Budget 2023: Industry hails FM Nirmala Sitharaman's MSME push; check reactions here

The Finance Minister’s 2023-24 Budget has brought cheer for the MSME sector, which was one of the worst affected in the pandemic. Many micro, small and medium enterprises, which were still reeling due to the Covid-19 impact can expect some relief in terms of finances as well as ease of doing business. 

The government has announced an extra corpus of Rs 9,000 crore in the revamped credit guarantee scheme for MSMEs, which will enable them to avail additional collateral-free credit of Rs 2 lakh crore. It will also reduce the cost of credit by 1 per cent. Also, MSMEs now stand to get 95 per cent of forfeited amount from the government and other undertakings for contract failure during Covid-19. 

Both initiatives, which come into effect from April 1, 2023, have been hailed by the sector as “inclusive” and “pro-development”. 

Calling it a pragmatic Budget for the MSME and fintech sector, Manish Lunia, Co-Founder of Flexiloans, said, “Credit Guarantee for MSMEs of Rs 9,000 crore will aid enhanced credit to MSMEs with a multiplier effect of up to Rs 2 lakh crores, while reducing the cost of credit. Presumptive taxation for MSMEs with enhanced limits to Rs 3 crore, recognition of expenditure as they occur will improve compliance further for MSMEs and reduce the time and cost for it, bringing more MSMEs to the formal sector.”

George Alexander Muthoot, MD, Muthoot Finance, shared, “During the pandemic, MSMEs relied heavily on gold loans to meet their credit needs. The Budget has offered a big relief to MSMEs, which have been one of the most impacted sectors during the pandemic. In order to reduce the stress on the segment and increase the flow of funds, the government revamped the ECLGS scheme via the infusion of Rs 9,000 crore in the corpus. These measures will positively enhance the scope of gold-loan NBFCs like us, which are catering to the underbanked sectors of the society.”

Some founders reckon the announcements relating to MSMEs and the thrust on digital banking will go a long way in supporting the economy, which is recovering from the ill effects of the pandemic. “Union Budget 2023 remains consistent with the Government's growth agenda and aims at small initiatives to achieve a large and lasting impact on the economy in the future. The sector continues to be the spine of the Indian economy, and steps such as Vivaad Se Vishwas, Credit Guarantee, expansion of Skill India digital platform and increase in presumptive taxation would go a long way in further strengthening the sector,” said Kunal Jhunjhunwala, Founder and MD, Airpay. 

In a major step towards promoting digital governance, the government has also introduced PAN as the common business identifier, and is gradually moving towards a system of unified filing. The concept of interoperable digital IDs and registries promises enhanced convenience and reduced costs for individuals as well as businesses, according to sector observers.

Shilpa Mankar Ahluwalia, Partner, Shardul Amarchand Mangaldas & Co, said, “The move to make PAN a universal identifier for all digital systems at government agencies, if utilized effectively, can be a game-changer for digital services. For businesses, it can achieve what Aadhaar has done for individuals… With adequate safeguards around data security and privacy, data linked to PAN could potentially be analyzed to determine eligibility for credit, investment, insurance and other financial products, improving, for example, credit access for SME and MSME businesses.”

“This move will also facilitate the building of a centralized KYC database that could significantly lower KYC costs for banks and other financial institutions when onboarding smaller businesses,” she added. 

The FM, in her Budget, also enhanced presumptive taxation limits for MSMEs with turnover of up to Rs 2 crore. “MSMEs are the growth engines of our economy. Micro enterprises with a turnover of up to Rs 2 crore can avail the benefit of presumptive taxation. I propose to provide enhanced limits of Rs 3 crore to taxpayers whose tax receipts are no more than 5 per cent of total receipts,” she said in her speech. 

Calling it a “progressive” Budget, Chandra Shekha Ghosh, MD & CEO of Bandhan Bank, said, “Support to the MSME sector, along with enhancement of credit guarantee scheme, will provide much needed relief to the sector. The new slabs of taxes will further help boost economic parameters like consumption, thus providing more impetus to economic growth.”

The industry also commended the government for its efforts in improving the ease of doing business. “It’s a very pro-growth and pro-development Budget. Initiatives like improving ease of business by reducing 39,000 compliances and 3,400 legal provisions, revamped credit guarantee scheme for MSMEs with Rs 9,000 crore, along with the various initiatives to improve farmer incomes will go a long way in driving rural consumption, leading to higher sales of autos, tractors and FMCG products,” Rajat Wahi, Partner, Deloitte India, stated. 

 

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