Promoting SC/ST Entrepreneurs

What is the issue?

Addressing the limitations in government measures to promote SC/ST entrepreneurs is essential to meet the intended objectives.

Capital can break caste system

What is the recent measure?

• The government recently tried to ensure a market for MSMEs by reserving a fifth of all purchases of PSUs and ministries for them.
• While doing so, it reserved a certain portion for Scheduled Castes and Scheduled Tribes (SC/ST) entrepreneurs.
• At 4% of the total spending of around Rs 6 lakh crore, this means government departments and PSUs have to buy Rs 24,000 crore of goods and services from SC/ST enterprises every year.
• There is no price preference; the enterprises have to agree to match the lowest bidder.
• If their quality is up to the mark, they will get the order, subject to the 4% cap.

What are the limitations?

• Capital - Getting SC/ST enterprises to an adequate level of quality can often mean completely reorienting their business practices.
• This, in turn, would mean entailing large investments which, often, they cannot make.
• There is also a concern that the lack of capital is a consequence of casteist bank managers.
• Banking - Besides the above, most banking is collateral-based.
• But millions of poor youth, with no family history of business or sufficient collateral, find it difficult to raise bank loans.
• So scaling up businesses is not easy irrespective of caste background.
• Others - The above is compounded by red tapism in most firms, high costs of land, high electricity tariffs, impossible labour laws, etc.
• Naturally, the burden is higher for smaller firms as unlike large ones, there are no agents to handle these issues.

Source: Financial Express