The Modi government has helped in the formalisation of the country’s Micro, Small and Medium Enterprises (MSMEs), revealed a research report published by the State Bank of India (SBI) on Tuesday (August 15).
The government launched the ‘Udyam Registration Portal’ on July 1, 2020, to facilitate the formalisation of India’s informal economy. The registration process is paperless, free and does not require the submission of any document. Only an Aadhar number is mandatory for registration.
Additionally, the government launched the Udyam Assist Platform(UAP) this year to bring Informal Micro Enterprises (IMEs) under the formal ambit. According to SBI Research, Udyam is now propelling the filing of Income Tax Returns (ITRs) by the MSMEs.
“…Around 22 million micro small and medium enterprises have registered on the Udyam portal (including Udyam Assist Platform)…We mapped these state-wise Udyam registration with ITR filed in respective states,” the report said.
It further added, “We believe (based on our findings) that these 21.8 million MSMEs have also helped in increasing tax filing base in India, which has increased by ~10 million to 78 million in last 4 years. The top 5 states that accounted for 60% of total incremental increase in ITR filling, also accounted for 45% total Udyam registration, supporting our contention.”
SBI Research concluded, “This indicates formalisation of MSME units on a larger scale driven by innovative measures and contribution by all stakeholders“
Tripling in net profit of banks, 2x increase in credit and deposit growth: SBI Research
The Indian banking sector has witnessed tremendous transformation between Financial Year 2013-2014 and Financial Year 2022-2023, revealed the same SBI’s research report.
“Indian Banks, resurgent, strong, capital-healthy, tech-oriented and adopting best global practices look confident and ready to front-lead the aspirations of this new India and the aspiring Middle Indian class…” the report read.
Between FY14 and FY23, the banking credit has increased from ₹60 trillion to ₹138 trillion, thereby registering a credit growth of over 2.3 times. Around the same period, bank deposits surged 2.4 times from ₹77 trillion to ₹187 trillion.
Moreover, the net profit of banks tripled from ₹809 trillion to 2,480 trillion between Financial Year 2013-2014 and Financial Year 2022-2023. According to the SBI research report, it was made possible through the process of ‘consolidation’.
There are 9588 banks/ FIs in India in 2023 as opposed to 12,175 in 2014. The number of Public Sector Banks (PSBs) has also been reduced to 12 from 27 in the past 9 years.
“Consolidation leads to bigger and stronger Banks/FIs…consolidation leads to more profitable non-Bank players in synergy with Banks,” the report added. The Modi government has realised the ambition of financial inclusion through the opening of 49 crores Pradhan Mantri Jan Dhan Yojana (PMJDY) accounts.
SBI Research reveals ascent of Indian middle class
The analysis of the Income Tax returns filed in the Financial Year 2022-2023 revealed the ascent of the Indian middle class, reported SBI Research.
The State Bank of India estimated that there will be 48.2 crore ITR filers in FY 2047 as compared to 7 crores in FY 2022-2023. By then, 85.3% of ITR filers will also be eligible to pay taxes.
About 25% of them are also expected to leave the lower-income strata by the Financial year 2046-2047. The per capita income is also expected to rise from ₹2 lakhs in this Financial year to ₹14.9 lakhs by FY 2047.
This can largely be attributed to the Modi government’s efforts in formalising 7 crore Micro, Small and Medium Enterprises (MSMEs) and empowering the middle class.
Moreover, the weighted mean income of ₹4.4 lakhs in the Assessment Year 2013-2014 has increased to ₹13 lakhs in Assessment Year 2023-2024 and is projected to increase to ₹49.7 lakhs (~ 50 lakhs) in Assessment Year 2046-2047.
The stark increase in weighted mean income, as evident from the ITR filed between Assessment Years 2011-2012 and 2022-2023, explains the transition of filers from the lower-income group to the upper-income group.
