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Study About Awareness and Availing of Various Direct and Indirect Fiscal Incentives and its Impact on Financial and Strategic Decisions of MSMEs

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  • Falguni H. Pandya

Abstract

In India as well as abroad, micro, small, and medium enterprises (MSMEs) are very well known for their contribution to generate employment, export, inclusive growth, and innovation with very low or medium level of investment. However, their contribution to the economy depends upon their competitiveness and sustainability; and in this respect, MSMEs have distinct disadvantage as compared to the large industries. What is required is to awaken the firms for functional competencies for growth and for that financial institutions and the government should find ways and means to spread awareness and sustain its growth for the interest of the nation. Furthermore, in order to undo the setbacks suffered during the British colonial period by craftsman and rural artisans who constituted the backbone of India’s traditional and self-sufficient economy; the policymakers’ task was to make them once again stand on their own feet. In this regard, the government has designed fiscal policy and fiscal instruments as a tool to achieve specific macroeconomic and sector-wise objectives. However, fiscal incentives act as an instrument to enhance the growth of industry and in turn that of economy is a debatable issue all over the world. The present article attempts to examine different types of fiscal incentives given to the MSME units through the survey cum interview method; for that 216 units of GIDC were visited and interviewed. The result revealed that the government must improve awareness of incentives and reduce the procedural complexities to avail it. Furthermore, it was found that direct fiscal incentives such as investment subsidy for establishment of new units and interest rate subsidy and not indirect incentives such as energy review subsidy, cash subsidy for assessment of water consumption and so on are preferred by MSMEs.

Suggested Citation

  • Falguni H. Pandya, 2017. "Study About Awareness and Availing of Various Direct and Indirect Fiscal Incentives and its Impact on Financial and Strategic Decisions of MSMEs," Business Perspectives and Research, , vol. 5(1), pages 36-68, January.
    • Handle: RePEc:sae:busper:v:5:y:2017:i:1:p:36-68
    DOI: 10.1177/2278533716671628
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    References listed on IDEAS

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    1. Benjamin Russo, 2004. "A cost-benefit analysis of R&D tax incentives," Canadian Journal of Economics, Canadian Economics Association, vol. 37(2), pages 313-335, May.
    2. Cielik, Andrzej & Ryan, Michael, 2005. "Location Determinants of Japanese Multinationals in Poland: Do Special Economic Zones Really Matter for Investment Decisions?," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 20, pages 475-496.
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