The MSME (Micro, Small & Medium Enterprises) sector has been hit badly during the COVID pandemic. The Government of India though had initiated timely measures in 2020, this COVID pandemic period has been a difficult phase for the MSMEs. The Union Budget 2022 has further brought a fresh array of hope for the revival and sustainability of MSMEs. The Union budget presented by Finance Minister has laid emphasis on inclusive finance, digital transformation, and sustainability. The various initiatives can potentially have a short and longer-term positive impact on MSMEs and the startup ecosystem in the country.
Budgetary allocations
Amongst the various initiatives for the MSMEs sector, one key highlight was the increase in budgetary allocation for MSMEs from last year’s Rs 15,699 to Rs 21,422 crores, which is up by 26.71%.
The Prime Minister Employment Generation Programme (PMEGP) has seen a significant increase in allocation from Rs 12,499 to Rs 17,600 crores, an increase of 29%. Entrepreneurship and skill development schemes allocation also increased from Rs 571 to Rs 718 crore (a 20.48% increase). Within this, the Fund of Funds has got Rs 486 crores, from Rs 350 crores earlier. Similarly, other sub-schemes have also seen a hike. FM has significantly hiked the allocation for the Total-Infrastructure Development Programme — from Rs 1,107 to Rs 1,596 crores.
A fresh allocation of Rs 262 crore has been made for the Micro and Small Enterprises Cluster Development Programme (MSE-CDP). Recognising the need for skilling and technology up-gradation, fresh allocation of Rs 235 crores and Rs 205 crores has been made for tool rooms and technical education, and the ‘Technology Centre Systems Programme’ (TCSP) respectively. The Technology Upgradation and Quality Certification scheme has seen a reduction in allocation.
New Initiatives
Budget 2022 has taken various initiatives for MSMEs, which have been discussed below:
(i) Interlinking key portals. India’s MSME sector has been witnessing encouraging strides towards digitisation. The Government announced the UDYAM, e-SHRAM, and National Career Service (NCS), with an intent to help widen the scope of services they offer.
The intent of e-Shram was designed to develop a nationwide database of unorganised labour, while Udyam portal for registering enterprises as MSMEs and NCS provided online job search, job matching, career counselling, vocational coaching, information on skill development courses, internships, and other employment-related services. While the ASEEM portal has been serving as a platform for the supply of skilled workers as per market demands.
Consequent to the interlinking, these portals will be equipped with live organic databases providing G2C (Government to Consumer), B2C (Business to Consumers), and B2B(Business to Business) services. This initiative of the government is aimed at addressing the demand for skilled manpower and credit facilitation. Thus, financial institutions will benefit to mitigate risks in a better way, and in turn, enhance credit flow and credit outreach to MSMEs.
(ii) Revamp of Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme. This is another welcome measure for the MSME sector. Credit guarantee trust for MSMEs will be revamped and have the allocation of Rs 2 lakh crores more. This in turn will have confidence building for the Banks to expand credit to the MSME sector basis the credit guarantee of trust.
(iii)Extension of Emergency Credit Line Guarantee Scheme. This was introduced in 2020, and has been extended for one more year till March 2023. The guarantee amount has also been enhanced by Rs.50,000 crores to Rs.5 trillion.
(iv) Raising and Accelerating MSME Performance (RAMP) program. This has been launched with an outlay of Rs 6,000 crores over five years, aimed at improving the competitiveness and efficiency of the sector, enabling them to become part of global value chains. This has an allocation of Rs 723 crores in FY’23. RAMP will help MSMEs to recover from the impact of the pandemic.
(v) Accelerating Financial inclusion & strengthening Agri-MSME value chain. The tech-driven initiatives in rural areas such as Kisan drones, digital high-tech services to farmers, up-gradation of 2 lakh Anganwadis, core banking solution for 1.5 lakh post offices, digital banking units in 75 districts, e-VIDYA for 200 TV channels, change of syllabus in agricultural universities, etc are aimed at achieving financial inclusion in the countryside. This will give a boost to productivity in the rural economy.
The Government will integrate 100 per cent of the 1.5 lakh post offices in the country into the core banking system as part of the Budget’s initiatives to increase financial inclusion. For the promotion of digital infrastructure, a DESH-stack e-portal will be launched.
The setting up of the Centre for Processing Accelerated Corporate Exit (C-PACE) which aims to reduce the voluntary winding–up time from the current 2 years to 6 months will encourage MSME to come on board the formal fold.
Also, a greater focus on sectoral thematic funds in agriculture, health and deep-tech, higher allocation to NABARAD, and the formation of committee to study various issues in the ecosystem should go a long way in strengthening the foundations for MSMEs.
(vi) Timely receivables payment for MSMEs. This remains a challenge for MSMEs as payments from the buyers get blocked for an unduly long period, impacting their liquidity. In the case of government procurement, 75% of the running bill of MSMEs will be paid within 10 days. Provision for an end-to-end platform to submit and manage e-bills for government contracts and commitment to paying 75% within 10 days for running bills will help improve liquidity for MSMEs.
Besides, the introduction of surety bonds for suppliers brings in a lot of advantages as it ensures that the critical cash reserves of MSMEs are not blocked-in financial guarantees thereby enabling a sustained cash flow.
(vii) Tax benefits. The Union budget has given leeway to investors in equity shares of start-ups by capping the surcharge at 15%, extending of tax holiday. The Union government has decided to extend custom duty exemption on the import of steel scrap by a year.
(viii) Thrust in sunrise sectors. The government’s thrust in sunrise sectors and opening up of the defence sector to domestic suppliers is a great opportunity for entrepreneurs and enterprises in the broader start-ups and MSME ecosystem. Start-ups and MSMEs can benefit immensely from the policies which are likely to be announced in sunrise sectors like e-mobility, batteries, artificial intelligence, climate change, semi-conductors, space economy, genomics etc.
(ix) Other Budgetary Initiatives Impacting MSMEs. With digitisation gaining great momentum, it is inevitable for MSMEs to deliver their products quickly and efficiently. PM GatiShakti master plan, encompassing the development of roads, ports, railways, airports, mass transport, waterways, and logistic infrastructure, aimed at creating a world-class modern infrastructure to facilitate “seamless multimodal connectivity and logistics efficiency” shall help MSMEs bring down logistical costs and time. The development of 25,000 kilometres of national highways, cargo terminals, multimodal logistics park, and the one station-one product idea of railways will undoubtedly boost the local business and supply chains.
Conclusion
The Union Budget 2022 continues to provide much-needed support to MSMEs. It is important that the blueprint laid down by the government materialises in a time-bound manner to create an Amrut Kaal of the next 25 years for the MSMEs, to realize the government’s vision of making the MSME sector contribute 50 per cent to India’s GDP by 2025.
