The Union Budget’s push on infrastructure, manufacturing and capital investments would further enable the growth of MSMEs and will lead to job creation.
The Budget focused on empowering the MSMEs by addressing their financial needs, which were most affected during Covid-19. The government has announced a credit guarantee scheme for the MSME sector and an additional Rs 2 lakh crore collateral-free credit scheme which is very crucial for the infusion of cash in businesses.
Initiatives to Support MSMEs
The Budget also focused on improving access to finance by revamping the CGTMSE and on lowering the burden of MSMEs which suffered during the pandemic. While all the initiatives seem to be in a positive direction, the success of these obviously depends on the execution of the schemes and the collective efforts of the businesses.
The government has been focusing on the formalisation of the Indian economy and MSMEs for some time now. Budget 2023-24 also reflects the government’s commitment to boost economic growth by investing in infrastructure development and increasing capital expenditure.
Apart from that, this Budget further encourages the use of technology and digital mediums which is reflected in the push of digital payments, Make AI for India, ONDC, GeM and Digital Skill centres.
Simplification of Taxes
While the government has covered many aspects of MSMEs, there are a few areas which need simplification. For instance, one issue that the Budget could address and set right is eliminating the separation of Central Goods and Services Tax (CGST) and State GST in bills and filings.
Similar to the direct tax filing approach, GST compliance can also be made easier by pre-filling details, especially with the thrust on e-invoicing. It is very much possible. Advance tax payments can be aligned with quarter ends rather than 15 days before quarter end.
Perhaps the government will incorporate these aspects in future budgets as these moves will go a long way to simplify business processes further and help small businesses.
MSMEs & The Retail Sector
The MSMEs contribute nearly 30 per cent to the Indian GDP. When it comes to the retail sector it is the MSMEs which meet 70 per cent of the total demand. And MSMEs’ contribution to the gross export is 45 per cent. Yet, this industry suffers from the problem of long working capital and slim profit margins.
Access to finance, lack of infrastructure leading to increased operational costs, market, technology, availability of raw materials, skilled labour and information have always remained big hurdles for MSMEs.
A lot needs to be done to educate and assist small business owners, especially from emerging markets, around the use of digital means for running and growing their businesses. If MSMEs could leverage the technology to their full potential, many of the challenges being faced by MSMEs currently can be solved and can contribute to sustainable economic development.
(As told to Abhishek Sharma)