Budget with many positives, yet actual implementation holds the key: MSME Inc

The MSME fraternity of the country seems to hold that the NDA-II’s first Budget did contain many pro-sector announcements, yet the actual implementation of sops announced hold the key to their actual success. Certainly, this year, a slew of promises and new provisions have been announced to jump-start growth in the MSME sector.

The major highlight of this year’s Budget included an allocation of Rs 50 crore for 2% interest subvention for all GST-registered MSMEs on fresh or incremental loans and the launch of a dedicated payment platform for MSMEs (where they can upload the bills and process payments). It was important to bring down of the payment timing for MSMEs from large companies as most in the sector face liquidity crunch. The other announcements include, extending of pension benefit to around 3 crore retail traders and shopkeepers with an annual turnover less than Rs 1.5 crores and a promise for facilitating loans up to Rs 1 crore for MSMEs within 59 minutes.

According to Anil Bhardwaj, Secretary General of the Federation of Indian Micro Small & Medium Enterprises (FISME), the intent and the direction indicated in the NDA-II’s first budget makes it amply clear that the Government has realised the danger of India slipping into the low growth zone. “The Government wants to prime the economy in a big way by spending in infrastructure in road, railways, waterways etc. The intent expressed in Budget for addressing delayed payment and helping NBFCs augurs well for MSMEs. A path-breaking initiative is to create fundraising platform under the watch of SEBI for Social enterprises and NGOs,” says Bhardwaj.

Sanjeev Layek, a representative of World Association for Small and Medium Enterprises (WASME), however, has a different take on the subject. While hailing various pro-MSME measures such as the interest subvention scheme for MSMEs, a national payment gateway for them and the provision in the Mudra loan for women entrepreneurs that has now been increased to Rs 1 lakh, he points at the lack of awareness of and the actual implementation of schemes as the real cause of concern that could play spoilsport here.

“The 59 minute loan scheme was announced by Prime Minister Narendra Modi on 2nd of November 2018. Till date, there is less awareness and support from the Government and banks. Through this scheme, the online portal gives MSMEs approval in 59 mins, which indeed is very fast, but when these MSMEs approach banks for loans, they are asked for more documents and collaterals for disbursing loans. Hence, the ground reality is something different,” he says.

While currently, banks officials are talking of embracing the digital bandwagon and promoting all these new funding avenues, while disbursing loans, they, in fact, are afraid of the scenarios that their funds might turn into NPAs, he adds.

A focussed and well directed budget

Mehernosh Tata, Head SME Lending, Edelweiss is of the view that Union Budget 2019 recognises the critical role of MSMEs in taking India to $5 trillion economy. “There will be an increased focus on efficiency, faster access to credit and capacity augmentation through skill development, digitalisation and infrastructure creation. The e-payment platform for MSMEs and pension scheme for retail traders will help in bringing the smaller entrepreneurs into the formal financial system. The interest subvention scheme, especially for women entrepreneurs, is a commendable step towards financial inclusion.”

Echoing similar thoughts, K R Sekar, Partner at Deloitte India, believes that this time the Government made an honest attempt to address the needs of all the key sectors. Calling it ‘a balanced budget’, he lists the infusion of Rs 70,000 crore into the country’s public sector banks to accelerate the pace of lending to various sectors, including to MSMEs, lowering of corporate tax to 25% for firms with a turnover of Rs 400 crore, clarifications on angel tax, and allowing the startups to carry forward their losses as crucial hits of the Union Budget.

Worth mentioning is as a result of the government’s move on the corporate tax, 99.3% of the companies operating in the country would benefit, the finance minister said today.


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