Budget expectations: The government of India is all set to present the Union Budget 2021 – The first Budget since the pandemic. This year’s budget is expected to revive the slow economic growth, which is in line with making India a $5 trillion economy.
With just a few days to go, all businesses are eagerly waiting for the Union Budget to be presented by Finance Minister Nirmala Sitharaman on 1st February 2021.
Here’s the Budget expectations from Indian startups and MSMEs as they hope to recover from the economic slump.
Budget Expectations: The MSME Sector
Liquidity and easy access to credit
One of the major issues in the MSME ecosystem is the liquidity crunch. Due to non-availability of easy credit, the sector suffers from working capital shortage.
The sector expects the government to introduce certain schemes, which would provide interest subvention for small MSME loans. This will result in higher liquidity and regular credit flow in the MSME ecosystem.
Also, the credit guarantee scheme might get extended for another 12 months. This facility might enable easy credit access from NBFCs.
Simple and digitised compliance
MSMEs find it difficult to keep up with mandatory compliances. And, they end up paying hefty penalties or late fees, when they fail to comply with laws. This negatively impacts the working capital and cash flow of businesses.
If the government simplifies and digitises compliance like EPF, labour laws, taxes from start to finish, it will be a sign of relief for MSMEs.
More investments in the MSME sector
Due to the lack of monetary resources, MSMEs are unable to get access to advanced technology and skilled labourers. And, it is affecting their global competitiveness.
The sector is expecting from the government to pave way for domestic and international investments through concessions or incentives in Budget 2021. This will help them enter into a healthy competition with global leaders.
Introduction of GST has resulted in complications for small businesses rather than simplifying their business operations and lowering their compliance costs. This has resulted in stress and has increased focus on non-core areas.
If the budget slashes the GST prices and tax holidays, this would undoubtedly help the sector.
To increase digital adoption amongst businesses, the government is expected to incentivise MSMEs that are adopting digital methods for executing their business activities.
Harshil Mathur, CEO and Co-Founder, Razorpay said, “We’ve seen a substantial spike in the adoption of digital payments in the last few months of Covid-19 and the need of the hour is to explore ways to further this adoption.”
I’m hoping that in the upcoming budget, the Government will think of alternatives to the Zero MDR policy, one of the alternatives could be providing tax incentives for MSMEs towards accepting digital payments, as that will help promote e-payments and drive significant digital adoption amongst businesses.
He further said, “Initiatives like these will also lead to new innovations in the payments infrastructure, thereby creating solutions and tools that respond to both, shifting customer demands and need for customised solutions for MSMEs.”
Budget Expectations: Startup Ecosystem
Easy access to working capital
The availability of working capital is a primary focus for startups. As per NASSCOM, the investment environment is set to return to its pre-pandemic levels. If it does not reach that level, a mobilised financing mechanism will be a good start to promote inflow and outflow of foreign investments.
Startups are hopeful that this year’s Budget might enhance growth opportunities and incentivise domestic businesses.
Better tax infrastructure
The upcoming budget is expected to correct India’s present tax infrastructure, especially for startups and small businesses.
Employers and employees expect incentives like tax holidays, rebates, or deductions. This might benefit employers who are making an effort for employee wellness.
Stay tuned with RazorpayX for a week full of post-budget analysis starting 1st February 2021 where we will cover:
- The impact of the Budget on Indian startups & MSMEs
- Detailed analysis of tax policy changes for businesses
- Answers for all-things-Budget, by industry experts
See you there!