flows and velocity
results in both funding
liquidity and market liquidity
crises.
Adverse 'liquidity effect' of TC
assumed systemic propor-
tions when demonetisation
and GST disrupted the use of
cash or informal business
funds for formal transactions.
Demonetisation,GST and
LiquiditySqueeze
ECONOMY
43TISA
2020FEB

RBI's rupee-dollar-swap, repo
operations, open market
operations (OMOs), and Banks'
excess statutory liquidity ratio
(SLR) holdings of about Rs. 8-9
trillion, help in enhancing banks'
liquidity.
RBI's assertion of bank liquidity
in surplus is deceptive and
meaningless when businesses
are reeling under an unprece-
dentedliquiditycrisis.
Bank liquidity does not neces-
sarily translate into micro
liquidity given low credit
confidence, rule-book-based
lending and Banks' limited
reach.
The critical liquidity squeeze is in
the non-bank segment of the
credit market, leading to serious
damage to business confidence
andpaymentsystem.
The use of informal or unac-
counted funds used to be
w i d e s p r e a d a l o n g w i t h
accounted funds across the
economy before introduction of
GST.
Sudden interruption in their
availability and deployment,
following demonetization and
subsequently GST have resulted
in an acute liquidity crisis,
disruption in credit chain and
inordinate lengthening of
average repayment period
acrossfirms.
The very large increase in the
requirement of accounted funds
under the GST regime compared
to limited availability, coupled
with Banks being ill-equipped to
fill the transaction financing gap
left by disruptions in the use of
informal and unaccounted
business funds, have created a
sharpliquiditymismatch.
Unaccounted business capital or
fundsremainunderutilized.
These mismatches in the use of
accounted and unaccounted
funds should have been
taken care of before the
implementationofGST.
Unrealistic treatment of
unaccounted business capital
on par with black money
(generated through illegal
activities) under voluntary
income disclosure schemes
disincentivised its conversion
into formal money and has
implicationsforoureconomy.
But that's a story youcan lookup
in “ A Rescue Plan for Liquidity”
in the July, 2019 issue of TISA…
B.L. Chandak is a former Dy.
General Manager of SIDBI. He
has an M.A. in Economics from
JNU and his articles have been
published in many leading
financialdailiesandjournals.
He has made presentations at
RBI, Ministry of Finance, DC
(MSME), SEBI, & many Industry
Associations. [Hecan be
c o n t a c t e d a t blchandak @
gmail.com]
ECONOMY
44 TISA
2020FEB

Lean – Value
Last month's article ended with
an understanding of the first
principleofLean–Value.
You may recollect that value is
as defined by the customer and
customer alone. If we are giving
something the customer does
not want, we are wasting our
resources. We also defined who
o u r c u s t o m e r s a r e . We
examined concepts relating to
multiple entities such as the
decision maker, the one who is
paying; to a concept applicable
to internal operations of a
business.
The concept of value has an
obvious and immediate
implication. We must do only
those activities that add Value to
the product or service and not
do anything that does not add
Value.
Value, once again, is seen from
customer'spointofview.
This immediately brings us to
theconceptofValueStream.
ValueStream
A product or service is created
from its incoming inputs like
m a t e r i a l o r d a t a ; a n d
systematically converted into a
finished product, ready for the
customer; in various steps,
activities, operations or
processes.
Typically, an organization has
work stations (service and
manufacturing) or machines
(manufacturing) organised,
b a s e d o n s o m e l o g i c .
Customer's product or service
flows through these work
stations in some ordered
manner.
There may be travel time
between one work station to the
next work station, sometimes
the same work station will be
visited more than once. There is
waiting time before the semi-
finished product or service is
picked up for processing at that
workstation.
Then there is processing time;
and finally, the time it waits at
this work station before the job
issenttothenextworkstation.
Raj Aphale
MANAGEMENT
KALEIDOSCOPE
MANAGEMENT
45TISA
2020FEB

At various stages in all this
activity, there are stages of
inspection, quality checks which
are all quality gates, by
whatever name you choose to
callthem.
If we put this information on an
office or factory layout diagram
as the case may be, of various
work stations, flow of work from
start to finish, incoming to
outgoing, first work station to
the last, including outside
processing, in a scaled diagram;
and put in the travel and waiting
times, we get a Value Stream
Map(VSM).
VSM in Operations
Management
VSM is a ver y power ful
technique in managing our
operations. It can help us in
identifying-
1.Distance travelled by a
product or service in the entire
operation. By extension, you
will eventually, include the steps
carried out outside of our
premises / factory / company as
well, covering the entire supply
chain.
2.Waiting time at each station
a n d m a k e a t t e m p t s t o
reduce/minimise/eliminateit.
3.Inspection time, with a view
tominimiseoroptimiseit.
4. Which of our actions are
adding value to the customer
andwhicharenot.
This classification of activities in
terms of value adding and non-
value-adding needs careful
consideration. This can prove to
be a very powerful technique to
improve efficiency of our
operations and we can achieve
much more than we thought
waspossible.
Value Addition
By definition, any activity that
adds Value to the product or
service, is value adding. Any
activity that does not, is non-
Valueaddingactivity.
What is the criterion for defining
this Value? Remember value is
defined by the customer, not
what we think the customer
wants. If the customer does not
want to pay for something, it is
not adding value and must be
classifiedaccordingly.
N
on-Value Addition
Let us look at some examples of
activities not adding value, so
that the remaining can be
understoodtobeaddingvalue.
 Travelling time for material or
information, does not add
value.
 Waiting time, whether in the
stores or at a work station or at
some server or some computer
doesnotaddvalue.
Non-value adding activities can
be classified into 7 categories
(the classical model) called 7
muda (waste). Once identified,
it becomes our job to keep
eliminating them and look for
more.These7mudasare-
a . T r a n s p o r t a t i o n –
Unnecessary movement of
material or data is a waste.
When we use the word
unnecessary, we are tempted to
classify lot of movements under
the carpet of ''necessary''. The
right approach is, whenever you
have a doubt, apply a strict rule
and consider all or most of it
unnecessary!
If you do not move material in
your factory, customer is not
going to pay you less. The same
applies to movement of
information, data, or any other
resource.
b. Movement of people – Like
movement of material is a
waste, unnecessary movement
of people is also a waste.
Unnecessar y movement
includes movement of the
whole body or micro movement
ofevenafingeroreye.
c. Defects / rejects – Producing
defects so that the product gets
rejected is an important waste.
Manufacturing organisations try
to target lower and lower rates
of rejection. This is a visible
MANAGEMENT
46 TISA
2020FEB

waste in manufacturing but not
sovisibleinserviceindustries.
d.Reworking – reworking on
some material or product is
visible waste. Despite this, many
companies simply do not
measure or target the reduction
of rework. In service industry it is
completely neglected. For
i n s t a n c e , i n s o f t w a r e
development business, rework
reflectsinaprojectbeingworked
uponagainandagain.
Typically, developer writes code,
QA finds bugs, developer
corrects it and this situation
repeatsitself.
Where the developer and QA
work together, the same
situation happens at a micro
level. This issue is so common
and accepted, that software
developers say with full
confidence that no project code
can be developed right the first
time.
Manufacturing industry has
gone through this situation and
there is a strong school of
thought that says “Do it Right
the First Time” is possible,
thoughdifficult.
e. Material waiting – waiting
time for material is considered to
be waste, as there is money
blocked in stock, the stock
occupies space and can
deteriorate in value. Most
organizations are now sensitive
to this aspect and are looking to
improve their inventory turnover
ratios and stocks of slow-moving
items.
f. Overproduction – producing
more than what is wanted, is a
waste. In manufacturing
companies, the focus used to be
on utilising resources of money
and people. They, therefore, kept
producing products even when
there was no order for them or
noreliableforecast.
The excess goods just sit in the
stock and block money or
deteriorate over a period of time,
causinglossesforthebusiness.
In service businesses, this can be
interpreted as providing services
the customer is not asking for or
customerdoesnotappreciate.
Often there is a tendency to
provide more, under the excuse
of the “wow factor”. While this
may help retaining a customer
(we haven't seen a reliable study
on the profitability of this yet),
customers may not notice the
extra value we are trying to
provide and an added “wow”
becomes a necessary part of the
product or service next time,
increasing cost, without
increasingthevalue.
A hotel may offer a welcome
drink. Customers may love it. If
they don't get it when they check
in next time, they are going to be
unhappy. And this welcome
drink won't compensate for poor
service.
g. People waiting – Like
material or equipment waiting,
people waiting is one of the
most important wastes. This is
invisible, as we take waiting
time of people (except when
they are manufacturing workers)
forgranted.
People waiting for material,
equipment, instructions,
information etc are examples of
waste. Time spent on searching
isnevercounted.
In a large factory, a supervisor
and workman spent a good 45
minutes searching for an Allen
key!! Can you find any important
document within 30 seconds?
Can you find any file you need
from your computer within 30
seconds ? Searching for
material?Information?
People coming to work late, from
home, tea or meal are some
moreexamples.
One of the most invisible and
damaging wastes in this
MANAGEMENT
47TISA
2020FEB

Tisa feb 2020 final

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