Recent Budgets And The Growing Importance Of MSMEs

Recent Budgets And The Growing Importance Of MSMEs

LegalKart Editor
LegalKart Editor
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Last Updated: Nov 6, 2024

The Importance Of MSMEs; The Heart Of The Larger Socio-Economy 

MSME, which stands for Micro, Small & Medium Enterprises, is the well-nurtured sanctuary of not so powerful active agents of the Indian Economy. Yes, the businesspersons, which are not so big and not so powerful, thrive, flourish and grow in this protected segment of the economy. MSMEs are the real strength, may not be (statistically) of pure economy but of the larger (substantial) socio-economy. A large number of people exist and subsist in the MSME segment. 

Also read The MSMED Act, 2006 And Its Amendment In 2018.

Why Are MSMEs So Important To The Larger Socio-Polity? 

MSMEs represent the struggle of people to rise up and make a mark in the socio-economy. They provide the platform wherein the non-rich and not-so rich make a fervent effort towards reaching tall heights. They are the economic expression of the most noble ideal of the marvel of democracy. Strengthening MSMEs is strengthening the fuel that moves society and energizes the onward march of the economy. MSMEs also tend to subdue inequality and destroy chronic poverty. 

Post-2018 Union Budget, The Changes Introduced Vis-à-vis The MSMEs In The Succeeding Union Budgets: 

In order to help MSMEs, the government of India introduced the MSME (Amendment) Bill Of 2018. Following 2018, the succeeding budgets introduced the following changes. We start from the latest budget, 2022-23, here are the changes: 

MSMEs In The Indian Union Budget 2022-23: 

As per the announcement made during the Union Budget 2022-2023, India’s micro, small, and medium industries (MSMEs) need strong market support. With the rise of digitisation, it is essential that MSMEs can deliver and sell their products quickly and efficiently. Prime Minister’s GatiShakti National Master Plan aimed to create a world-class modern infrastructure to facilitate “seamless multimodal connectivity and logistics efficiency” which shall help in developing the market for MSMEs and bring down logistical costs and time.

The government has also tried to address the demand for skilled manpower and credit facilitation by setting up to link the Udyam, e-Shram, NCS, and ASEEM portals which if materialized, can be a propelling factor for the MSMEs efficient output. Bringing in trust-based governance in ease of doing business will also benefit the MSME sector as they spend considerable time in documentation and approvals.

The initiation of surety bonds for suppliers brings in many advantages as it makes sure that the critical money reserves of MSMEs are not blocked in financial guarantees thereby enabling a continuous cash flow. Another impetus to the MSMEs cash flow cycle comes from the announcement that 75 percent of running bills shall be mandatorily paid within  a period of ten days. The setting up of Centre for Processing Accelerated Corporate Exit (C-PACE) which aims to reduce the voluntary winding–up time from the current 2 years to 6 months will encourage MSME to come on-board the formal fold. Setting up 75 digital banking units in 75 districts of the country can provide innovative solutions for improving the liquidity of MSMEs.

You may also read Company Changing Its Activity - The Karmic Reorientation Of A Corporate Body.

MSMEs In The Indian Union Budget 2021-22: 

The Financial Incentives Proposed By the Government In The Union Budget Of 2021 (In the shadow of Covid pandemic): 


In order to support the economy and MSMEs that were severely affected due to the outbreak of COVID-19:


The government made an announcement of allocation of Rs 15,700 crores for the MSME sector which were double the Budgeted Expenditure of 2020


Also, a higher budget was  allocated towards the Prime Minister Employment Generation Programme (PMEGP) and Other Credit Support Scheme to help the pandemic struck MSMEs. The previous year the budget was INR 2800 crore and currently, it has been increased to INR 12499.70 crore.


Customs duties were  reduced to 7.5 percent on semis, flat, and long products of non-alloy, alloy, and stainless steels (raw materials for certain MSME businesses) which would help them procure raw material at cheaper rates than were otherwise available in the domestic market at a higher rate.


To help metal recyclers, mostly MSMEs, the exemption in customs duty in steel scrap up to 31st March 2022. Also, ADD (Anti-dumping Duty) and CVD (Countervailing Duty) on certain steel products have been revoked.


In order to provide relief to copper re-cyclers, duty on copper scrap has been reduced from 5 percent to 2.5 percent.


On the other hand, on certain finished products produced by MSMEs players, custom duties have been increased to revive the domestic industry of garments, leather, handicrafts, and finished synthetic gems. The minister also announced increasing duty on steel screws and plastic builder wares from 10 percent to 15 percent.

MSMEs In The Union Budget 2020-2021: 


Earlier, any business with an annual turnover of ₹1 CR would have to maintain and get their books of accounts examined by an external auditor. To help reduce the compliance burden and encourage online payments, the government has raised the threshold to ₹5 CR.

To ensure the MSME sector has enough funds available for operations, the government has proposed to launch an app-based invoice financing loan product that could help small businesses with their cash flow problems.

The MSME sector was expecting a distressed fund to help bail them out of the dire financial situation. The Sitharaman budget obliged by urging the RBI to extend the debt restructuring scheme to March 2021.

According to Sitharaman, over 500,000 MSMEs benefited from the debt restructuring scheme launched last year. The restructuring was a one-time scheme that allowed defaulting MSMEs to revise the loan tenor and interest rate for up to ₹25 CR.

The Government eMarketplace was introduced in the 2019 budget to have a one-stop platform to procure goods and services for all government needs. In budget 2020, Sitharam mentioned there were 3.24 Lakh vendors on the platform that the government has been sourcing from.

For this, a hefty sum of ₹27,300 CR has been allocated to the development of GeM and the businesses onboard the platform.

Emphasizing how working capital has always been a problem for small and medium enterprises in the country, a new debt scheme has been talked about in the MSME budget 2020.

Also, a special hand-hold allocation of ₹1000 CR via the EXIM bank has been made to help MSMEs in the pharma and auto components sector.

Also read Know About The Laws For Startups

MSMEs In The Union Budget 2019-20 :


350 crore rupees allocated for 2% interest subvention for all GST-registered MSMEs on fresh or incremental loans


MSME: Large-scale extensive reforms planned, government to create a platform for MSME payments


MSME to get loans up to 1 crore within 59 minutes. Loans worth Rs. 350 crore already disburse
 

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