India is on the brink of a major economic growth with the country’s GDP likely to amount to $4.3398 trillion in 2025. The country’s thriving business sector consisting of enterprises, micro, small, and medium enterprises (MSMEs) and small enterprises in India will have a major role to play in reaching these numbers. However, as businesses grow, managing expenses becomes a critical factor in sustaining momentum and ensuring long-term success. Growth, while desirable, often brings about a surge in costs that can challenge even the most well-prepared organizations. The need for capital-intensive assets such as equipment, machinery, vehicles, and infrastructure becomes necessary to support increased operations and efficiency.
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In the same vein, Federation of Indian Chambers of Commerce & Industry (FICCI) and PWC have jointly released a report to explore if leasing can help businesses in India gain access to the latest technologies, while maintaining a flexible financing structure and curate customised solutions as per their specific requirements.
The report titled “Unveiling opportunities: Exploring India’s leasing landscape” was launched recently. Shrirang Tambe, Chair, FICCI Sub-Committee on Leasing said, “Leasing is expected to play a major role in the funding of capital expenditure initiatives across all the industrial segments in India in the coming years”.
How Leasing Can Help with Economic Growth
Leasing provides businesses with an alternative to traditional financing methods, allowing them to acquire essential equipment and technology without the significant upfront costs typically associated with purchasing. This approach is particularly beneficial for MSMEs, which often face challenges in securing adequate funding due to limited credit histories and collateral.
The report indicates that by alleviating these financial constraints, leasing can enable smaller enterprises to enhance their operational capacities, boost productivity, and scale their operations more effectively. Consequently, this could lead to increased job creation, higher economic output, and a more vibrant MSME sector, which is a cornerstone of the Indian economy by playing a vital role in achieving the ambitious goals of the ‘Atmanirbhar Bharat’ (Self-Reliant India) and ‘Make in India’ initiatives, which aim to boost domestic manufacturing and reduce dependence on imports.
Kinds of Leasing Products Available
The report highlights that there are various kinds of leasing products that are available, which businesses may opt for based on their requirements:
- Vehicle leasing allows individuals or businesses to use any sort of vehicle for a specified period in exchange for regular lease payments.
- Equipment leasing allows organizations to utilize various types of hardware and tools without incurring substantial upfront costs. This encompasses leasing machinery, medical apparatus, construction tools, state-of-the-art technology (such as IT assets), material handling gear, and mining machinery.
- Software leasing, commonly referred to as Software as a Service (SaaS), enables enterprises to utilize cutting-edge software applications via the internet on a subscription model. This approach negates the necessity for upfront software acquisitions and facilitates consistent updates and ongoing expert assistance from the software vendor.
- Leasing renewable energy systems permits individuals or businesses to rent wind turbines, solar panels, and similar renewable energy setups. This arrangement benefits the lessee by relieving them of the burden of upfront expenses for installation and maintenance, while still enjoying the energy produced.
- Aircraft, ship, rail vessels and other logistics vehicles may also be leased.
For more insights, viewers may download the report on the official FICCI website. The Indian market, with its vast and diverse economic landscape, presents a significant opportunity for growth in leasing. By learning from the experiences of developed markets, Indian policymakers and industry stakeholders can implement best practices to accelerate the adoption of leasing. This includes creating a favorable regulatory environment, enhancing financial literacy, and promoting the advantages of leasing among MSMEs.
