Budget For MSME: 7 Game-Changing Announcements By FM

The government's emphasis on employment opportunities, skill development, MSMEs, and the middle class is the most significant advantage of Budget 2024. MSMEs and manufacturing, especially labour-intensive manufacturing, are given special consideration in this budget. The government has developed a package for MSMEs that includes financing, changes to regulations, and technical support to help them expand and compete worldwide. According to Budget 2024, a credit guarantee plan would be implemented to enable MSMEs to acquire machinery and equipment using term loans without the need for collateral or a third-party guarantee.

Public sector banks will increase their in-house capability to evaluate MSMEs for credit rather than depending on external assessment. a fresh approach to helping MSMEs maintain bank credit during a time of hardship. The FM plan is to lower the required onboarding limit for buyers on the TReDS platform from Rs 500 crore to Rs 250 crore in order to help MSMEs release their working capital by turning their trade receivables into cash. Within three years, SIDBI plans to open more branches and extend its services to all key MSME clusters, offering them direct financing. This year, 24 more of these branches will open, bringing the total number of large clusters served by the service coverage to 168.

FM has said that financial assistance will be made available to establish 50 multi-product food irradiation units in the MSME sector. It will be made easier to set up 100 food safety and quality testing labs that are certified by NABL. In order to facilitate the sale of products manufactured by MSMEs and traditional craftspeople in global marketplaces, E-Commerce Export Hubs will be established through public-private partnership (PPP).

Considering the 7 announcements for the MSME sector, here are the reactions from prominent players in the MSME sector.

Raghunandan Saraf, Founder & CEO of Saraf Furniture

This can therefore be considered as a game-changing initiative for workforce development in India: the announcement of a pan-India internship scheme for 1 crore youth in the top 500 companies. Nearly 12 million people enter into the job market every year, so this scheme may claim a fair share of new job seekers. The span of 12 months gives ample exposure and makes up for the gap between education and what actually is expected by industry standards. The demographic dividend of India will be the very foundation on which this initiative should ride, due to its 65% population below the age of 35. Involving top companies would ensure quality training through follow-up employment. It will also help negate the very basis of one of the most cited reasons for skill mismatch, as 63% of Indian firms face difficulty in filling job vacancies due to skill gaps. This would greatly increase employability, hence significantly reducing the youth unemployment rate of 23.2%, raising general productivity in the economy.

Delphin Varghese - Co-founder and Chief Revenue Officer, AdCounty Media

The seriousness of the government in facilitating credit access to aggrieved MSMEs stands as a critical factor for survival and growth of the sector. While MSMEs are the backbone of the economy-contributing 30 per cent to GDP and 48 per cent to exports-it faces an estimated credit gap of ₹20-25 trillion by IFC estimates. There could be a gap bridged with the proposed multiple mechanisms; for example, credit growth to MSMEs was 11% year over year in FY2021. Better access to credit would have implications for massive job creation and economic stability if taken from over 110 million working in the MSME sector. This is opportune; 67% of MSMEs surveyed said that the pandemic hit them adversely. By ensuring credit flow, it would revive a sector that is important for achieving India's goal of a $5 trillion economy.

Atif Shamsi, CEO & Founder at OuchCart

It is an integral part of ease of doing business reforms, and subnational deregulation aimed at reducing the compliance burden of MSMEs. As of now, compliances run to over 750 annually for MSMEs, with an estimated ₹12 lakh crore cost incurred for the same. The maze of these regulations has reportedly retarded their growth-it is stated that about 64% of MSMEs reported compliance as a huge challenge. Streamlined, these two processes can help save billions in compliance costs and hundreds of work hours annually. This is also in step with India's vision to break into the top 50 in the World Bank Ease of Doing Business rankings from its current position of 63rd. Coupled with simplification of regulations at the state level, it has the potential to unlock the actual potential of the MSME sector accounting for 95 percent of India's industrial units. Coupled with access to credit, this could be transformative for the 63.4 million MSMEs in India.

Ridhima Kansal, director of Rosemoore

It is of significant interest that the Economic Survey puts a focus on striking a fine balance between concerns over trade and security with China for MSME growth. Indeed, the Chinese share in India's imports is about 30%, a large share of which comprises intermediate goods that are vital for MSMEs. Recent tensions along the border led to restrictions that affected 19% of India's imports from China. This is what most affected the MSME sector, with 45% of them reporting some form of supply chain disruption. This call for balance underlines a complex interdependence, wherein the 70% of active Pharma Ingredients come from China and 80% of cells utilized in the solar sector are also manufactured there. The government is balancing this call for shielding MSMEs from dumping or unfair competition against access to vital inputs. This is a sensitive balancing act for 6.3 crore MSMEs in India, as it affects their competitiveness and survival not only in the domestic market but also in international markets.