Budget Reactions | Vivek Baj, Partner, ELP Comments On MSME Segment

The Union Finance Minister Nirmala Sitharaman introduced the Budget in the Parliament on Tuesday.

Vivek Baj, Partner, Economic Laws Practice, said, “The MSME segment had been severely impacted over the years and thus, the segment had pinnedits  hopes from Modi Government 3.0 to get better access to institutional credit and to provide for a package that offers a more balanced relationship between banks and MSMEs. Although MSMEs are the backbone of the Indian economy, contributing approximately 30 per cent of the country’s GDP, 45 per cent of manufacturing output, and providing employment to 11 crore of India’s population, they have been facing challenges, including issues with formalisation and inclusion, limited access to finance, markets, technology, and digitalisation, infrastructural bottlenecks, and skilling.”

“Taking this into consideration and the fact that it is a labour-intensive sector with a potential for growth and job creation, this sector was amongst the top priorities in today’s Budget. Improving credit flow at a low cost has been a policy priority of the Government and RBI. In keeping with this objective and to provide further impetus to this sector, key announcements are proposed in the Union Budget 2024 including  increased loan limit for the Pradhan Mantri MUDRA Yojana (PMMY) scheme which has increased from INR 10 lakhs to INR 20 lakhs for those who have availed the loans before and successfully repaid under TARUN category, credit guarantee cover for unsecured loans has also been expanded from INR 2 to 5 Cr, turnover threshold of buyers for mandatory on-boarding on TReDS platform (online platform to help MSMEs) has been proposed to be reduced from INR 500 crore to INR 250 crore. Further, a new mechanism for facilitating continuation of bank credit to MSMEs during their stress period has also been proposed. Moreover, in order to facilitate the purchase of machinery, a credit guarantee scheme has been announced with a guarantee of up to INR 100 Cr,” Baj further said.

“Additionally, Linked to the initiative of Districts as Export Hubs (“DEH”) launched in August 2019 to foster balanced regional development across all districts of the country and given that nearly 70 per cent of total e-commerce sales in 2020-21 were from MSMEs, setting up of e-commerce export hubs in a PPP mode has been proposed to enable MSMEs and traditional artisans to make their mark in international markets. With these proposals being effectively implemented, MSMEs are expected to have greater access to necessary financial resources, enabling this sector to broaden their market exposure and scale up to play a key role in defining the economic trajectory of India. With such befitting announcements, the Union Budget 2024 is indeed in line with the Modi’s Government's Viksit Bharat vision,” Baj added.