Finance Minister Nirmala Sitharaman presented the union budget 2024 on 1st February 2024. MSMEs, which are micro, small, and medium enterprises, are prime movers of the Indian economy. They employ over 12 crore people and are the second largest source of employment after agriculture. They account for roughly 6.11% of the manufacturing and 24.63% of the service GDP, spread across approximately 4.5 million units nationwide. Since taking office in 2014, the Modi government has prioritized making India self-reliant, implementing initiatives like the “Make in India” program.
Favourable budget policies are crucial for the success of the MSME sector in India. A well-planned, inclusive budget has the potential to propel the growth of the MSME sector.
You can read the Impact of the budget on the MSME sector of India in 2022
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Highlights for MSMEs in Union Budget 2024
While presenting her last budget before the general elections, the Finance Minister concentrated on the MSME sector, which accounts for around 30% of India’s GDP. She underlined the government’s focus on MSMEs under the banner of “Viksit Bharat” by 2047.
Fiscal deficit of 5.8%
While capital expenditure (CapEx) has seen an increase, it fell short of the previous year’s levels. Despite this, the revised fiscal deficit estimate remains at 5.8% of GDP. This highlights the crucial role of private sector participation in sustaining economic growth momentum.
Timely Funding
The government will provide prompt and necessary funds, cutting-edge technology, and effective training. According to the economic survey, government reforms for the MSME sector have helped smaller enterprises expand further and bounce back from the pandemic’s effects. This initiative will help Micro, Medium, and Small enterprises compete globally.
Green initiatives
The government has taken several measures to meet India’s net zero emissions target in 2070. They are offering incentives for biofuels, rooftop solarization, offshore wind energy, and expanding EVs.
The government hopes to establish a conducive environment for renewable energy entrepreneurs, which aligns with its goal of encouraging resource-efficient economic growth, as outlined in the “Panchamrit” framework. The framework encourages investment in renewable energy technologies, MSME expansion, and job development.
Larger credit available for the private sector
The projected gross and net market borrowings for dated securities in the fiscal year 2024–25 stand at 14.13 and 11.75 lakh crore respectively, signalling a decrease compared to the previous fiscal year. This reduction by the Central Government should enhance credit accessibility for the private sector.
Rail Connectivity Corridor
The government plans to set up 3 major railway corridors and upgrade 40,000 boogies to Vande Bharat standards, which is welcome news for MSMEs looking to diversify by entering the rail sector. With this massive project, they see a chance to play a crucial role in supplying components of these boogies.
However, to truly improve their participation, they urge the government to implement measures that reserve a portion of work orders specifically for the MSME sector. Such targeted allocation would enable MSMEs to leverage their expertise and capacities in this national initiative. It would stimulate economic expansion and employment opportunities nationwide, empowering MSMEs to emerge as pivotal contributors to India’s infrastructural advancement.
Interest-free, debt-fueled R&D
Young entrepreneurs in India just received a major boost! This budget provided a massive Rs. 1 lakh crore corpus offering a 50-year interest-free loan to fund an expensive R&D project. This move removes significant financial hurdles, allowing the private sector, especially young innovators, to scale up their research and development efforts in cutting-edge sectors.
With this support, young minds can focus on pushing boundaries and developing groundbreaking solutions. This will not jut benefit the individuals and their businesses but also contribute to the country’s economic and technological progress.
The India-Middle East-Europe Economic Corridor
This trade corridor is poised to become a powerful engine for global trade in the coming years. Imagine seamless trade facilitation and integrated supply chains, combined with the unique advantages of GIFT City, a hub for financial and technological innovation. This powerful combination will unlock a world of opportunities for MSMEs, empowering them to thrive in international markets and compete on the global stage with confidence.
State-level incentives
The government is fostering development by offering long-term, interest-free loans to states. These funds will incentivize states to rejuvenate iconic tourist destinations. Beyond mainland areas, there are ambitious plans to enhance port connectivity, infrastructure, and amenities on islands. This strategic initiative holds significant potential for MSMEs in the tourism sector. Given that over 80% of businesses in this sector are MSMEs, this initiative directly empowers them to flourish and drive the sector’s growth.
Emergency Credit Line Guarantee Scheme
The Emergency Credit Line Guarantee Scheme (ECLGS) plays a crucial role in supporting the MSME sector. Its recent expansion now includes retail and wholesale businesses, broadening access to credit facilities. Additionally, the updated MSME definitions under Aatmanirbhar Bharat ensure a wider range of enterprises can benefit from essential credit resources.
The implementation of TReDS addresses the longstanding issue of delayed payments by facilitating early invoice discounting, thereby improving cash flow for MSMEs. The extension of non-tax benefits for three years during periods of upward growth ensures stability, empowering MSMEs to pursue expansion opportunities.
This multi-faceted approach provides comprehensive support, tackling issues related to credit accessibility, timely payments, and future growth prospects. Ultimately, it nurtures a vibrant and flourishing MSME ecosystem in India.
On-time payment
In the union Budget 2024, there is a notable focus on ensuring timely payments for MSMEs by introducing incentives for prompt settlements. Businesses are now eligible for tax deductions on expenses related to payments to MSMEs only when these payments are received. This measure, as emphasized in Budget surveys, aims to simplify and expedite payment cycles for MSMEs.
Initiatives such as the Udyam portal, boasting 2.24 crore registered MSMEs, and the Udyam Assist Platform, with 1.2 crore registered units, are consolidating information to facilitate enhanced support and monitoring of this critical sector.
Conclusion
In conclusion, the Union Budget 2024 demonstrates the government’s unwavering commitment to bolstering India’s Micro, Small, and Medium Enterprises (MSMEs). Through a multifaceted approach encompassing timely payments, expanded credit accessibility, and infrastructure development, the budget aims to empower MSMEs and drive economic growth. With targeted initiatives and strategic investments, the budget sets the stage for MSMEs to thrive, innovate, and contribute significantly to India’s economic resurgence in the years ahead.
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