Union Budget 2023: A big push for MSME sector development

An additional loan guarantee of Rs 2 lakh crore has been arranged for MSMEs

The Micro, Small and Medium Enterprises (MSMEs) sector occupies second place in the employment generation to semi-skilled and unskilled labour after the agriculture sector. That’s the reason the MSME sector is treated as an engine of economic growth and plays an important role in rural development by providing more employment opportunities.

The Micro, Small and Medium Enterprises (MSMEs) sector occupies second place in the employment generation of semi-skilled and unskilled labour after the agriculture sector. That’s the reason the MSME sector is treated as an engine of economic growth and plays an important role in rural development by providing more employment opportunities.

The MSME sector faces various barriers, like funding constraints, marketing of their products, labour-related challenges, etc. The Union Budget-2023 revamping of the credit guarantee scheme for MSMEs will take effect on April 1, 2023 through the infusion of Rs. 9,000 crores in the corpus. This will enable additional collateral-free guaranteed credit of Rs. 2 lakh crores. Further, the cost of the credit will be reduced by about 1 per cent.

The Union Budget 2023-24 laid much-needed importance on the Micro, Small, and Medium Enterprises (MSME) sector, which is still recovering from pandemic-induced challenges. The infusion of INR 9,000 crore for the revamped credit guarantee scheme significantly addresses the credit gap and is aimed at enhancing credit access, thereby paving the way to encourage entrepreneurship in the country.

In this budget, along with ‘Ease of Doing Business,’ the campaign of credit support and reforms for our industries has been taken forward. An additional loan guarantee of Rs 2 lakh crore has been arranged for MSMEs. Increasing the limit of presumptive tax will also help MSMEs to grow, thereby achieving one of the seven priorities of Union Budget 2023-24 is “Inclusive Growth”.

The government has proposed to extend income tax benefits to startups incorporated till March 2024. Finance Minister Nirmala Sitharaman also said that the government proposes to increase the benefit of carrying forward losses for startups to 10 years. New cooperatives that commence manufacturing activity till March 2024 would also attract a lower tax rate of 15 per cent.

Dr. Balaji Vejju Assistant Professor, SRM University

The Budget 2023-24 is very supportive for the start-up ecosystem in India. There is an additional incentive for the Indian start-up ecosystem with the extension in time-limit of incorporation for IT. More importantly, the extension of the carry forward period on change in shareholding from 7 years to 10 years makes start-up acquisitions more attractive, thus supporting consolidation in the industry and enabling exit opportunities for founders and investors.

Vivad se Vishwas I – Relief for MSMEs: In cases of failure by MSMEs to execute contracts during the Covid period, 95 per cent of the forfeited amount relating to bid or performance security will be returned to them by government and government undertakings. This will provide relief for MSMEs. Similarly, the concessional BCD of 2.5 per cent on copper scrap is also being continued to ensure the availability of raw materials for secondary copper producers who are mainly in the MSME sector.

The Finance Minister has announced measures to increase the scope of Digi Locker services for individuals and MSMEs. This will certainly aid in enhancing the accessibility of financial services with greater convenience and simplified processes with robust security.

Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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