Question: The Indian Government’s e-Marketplace platform was launched a few years ago. Has it met with any success in helping small businessmen?
ANSWER: The Government e-Marketplace (GeM) platform has become highly successful as it has enabled small entrepreneurs to participate in government tenders at any time, breaking the monopoly of established service providers. This platform currently has over 370,000 buyers and more than 2.1 million sellers for around 12,000 products and more than 320 service categories. Service contracts have been most successful as, during the last financial year ended on March 1, 2024, Rs4 trillion worth of gross market value has been achieved. The Commerce Ministry in India is using artificial intelligence (AI) in a big way and has set up a generative AI-based chatbot to resolve any query from prospective customers. With a view to improve the ease of doing business, transaction charges have been reduced substantially. A transaction charge of only 0.3 per cent of order value is levied for orders between Rs500,000 and Rs100 million. Orders in excess of Rs100 million attract a flat fee of Rs300,000. Caution money deposit has been reduced from Rs5,000 to Rs2,000 for new sellers with turnover up to Rs10 million. Currently, Korea’s online e-procurement system is the biggest platform which had a turnover of $85 billion during the last fiscal year, of which almost 75 per cent related to works contracts. According to Indian Government officials, GeM is expected to become the world’s biggest public procurement platform during the current financial year 2024-25.
Question: Is the Indian Government doing enough to promote the cause of medium and small scale enterprises which generate employment and are responsible for substantial exports from India?
ANSWER: The Indian Government is giving meaningful incentives to micro, small and medium enterprises (MSMEs) which are involved in labour intensive manufacturing. Technology support is being given to help them compete globally. Term loans are being provided for purchase of machinery and equipment without collateral or third party guarantees. A new mechanism is being set up for facilitating the continuation of bank credit to MSMEs during their stress period. This will ensure that they continue to get credit and avoid getting the loan classified as a Non-Performing Asset. Further, the Ministry of Corporate Affairs has directed all companies to disclose information on payments made or which are overdue to small businesses on a half-yearly basis. This is done to ensure timely payments to these enterprises. To enable traditional artisans to sell their products in international markets, e-commerce export hubs are to be set up to facilitate trade and export related services.
Question: As I am returning to India shortly after retirement, I am planning to get into securities trading as I believe that millions of Indians, young and old, are involved in this business. Being cautious by nature, I would like to know what risks I am exposed to.
ANSWER: Trading in shares and securities carries its own set of risks. While profits may be easy to come by sporadically, the chances of losses in trading are even higher. A recent study by the research division of the Securities & Exchange Board of India (SEBI) reveals that in the cash section of the stock market, one in three investors were involved in intra-day trading. According to the report, seven out of 10 investors who traded suffered losses. The study has recorded that the number of individuals who are involved in intra-day trading in the equity cash segment has increased from 1.5 million in 2019 to 6.9 million in 2023. This surge in participation has been associated with a rise in traders with low turnover volumes. These traders belong to the Tier 2 and Tier 3 cities of India. SEBI and the Reserve Bank of India have cautioned investors against such trading which is virtually speculative in nature. Many investors who are not knowledgeable have ventured into the equity derivatives segment of the market. The SEBI report has stated that nine out of 10 such traders have lost money. With a view to dampen the enthusiasm of traders, the government in its recent budget introduced last month has proposed to increase the rates of the Securities Transaction Tax (STT) with effect from July 23, 2024, on sale of an option in securities from 0.0625 per cent to 0.1 per cent of the option premium. Further, the STT has been increased on sale of futures in securities from 0.0125 per cent to 0.02 per cent of the price at which such futures are traded. Hence it is certainly hazardous to get into intra-day trading or enter into F&O transactions, apart from the high costs involved by way of STT.
(H. P. Ranina is a practising lawyer, specialising in corporate and tax laws of India)