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Budget 2020: This unique fund if announced by FM Sitharaman can help MSMEs face drought, flood, more

Budget 2020 India: Small business, especially, may often be prone to calamities such as drought, flood, earthquake etc. which is bound to leave them in a distressed situation.

(Image: Reuters)
  • By Akash Gehani

Union Budget 2020 India | Credit and Finance for MSMEs: The Indian MSME sector is the world’s second-largest with 6.3 crore enterprises, and 90 per cent of all enterprises in the country belonging to the sector. Employing more than 40 per cent of India’s workforce, the MSME sector of India is one of the primary pillars of the Indian economy, contributing to nearly 30 per cent of the country’s GDP and will play a great role in helping the Indian economy achieve the $5 trillion mark.

However, the sector is still plagued with a host of developmental challenges especially in terms of cash flow, sustainability and access to credit and delayed payments. While the digital revolution has enabled better connectivity for MSMEs to operate in a mobile environment and yet, gain global exposure, operational challenges are what have been holding the sector aback from further exponential growth. With that given, in the upcoming Union Budget 2020, here are three expectations for MSMEs:

Distressed asset fund for MSMEs

External factors such as natural calamities are uncontrollable for any business. Small business, especially, may often be prone to calamities such as drought, flood, earthquake etc. which is bound to leave them in a distressed situation. There have been recent talks about an initiative by the government to introduce a ‘distressed asset fund’ of Rs 5,000 crore. We really hope this comes into action at the earliest as such initiatives will help provide a remedy in cases of unforeseen circumstances.

Help alleviate ‘Liquidity Crunch’

We hope to see a higher budget allocation to help small and medium-sized businesses battle liquidity crunch and measures towards the MSME schemes introduced in the last financial year. Keeping in mind the size of businesses in this sector, liquidity crunch has been a major hindrance to smooth operation for small businesses. Additionally, the activation of the proposed “Fund of Funds” of Rs 10,000 crore to encourage PE and VC firms looking at investing in the MSME segment will bring respite to both the MSME segment and its key stakeholders.

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Payment Act to help regulate timely payments

Managing and controlling delayed payments has always posed a threat to the expansion of the sector. Though the government has established MSME Samadhaan to report cases of delayed payments, having a payment act in place would help regulate timely payments to MSMEs by the government and other large companies.

Enabling growth for Micro-enterprises

Micro enterprises are defined as those who generate a turnover within Rs 25 Lakhs. Such micro-companies can be found in every nook and corner of the country, struggling to manage cash flow for their day-to-day operations. Growth for such micro-enterprises most often seems to be a far-fetched dream. It would be encouraging if the government could introduce policies/allocate funds towards the growth of micro-enterprises that are unable to graduate into small size businesses. The other expectations of the MSME sectors from the Union budget 2020 would include increased employment opportunities, easier GST compliance and allocation of Public Sector Undertakings (PSUs) for the MSMEs in Jammu and Kashmir.

(Akash Gehani is the COO & Co-founder at Instamojo. Views expressed are the author’s own.)

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