Why Budget 2022 Is A Hit For MSMEs

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Budget 2022: Indian economy is significantly propelled by the MSME sector.

Measures targeting critical factors, such as raw material and input costs and access to credit; supporting infrastructure and skill development; and facilitating ease of doing business announced

The budgetary announcements have been riding on optimistic sentiments vis-a-vis expectations on the growth rate of the GDP (even by the IMF) at comfortably over 8% this fiscal, with a strong balance of international reserves position at over USD 635 billion but mirrors global confidence on the Indian economy. In this setting, the Indian economy is significantly propelled by the MSME sector. The MSME sector comprising 6.3 million units and providing employment to over 11 crore of the Indian populace contributes to over 28% of the Indian GDP.

In this context, the budget offers several sops for the MSME sector, targeting critical factors, such as raw material and input costs and access to credit; supporting infrastructure and skill development; and facilitating ease of doing business. The budget also offers a phased environment of protection to some sub-sectors such as the capital goods sector as to lend it time to evolve global competitiveness. Some of the notable budgetary pronouncements and initiatives include:

Optimising input costs and phased market protection

1. Fostering MSME competitiveness: The government has announced reduced import tariffs on inputs and increasing/imposing tariffs on end products. This will lead to a higher degree of protection and improved competitiveness for MSMEs. Reduction in customs duty and exemptions on inputs, such as steel scrap, even while levying a 7% duty on finished capital goods are steps in the right direction. Reduced import tariffs for sectors, such as textiles, leather products and handicrafts, are likely to push growth and facilitate competitive global sourcing of inputs.

Access to credit

2. Promoting financial inclusion: The government has announced that 1.5 lakh additional physical banking facilities will be enabled by mobilising post office infrastructure. Further, 75 digital banking units will be set up by scheduled commercial banks in 75 remote rural districts.

3. Enhancing emergency credit line scheme: The scheme has been extended to March 2023 and its guarantee cover has been enhanced from INR 50,000 crore to INR 5,00,000 crore. Plus, an exclusive cover has been earmarked for the hospitality sector.

4. Revamping the credit guarantee scheme: An Additional credit of INR 2,00,000 crore is expected to be facilitated for the MSME sector.

Infrastructure

5. Gati Shakti infrastructure: Investments, such as multi model logistics parks and cargo terminals, will facilitate single domestic market connectivity as well as critical global market connectivity.

Start-ups

6. NABARD start-up initiative: Individual and FPOs ups are to be fostered aggressively through NABARD.

7. Capital gains surcharge: The rationalisation of capital gains surcharge will provide a boost to the startups.

Skilling

8. Employable skills: National skill qualification framework is to be aligned to dynamic industry needs.

Ease of doing business

9. MSME Udyam portal upgrading: The Udyam portal will be upgraded to provide B2B, B2G and G2B services, including by way of skilling and recruitment.

(Disclaimer: These are the personal opinions of the author.)

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