Interim Budget 2019: Major Benefits For The MSME Sector Unlikely

The SME sector is not likely to see significant benefits from the interim budget. This is simply because of the nature of the interim budget, which in the past has seen Finance Ministers not undertaking significant changes.

On the other hand, what we are likely to see is some statement on the policies and programmes that have been undertaken for the sector.

The government has been pushing, the Reserve Bank of India to provide relief to the stressed MSME sector. Accordingly, the RBI allowed a one-time restructuring of existing MSME loans that have defaulted, but are not non-performing as on 1 January.

According to reports, 25 per cent of the corporate loans disbursed go to the MSME sector and hence the significance.

On government's demand, the Reserve Bank of India issued new guidelines for debt restructuring of Micro, Small and Medium Enterprises, recently. Rating agency ICRA has estimated that up to Rs 10,000 crore of loans to small business will be structured.

It's most interesting to note that while the interim budget may not make any significant policy changes, the Union Budget 2019-20 to be delivered after a new government takes shape later this year, may have significant changes for the MSME sector.

In fact, in the last year's Union Budget a big step for MSMEs was taken by cutting the corporate tax rate to 25 per cent of companies with annual turnover up to Rs 250 crore from Rs 50 crore, which was estimated to leave more investable resources with 99 per cent of seven lakh firms filing their tax returns.

In short, expect a boost to the sector, not in the interim budget, but in the Union Budget later this year.