Budget 2024: MSMEs Await FM Sitharaman's Focus on Credit, Digital Transformation

Finance Minister Nirmala Sitharaman is set to present the Interim Budget on February 1, and the Micro, Small, and Medium Enterprises (MSME) sector, contributing 29.15 percent to the country's GDP in 2021-22, has outlined its expectations amidst the dynamic market conditions. The sector is emphasizing the importance of a well-balanced banking relationship and anticipates a tailored package to enhance access to institutional credit with competitive rates. This aligns with India's aspiration of achieving a $5 trillion economy, with a specific focus on bolstering the MSME sector's role in this economic endeavor.

"As India awaits the upcoming interim budget ahead of the pivotal general elections, we do not see any major announcements as indicated by the finance minister Nirmala Sitharaman. Nevertheless, we expect the 2024 budget will contribute to advancing the growth momentum experienced in recent years. Similar to the 2023 budget where the government introduced policies and schemes such as credit guarantee trust for micro and small enterprises scheme revamp, Vivad se Vishwas and Vishwakarma scheme to support a broad spectrum of MSMEs, we anticipate the 2024 budget to unveil initiatives aimed at further enhancing the MSME sector. To improve credit availability and stimulate growth within the sector, we expect the government to introduce interest subvention schemes, alleviate collateral requirements or launch initiatives like the Emergency Credit Line Guarantee Scheme", said Ashish Nayyar, Co-Head, India at OakNorth.

"We look forward to initiatives that enhance th? ease of doing business, r?ducing hurdl?s, and fostering a more responsive regulatory framework. The budget should also introduce ways to make it easier for new businesses to get credit, including r?duc?d int?r?st rat?s, ?xt?nd?d moratoriums, and innovativ? financial instrum?nts. Allocations for skill d?v?lopm?nt programs and training initiativ?s should be another focus in th? budget can ?nhanc? th? ?mployability of individuals and bridg? th? ?xisting skill gap. This would not only benefit startups but also contribute to overall economic d?v?lopm?nt", said Vanesh Naidoo, Founder and Director, SafeCams.

During the fiscal year 2023-24, until September 2023, the Ministry of Micro, Small, and Medium Enterprises revealed that the proportion of exports derived from products designated for MSMEs accounted for 45.56 percent of the nation's total exports. This marked a rise from the 43.59 percent recorded in 2022-23.

The Federation of Indian Micro and Small & Medium Enterprises (FISME) also wants the FM to address the uneven power dynamic between banks and MSMEs, where the balance often favors lenders. "Lack of competition in the banking sector (75 percent of banks being public sector) and weak regulatory institutions, which have not been very successful in ensuring customer centredness of banks, and near-defunct grievance redressal mechanism (Office of Banking Ombudsman) all coalesce into an unhappy experience for an ordinary MSME owner with the banks -- whether private or public", FISME Secretary General Anil Bhardwaj said.

Puneet Kaura, Chairman of CII Delhi State and MD & CEO of Samtel Avionics, said: "We want Finance Minister Nirmala Sitharaman to come up with a special package for MSMEs in the Interim Budget so that the small and medium units do not suffer for want of credit. This sector has the talent and risk-taking appetite and can play a big role in strengthening India's capabilities even in critical sectors such as semiconductors, space technology, defence, and medical equipment".

Under the leadership of Prime Minister Narendra Modi, the government administers several schemes such as the MSME Champions Scheme, CGTMSE, PMEGP, MSE-CDP, and RAMP, all crafted to nurture the growth and advancement of the sector in the country. In the Budget statement for 2023-24, a substantial allocation of Rs 22,137.95 crore was designated for the MSME ministry, reflecting a notable 41.6 percent increase from the preceding fiscal year. Expectations are high for even greater allocations in the upcoming fiscal year. The budget may also offer support for the implementation of the 'Open Network for Digital Commerce' (ONDC) initiative. This initiative aims to streamline MSMEs' access to various e-commerce platforms, eliminating entry barriers. Furthermore, it seeks to facilitate the standardization of data and processes, providing valuable assistance to MSMEs in their digital commerce pursuits.