In November last year, the Prime Minister announced 12 key initiatives aimed at uplifting the MSMEs.
Union Budget 2019: Narendra Modi government has been trying to push out perks for the MSME sector (Micro,Small and Medium Enterprises) as it seeks to spur economic growth ahead of general election 2019. In November last year, the Prime Minister announced 12 key initiatives aimed at uplifting the MSMEs.
Recently, the limit of GST exemption was doubled to Rs 40 lakh to bring relief to small businesses. Even the RBI stepped up to ease the burden of the debt-ridden MSMEs, by handing out a loan recast scheme for loans upto Rs 25 crore.
MSMEs are the mainstay of indian economy. They contribute to around 95% of the enterprises of the country and make up to about 30% of the overall GDP. Around 20% of the MSMEs are based out of rural areas and consequently are a major source of employing rural workforce.
However, structural reforms like demonetisation and the GST shook up the small businesses sector, leaving them starved of cash, and brought on practical hurdles — especially for those involved in exports, RBI said in a recent report.
That said, the report added that in the long run both those measures will turn out to be positive. Nevertheless, in the attempt to alleviate the damage caused by them, it is expected that the government will hand out generous incentives for the MSMEs.
In the past four years, Finance Minister Arun Jaitley has rolled out various measures for the benefit of the MSMEs. Budget 2018 saw an increased allocation to MSMEs to Rs 6,552.61 crore, from Rs 6,481.96 crore in the previous budget.
Getting access to institutional credit has been one of the major problems of the MSMEs. In budget 2015, Jaitley launched Pradhan Mantri Mudra Yojana to provide credit to SMEs from Rs 50,000 to Rs 10 lakh, for a period of 5-7 years. The scheme aimed at making affordable credit accessible to SMEs and bringing them under the fold of formal financial system. While Budget 2017 saw a budget allocation of Rs 2.44 lakh crore for Mudra yojana, in budget 2018, it was given a fresh allocation of Rs 3 lakh crore.
SMEs have found it difficult to make the most of technology. Trade Receivables Discounting System (TReDS) was initiated in the budget 2015, to serve as a web based platform for facilitating finance to MSMEs through multiple financers at a competitive rate. In Budget 2018, Jaitley proposed to bring public sector banks and corporates on the TReDS platform and link it with the goods and services tax network (GSTN). This move was expected to bring in more credit and make TReDS more usable and credible.
In budget 2017, a tax relief was awarded to small businesses. The corporate tax for those with an annual turnover of Rs 50 crore or less was reduced to 25% against 30% in the previous budget. In the last budget, this tax relaxation was extended to the companies that were recording a turnover of upto Rs 250 crores.
The National Manufacturing Competitiveness Program, which received an allocation of Rs 506 crore in 2017-2018 was hiked to Rs 1006 Crore in 2018-2019. The scheme is aimed at building a stronger and competitive MSME sector.
Narendra Modi government has also started various flagship programs that were chiefly aimed at boosting the MSMEs, if not directly, then indirectly. Initiatives like Stand-Up India, to encourage participation of SC/ST and Women entrepreneurs and Make in India to promote indigenous industries were started by the ruling government.
Skill India was another initiative launched by this regime. The allocation to the Ministry of Skill Development and Entrepreneurship was was increased from Rs 3,016 crore to Rs 3,400 crore. Recognising the need for digitization of the MSME, the Digital India programme saw the allocations doubling in the latest budget to account to Rs 3073 crore.