The announcement of Budget 2024 has brought a wave of reactions from experts regarding its impact on the Micro, Small, and Medium Enterprises (MSME) sector. In this selection of expert quotes, we delve into their evaluations of the budget’s potential to drive growth, address challenges, and shape the future of MSMEs in the coming year.
Delphin Varghese – Co-founder and Chief Revenue Officer, AdCounty Media
The seriousness of the government in facilitating credit access to aggrieved MSMEs stands as a critical factor for survival and growth of the sector. While MSMEs are the backbone of the economy—contributing 30 per cent to GDP and 48 per cent to exports—it faces an estimated credit gap of ₹20-25 trillion by IFC estimates. There could be a gap bridged with the proposed multiple mechanisms; for example, credit growth to MSMEs was 11% year over year in FY2021. Better access to credit would have implications for massive job creation and economic stability if taken from over 110 million working in the MSME sector. This is opportune; 67% of MSMEs surveyed said that the pandemic hit them adversely. By ensuring credit flow, it would revive a sector that is important for achieving India’s goal of a $5 trillion economy.
Atif Shamsi, CEO & Founder at OuchCart
It is an integral part of ease of doing business reforms, and subnational deregulation aimed at reducing the compliance burden of MSMEs. As of now, compliances run to over 750 annually for MSMEs, with an estimated ₹12 lakh crore cost incurred for the same. The maze of these regulations has reportedly retarded their growth—it is stated that about 64% of MSMEs reported compliance as a huge challenge. Streamlined, these two processes can help save billions in compliance costs and hundreds of work hours annually. This is also in step with India’s vision to break into the top 50 in the World Bank Ease of Doing Business rankings from its current position of 63rd. Coupled with simplification of regulations at the state level, it has the potential to unlock the actual potential of the MSME sector accounting for 95 percent of India’s industrial units. Coupled with access to credit, this could be transformative for the 63.4 million MSMEs in India.
Ridhima Kansal, director of Rosemoore
It is of significant interest that the Economic Survey puts a focus on striking a fine balance between concerns over trade and security with China for MSME growth. Indeed, the Chinese share in India’s imports is about 30%, a large share of which comprises intermediate goods that are vital for MSMEs. Recent tensions along the border led to restrictions that affected 19% of India’s imports from China. This is what most affected the MSME sector, with 45% of them reporting some form of supply chain disruption. This call for balance underlines a complex interdependence, wherein the 70% of active Pharma Ingredients come from China and 80% of cells utilized in the solar sector are also manufactured there. The government is balancing this call for shielding MSMEs from dumping or unfair competition against access to vital inputs. This is a sensitive balancing act for 6.3 crore MSMEs in India, as it affects their competitiveness and survival not only in the domestic market but also in international markets.
Mr. Ketan Mehta, CFO of CredAble
“We are delighted to see that the Union Budget 2024–25 has addressed many critical facets of the economy.
This year, the budget has truly put the spotlight on key issues facing the MSME sector in securing timely credit and has ushered in a plethora of opportunities for young entrepreneurs.
The government has proposed a new scheme under the Credit Guarantee schemes for MSMEs in manufacturing, providing MSMEs with collateral-free term loans for buying machinery and equipment. To further strengthen the financial stability of MSMEs, the limit for Mudra loans has been increased from INR 10 lakh to INR 20 lakh. Additionally, E-commerce export hubs will be set up to boost international trade. The government’s strategic move to provide internships and new schemes for the country’s youth, with a central outlay of INR 2 lakh crore, sums up its futuristic outlook.
The Union Budget has been extremely positive in recognising the role being played by MSMEs in India’s present and future. It’s also encouraging to see the government’s move to incentivise existing businesses and abolish the angel tax for all classes of investors, which will further aid the acceleration and globalisation of the startup ecosystem in the country.”
Prakash Sankaran – MD&CEO of Invoicemart
“TReDS has made a significant impact in FY24 by facilitating MSME invoice financing exceeding Rs. 1 lakh crore. The Finance Minister’s mention in today’s budget speech of the government’s proposal to reduce the turnover threshold of buyers for mandatory onboarding on TReDS from Rs 500 crore to Rs 250 crore is a welcome move.
This change will now bring a large number of medium-sized corporates under the ambit of TReDS. Additionally, this presents an opportunity for NBFCs, which are very active in this space, to play a significant role as financiers on TReDS.”
Mr. Rahul Garg, CEO & Founder, Moglix
“The removal of angel tax is a welcome move for India’s startup ecosystem. This, coupled with the establishment of a ₹1,000 crore VC fund for the space economy, will foster innovation. The budget’s focus on manufacturing, with the introduction of plug-and-play industrial parks, is progressive. MSMEs will benefit significantly from the credit guarantee scheme, new assessment models by PSU banks, and increased Mudra loan limits. The substantial allocation of ₹11 lakh crore for infrastructure especially nature resilient is crucial for building a Viksit Bharat. The strategic shift towards nuclear energy as a major power source is visionary. Finally, the emphasis on cultural heritage through the development of the Vishnupad, Mahabodhi temple corridors, Rajgir, and Nalanda is a welcome addition.”
Mr Ratish Pandey, Business Coach and Founder, Ethique Advisory
The expansion of the credit guarantee scheme for manufacturing sector MSMEs is a welcome step. It will enable MSME players to invest in plant and machinery, thereby enhancing their capacity for further growth.
The emphasis on employment and skill development will greatly benefit MSMEs by enabling them to hire more ‘employable’ individuals. The support for internships, along with the financial assistance for EPFO costs for new employees, will encourage the inclusion of more workers into formal employment structures.