MSMEs, growth engines of the economy, get a major boost in Budget 2023
MSMEs, growth engines of the economy, get a major boost in Budget 2023
From revamping the Credit Guarantee Scheme with an infusion of Rs9,000 crore and enhancing presumptive taxation limits to setting up an entity DigiLocker, Nirmala Sitharaman aims to bring cheer to the Covid-hit sector
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The Budget addresses some of the critical issues related to MSMEs by infusing Rs9,000 crore to the Credit Guarantee Scheme. Image: Shutterstock
During her Budget speech, Finance Minister Nirmala Sitharaman called micro, small and medium enterprises (MSMEs) growth engines of the economy and announced a slew of measures for the 6.3 crore MSMEs. They account for 30 percent of GDP and employ nearly 11 crore people. With an intent to give relief to this Covid-hit sector, Sitharaman said the Credit Guarantee Scheme for MSMEs will be extended with an infusion of Rs9,000 crore. The scheme will be effective from April 1.
Sitharaman added that an announced infusion is expected to enable additional collateral-free guaranteed credit of Rs2 lakh crore and reduce cost of credit by 1 percent. "Last year, I proposed revamping of the Credit Guarantee Scheme for MSMEs. I am happy to announce that the revamped scheme will take effect from April 1 through infusion of Rs9,000 crore in the corpus," she said.
The Budget addresses some of the critical issues related to MSMEs by infusing Rs9,000 crore to the Credit Guarantee Scheme. Also, a thoughtful step is to reduce arbitration as well as easier contract management and refund of money stuck with public enterprises for non-performance during the pandemic, explains Vivek Agarwal, partner and lead, Industrial and Infrastructure Development-Government and Public Services, KPMG in India. “Most of these aspects, we believe, will help ease the working capital and compliance burden on MSMEs.”
Further, to provide some more relief to MSMEs, the finance minister said that in cases of failure by MSMEs to execute contracts during the Covid-19 period, 95 percent of the forfeited amount relating to bid or performance security will be returned to them by the government and government undertakings.
Darshan Shah, vice chairman of the Confederation of Indian Industry (CII) Gujarat, and managing director of Hitachi Hi-Rel Power Electronics, says, "Many of us were fearing that it would be a populous Budget being the last one before elections but it’s clearly not. All the announcements for MSMEs will help in boosting the sector furthermore, and also give them relief in many ways. Under Vivad Se Vishwas scheme, the MSMEs will receive 95 percent of the performance security from the government in cases of failure to execute contracts. This is a great move for this sector which was badly impacted due to the pandemic.”
But Karan Jolly, founder of Ahmedabad-based chemicals manufacturing company Prolife Industries, is not happy with the announcements. “I think the budget for MSMEs in the chemical sector was underwhelming. This budget seems to be more focussed on pleasing the middle class tax-paying people of India,” he says. China and India are the two biggest players in the chemicals manufacturing industry sector. Because of the mishandling of Covid-19 in China, now was the right time to take charge and attract a lot of business to India, explains Jolly. “Also, to attract new investors and encourage the current players of the industry to expand businesses, the government should offer a fast-track regulatory compliance process,” he says.
Some other measures are including enhancing presumptive taxation limits for MSMEs and certain professionals with a turnover of up to Rs2 crore and Rs50 lakh, respectively. “Micro enterprises with a turnover of up to Rs2 crore and certain professionals with a turnover of up to Rs50 lakh can avail the benefit of presumptive taxation. I propose to provide enhanced limits of Rs3 crore and Rs75 lakh, respectively, to taxpayers whose tax receipts are no more than 5 percent of total receipts. Moreover, to support MSMEs in timely receipt of payments, I propose to allow deductions expenditure incurred on payments made to them only when payments are actually made,” said Sitharaman.
In her fifth straight Budget and also the final full Budget before the 2024 general elections, Sitharaman announced plans to launch DigiLocker storage and sharing services for MSMEs and other business entities, including startups, to enable more innovation in fintech services.
According to the Economic Survey 2022-23 tabled in Parliament a day before the Budget, the recovery of India's MSMEs was advancing swiftly, with the Emergency Credit Linked Guarantee Scheme offsetting the impact of the Covid-19 blow on the units through robust credit disbursement.
Only time will tell if these big announcements will bring cheer to the MSME sector.