The 2024 Union budget introduced a comprehensive package that includes financing, regulatory changes and technological support.
Following Finance Minister, Ms Nirmala Sitharaman’s Budget announcement, micro, small, and medium enterprises (MSMEs) are now breathing a sigh of relief as it has introduced several measures aimed at bolstering this sector, a cornerstone of the Indian economy. While the intent and strategy is commendable, a comprehensive analysis is essential to assess the effectiveness of these initiatives and their potential impact on the ground in the coming year.
Financing: The 2024 Union budget introduced a comprehensive package that includes financing, regulatory changes and technological support. To address credit access, a new scheme will provide guarantees of up to Rs 100 crore for MSMEs in manufacturing to acquire machinery and equipment. This will ease access to larger loans for modernization, expansion, and improved efficiency. For micro units, the enhancement of the Mudra loan limit from Rs 10 lakh to Rs 20 lakh is a welcome step towards helping larger manufacturing micro units to be set up.
This can also help grassroots-level entrepreneurs expand their business reach by investing more in social media marketing and promotion. However, access to affordable credit remains a major hurdle for MSMEs, particularly in the informal sector and for grassroots entrepreneurs. A critical aspect lies in increasing the average loan size from Rs 40,000 to Rs 4 lakh to ensure that micro units are adequately capitalised for sustainable growth.
Ease of Doing Business: Simplifying regulatory processes and reducing compliance burden for MSMEs is essential to create a conducive business environment. While the Union Budget 2024 did not specifically announce any amendments to GST for the MSME sector, the focus was more on broader economic reforms and initiatives. Key highlights included significant reforms in customs duties to simplify rates and enhance trade facilitation. One expectation from micro enterprises with turnover up to Rs. 100 lakhs is to be exempted from GST tax and compliances.
Additionally, the proposed development of rural roads and rail cargo access to tier 3 and tier 4 regions is expected to improve connectivity and logistics and create opportunities for the MSMEs. The announcement of the plug-and-play investment-ready investment parks for 100 districts of the country will become new hubs of Viksit Bharat which will give opportunities for MSMEs especially micro units to be vendors and to create jobs. An ease of doing business index aimed at micro enterprises in small towns and rural areas would go a long way towards scaling them and creating jobs.
