Union Budget 2021: ‘Govt has taken right steps to promote making of import substitute items by MSMEs’

Updated: February 02, 2021 1:15 PM

Union Budget 2021 India: The additional government spending will bring business opportunities to the MSME sector. The vision of achieving a $5-trillion economy will only be possible when MSMEs are able to become global players.

Budget 2021-22, Union Budget 2021The share of disposed applications by MSEFCs out stood at only 8.9 per cent in the past 12 months.
  • By Manguirish Pai Raikar

Indian Union Budget 2021-22: Finance Minister Nirmala Sitharaman presented the Budget for 2021-2022 on Monday in Parliament. This year the country, having faced critical conditions of the pandemic through the year, had a revenue shortage which led to an increase in the estimated fiscal deficit. Throughout the year the government monitored the pandemic situation and had taken suitable action to prevent the total collapse and in the process helped the economy to revive to some extent. Under these critical circumstances preparing this budget was a great test in itself.

Economists opined that more money should be brought into the hands of people to channelize the economy. This goes with the saying that the government should spend more when the economy is in a sluggish growth stage. India is currently the fifth-largest economy in terms of GDP and is catching up with the growth targets when the entire world is wobbling. The lockdown period due to COVID-19 resulted in disruption of sales leading to loss of revenue and reduction in demand. Businesses were confronting an intense money crunch because of a sharp fall in business and operational difficulties with low or zero labour throughout the COVID-19 pandemic since workers had migrated to their hometown. Hence loans taken from NBFCs can see a considerable increment in default payment levels. The lockdown interrupted the supply chain which pushed costs for crude materials up that contrarily hurt income. Therefore, delayed lockdown had material effects on the items/administrations offered by small firms.

There were a lot of incentives coupled with reforms brought in by the government to encourage growth in the industrial sector. Changes in the MSME definition, increased funding through banks, equity funding, and a lot of other fiscal concessions were introduced. The resilient industry also responded with vigor and dynamism. The hard work put in by the trade and industry has shown results and the recovery can be measured from the GST figures.

Also read: Budget 2021 boosts domestic startup funding, eases capital raising by extending capital gains exemption

The budget had many new incentives for MSMEs like the dispute resolution scheme, the definition of small companies has been widened, LLP act decriminalization to reduce the rigor of penalties, incentives to one-person companies, and tax holidays extended for startups. The government also proposed to reduce margin money requirements from 25 per cent to 15 per cent for startups. The Finance Minister has provided Rs 15,700 crore for the Ministry of Micro, Small and Medium Enterprises. The additional Government spending will also bring opportunities for business to the MSME sector.

The vision of achieving a $5-trillion economy will only be possible when MSMEs are able to become global players. The budget takeaway is that the government has taken steps to promote manufacturing of import substitute items under ‘Make in India” and also lots of incentives for exports. When the entire world is reeling under the pandemic, it is commendable that we already have two vaccines and another two are on the way. We have been the suppliers to the world in pharmaceutical products and we could do this with other products as well. This budget has opened avenues for new businesses as well as startups.

Manguirish Pai Raikar is Chairman at Assocham’s National Council for the MSME sector. Views expressed are the author’s own.

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