With the first full budget of the Modi 3.0 government around the corner, the MSME sector is hoping for a number of measures to be undertaken by the government to enhance their ease of doing business. The budget, to be presented on July 23 by Finance Minister Nirmala Sitharaman, is expected to address the issue of the revised 45-day payment rule introduced this financial year. Moreover, MSMEs are also looking at steps to boost credit access for them.
Here are the key recommendations from MSME experts and key stakeholders of the MSME ecosystem in India:
Vijay Kalantri, Chairman, WTC Mumbai & President, All India Association of Industries: It is imperative that the government recognises the contribution of MSMEs which needs access to credit to the tune of Rs 19 lakh crore which is the deficit in credit sanctioned to MSMEs as compared to their contribution of 30 per cent in GDP and 40 per cent in exports. The interest rate should be brought at par with the housing loans to enable them to upgrade their technology, skilled labour and infrastructure.
Mukul Goyal, Co-Founder, Stratefix Consulting: We anticipate initiatives to assist workforce development and job creation for MSMEs. The budget should allocate significant funding for upskilling and reskilling programs, particularly in automation, artificial intelligence, and data analytics. Further, we hope the budget will further support programs like ECLGS, PCGS to improve credit availability. We also expect the budget to include specific funding for initiatives that encourage the adoption of cutting-edge technologies.
Amit Bansal, CEO, Solv: The government should expand the reach of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and promote innovative lending models to bridge the MSME credit gap. Moreover, simplifying compliance procedures and reducing regulatory complexities will unleash the true potential of these enterprises.
Rakesh Kaul, CEO, Clix Capital: MSMEs are the driving force behind India’s economic growth and prosperity. To fully unlock their potential, the budget should prioritize measures to improve access to liquidity, skill development, and ease of doing business for small enterprises. Strengthening the digital infrastructure for MSMEs will also enhance their creditworthiness and contribute to the industry’s growth.
Monu Jain, Partner-credit, Aavishkaar Capital: There is an expectation that 45-day payment terms for MSMEs will be relaxed to avoid diversion of sourcing to non-MSME vendors by larger corporates. Lesser-known adverse impact is on exporting MSMEs who have been squeezed out of liquidity due to expedited payments to MSME vendors but no change in receivables from overseas customers.
Moreover, a funding pool for MSMEs with an outlay of over Rs 10,000 crore crore is being speculated along with rationalising existing guarantee schemes to provide incentives to financial institutions for lending. There is also expectation for schemes at subsidised rates for products customised for MSMEs and relaxing the SMA and NPA norms for MSMEs to provide more flexibility in their operations.
Winny Patro, CEO and Co-Founder, Recordent India: Introduction of section 43B(H) had an impact around the end of FY24 and will again only impact late payers during FY closings. There is a need to address the problem holistically like how the banking industry got better with timely payments due to credit bureaus. MSME data stack could be one of the solutions to reduce credit risk and avoid late payments. In addition to this, benchmarking payment terms based on sectors and the nature of products/services could be another solution.
Karthik Srinivasan, Chief Business Officer at HDFC Bank subsidiary HDB Financial Services: As we advance towards the ambitious $5 trillion economy milestone, we look forward to continued support for policies that enhance digital infrastructure, particularly in the banking and fintech sectors, to strengthen the economy. Over the years, the borrowing prospects of MSMEs have improved, and this budget should lay the groundwork for a more inclusive, resilient, and dynamic financial ecosystem for MSMEs. Implementation of these measures will not only benefit the NBFC sector but also contribute significantly to the rural economy and the financial well-being of Bharat.