Chief Economic Advisor (CEA) V Anantha Nageswaran on Monday criticised large corporations for pressuring the government to roll back a Budget 2023 measure aimed at ensuring timely payments to micro, small, and medium enterprises (MSMEs).
The tax provision (Section 43B(h)) mandates that payments to MSMEs must be made within 45 days for corporates to claim tax deductions on purchases from these units.
Speaking at an Exim Bank event in the capital, Nageswaran called out industry associations representing big businesses for resisting the “powerful behavioural nudge” and highlighted the precarious position of MSMEs. He noted that delays in payments create uncertainty for small businesses and make it harder for banks to extend credit to them, further aggravating their financial challenges.
“Large enterprises continue to see MSMEs as a source of working capital for themselves, rather than recognising that timely payments are critical for the survival of these smaller units,” Nageswaran said.
The CEA also emphasised the need to tackle political economy and behavioural resistance in India’s corporate landscape. He pointed out that the Budget 2023 provision—where tax deductions are allowed only for actual payments made to MSMEs, not on an accrual basis—was a progressive step to address the issue.
Nageswaran has previously criticised corporate practices that harm stakeholders like MSMEs and employees. In December 2024, he flagged concerns over poor employee compensation by India Inc., warning that it could dampen consumer demand and eventually harm corporates themselves. He noted that while private sector profitability has surged fourfold in recent years, employee pay has stagnated, undermining economic growth.
“Not paying employees well will be self-destructive for corporates as weak income levels won’t generate sufficient demand for their products,” he had said.
By reiterating his stance on these issues, Nageswaran underlined the government’s commitment to supporting MSMEs and promoting equitable economic growth.
