Budget 2024 Top Updates For MSME Sector
On July 23rd, Finance Minister Nirmala Sitharaman presented the Union Budget for the fiscal year 2024-25. While the budget included significant adjustments for salaried individuals under the new tax regime (covered in a separate article), a strong emphasis was placed on supporting the growth and development of Micro, Small, and Medium Enterprises (MSMEs).
Here are the key takeaways:
- Focus on Innovation: Look for funding or initiatives in your sector.
- Easing the Burden: Potential tax breaks or easier access to credit.
- Infrastructure Advantage: Improved connectivity and business environment.
Top Highlights of Budget 2024 for MSMEs
Enhancing Credit Accessibility:
1. Collateral-Free Loans:
A game-changer for MSMEs in the manufacturing sector is the introduction of a credit guarantee scheme offering term loans for machinery and equipment without requiring collateral or third-party guarantees.
2. Risk-Sharing Mechanism
This scheme also establishes a self-financing guarantee fund that pools credit risks, providing coverage up to ₹100 crore per applicant. Borrowers pay minimal upfront and annual fees based on the reducing loan balance, making credit more affordable.
3. Digital Footprint-Based Assessment
A revolutionary shift is the adoption of digital footprints for credit evaluation. Public sector banks will develop in-house capabilities to assess MSME creditworthiness, moving away from traditional asset-based methods. This approach will benefit MSMEs lacking formal accounting systems.
Supporting MSMEs During Financial Stress:
1. Credit Guarantee for Stressed MSMEs
Recognizing the challenges faced by MSMEs during financial hardships, the budget proposes a new mechanism to ensure continued credit access for those categorized as “special mention accounts” (SMA) due to unforeseen circumstances. This government-backed guarantee will help businesses maintain operations and avoid transitioning into non-performing assets (NPAs).
2. Increased Mudra Loan Limits
Entrepreneurs with a proven track record of successful loan repayments can now access larger funds for business expansion. The Mudra loan limit under the “Tarun” category has been increased from ₹10 lakh to ₹20 lakh.
Expanding Market Access and Infrastructure:
1. TReDS Platform Expansion
By lowering the mandatory onboarding turnover threshold for the TReDS platform from ₹500 crore to ₹250 crore, the budget facilitates participation from an additional 22 Central Public Sector Enterprises (CPSEs) and 7,000 companies. This move will also allow medium enterprises to participate as suppliers, unlocking more working capital for MSMEs through trade receivables discounting.
2. Enhanced SIDBI Presence
To provide direct credit support to MSMEs in key clusters, the Small Industries Development Bank of India (SIDBI) will establish 24 new branches this year, expanding its reach to 168 out of 242 major clusters within three years.
3. Boosting Food Processing
Financial support will be provided for establishing 50 multi-product food irradiation units and 100 NABL-accredited food quality and safety testing labs. This initiative aims to enhance food safety standards and propel MSME units involved in food processing.
4. E-commerce Export Hubs
The government plans to create e-commerce export hubs in Public-Private-Partnership (PPP) mode. These hubs will offer trade and export-related services under one roof, making it easier for MSMEs and artisans to sell their products in international markets.
Building on a Strong Foundation:
The table below highlights the consistent focus on MSMEs through ECLGS allocations in the past five Union Budgets:
|
Budget Year |
ECLGS Allocation (₹ crore) |
|
2024-25 |
6,000 |
|
2023-24 |
5,250 |
|
2022-23 |
5,000 |
|
2021-22 |
4,500 |
| 2020-21 |
3,000 |
Overall Impact:
Budget 2024 builds upon this strong foundation by introducing innovative credit solutions, digital-based assessments, and support for MSMEs facing financial stress. By enhancing market access, infrastructure development, and food safety standards, the budget aims to empower MSMEs to become significant contributors to India’s economic growth and export potential.
FAQs
1. How much has the government allocated to the MSME in Budget 2024?
The exact allocation for Startups, SMEs, and Businesses can be difficult to pinpoint in the budget document as it often comes through various initiatives. However, we can look at specific announcements:
- Spacetech Startups: A ₹1,000 crore venture capital fund was announced to specifically invest in space startups.
- Tax Benefits: There may be broader tax benefits announced in the budget that apply to businesses of all sizes. We’ll need to see the specifics of the budget to understand the full impact.
2. Are there any new compliance requirements for businesses?
The budget may introduce changes to tax regulations or introduce new reporting requirements. It’s important to stay updated on the official budget documents and consult with a tax advisor to understand any new compliance obligations.
3. How will infrastructure developments impact businesses?
The budget might allocate funds for infrastructure projects like roads, railways, and digital connectivity. These developments can have a positive impact on businesses by:
- Reducing transportation costs
- Improving access to markets and resources
- Enhancing overall business environment
However, the specific impact will depend on the nature of your business and the location of the infrastructure projects.
4. How will the budget impact access to credit for businesses?
The budget may announce initiatives to:
- Promote lending to SMEs and startups
- Reduce interest rates on loans
- Ease access to government credit guarantee schemes
The impact on your business will depend on the specific programs offered and your creditworthiness.
