Announcing a slew of measures for the Micro, Small & Medium Enterprises (MSMEs) in the Budget 2023, the finance minister said MSMEs are the growth engines of our economy.
The government revamped credit guarantee scheme for MSMEs to take effect from April 1, 2023 through infusion of Rs 9,000 crore in the corpus. This scheme would enable additional collateral-free guaranteed credit of Rs 2 lakh crore and also reduce the cost of the credit by about 1%
Also, 95% of the forfeited amount relating to bid or performance security, will be returned to MSMEs by government and government undertakings in cases the MSMEs failed to execute contracts during Covid period.
FM Sitharaman also announced a unified Skill India Digital platform to be launched for enabling demand-based formal skilling, linking with employers including MSMEs, and facilitating access to entrepreneurship schemes.
Deduction for expenditure incurred on payments made to MSMEs to be allowed only when payment is actually made in order to support MSMEs in timely receipt of payments.
Kanika Mayar, Partner, Vertex Ventures, SEA & India, feels that Rs 9,000 crore infusion amount in the MSME corpus would push the entrepreneurial spirit of the country.
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Anand Kumar Bajaj, Founder, MD and CEO, PayNearby, said that to make MSMEs more resilient and competitive, the Rs 9000 crores infusion will help shield them from the rising interest rate burden.
“This measure will ensure the continued handholding of MSMEs, which account for more than 30% of India’s GDP and remains an important engine of economic growth, job creation, income generation and livelihood support,” Bajaj said.
Deepak Aggarwal, Co-Founder, Moneyboxx, said the move will facilitate additional collateral-free guaranteed credit of Rs 2 lakh crore for MSMEs.
“In fact, last year itself we had suggested revamping the credit guarantee scheme for MSMEs. Significantly, the scheme will nudge banks to lend to MSMEs, which they were earlier reluctant to do because of the absence of adequate collateral. This will lower the cost of credit by around 1% and benefit the fund-starved segment,” Aggarwal added.
R Narayan, President FICCI CMSME, Founder &CEO, Power2SME, said government’s efforts to boost the MSME sector will not only help the sector to gain confidence back but help in creating employment in the country.
“We appreciate the major step taken by the government to enhance the ease of doing business, reducing more than 39,000 compliances as well as decriminalising over 3,400 legal provisions. It’s indeed an essential step for a prospective future and was much required to sustain the growth momentum for the MSMEs,” Narayan said.
The allocation of funds for credit support will help MSMEs access finance at lower interest rates and improve their ability to invest in growth.
Experts feel that the measures to ease the process of doing business, such as simplifying the tax regime and reducing compliance burdens, will help MSMEs operate more efficiently and effectively.
“The budget focus on skill development and entrepreneurship, with the announcement of new incubation centres and training programs for young entrepreneurs, is a welcome step. The outlook is optimistic for the big picture and the success will now hinge on effective implementation,” said Sandip Chhettri, CEO TradeIndia.com.
Gokul Tandon, Group Executive Chairman, Cloudconnect Communications added that the extension of the carry forward of losses on changes in shareholding of startups to 10 years after incorporation from 7 years will help the sector cap on losses and create more fungible profits.
“Additionally, under the Startup India initiative, Fund of Funds for Startups (FFS) scheme, Startup India Seed Fund Scheme (SISFS) and Credit Guarantee Scheme for Startups (CGSS), the aim is to provide capital at various stages of the business cycle of a startup. We see this as a progressive measure to build a healthy start-up environment in the country,” Tandon added.
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