Union Finance Minister Nirmala Sitharaman, in her budget speech on Tuesday, unveiled significant measures aimed at bolstering the micro, small, and medium enterprises (MSMEs) sector. Key among these is the increase in the MUDRA loan limit from Rs 10 lakh to Rs 20 lakh for MSMEs that have previously availed and successfully repaid these loans.
Enhanced Support for MSMEs
To further support the MSME sector, Sitharaman introduced a new credit guarantee scheme specifically for MSMEs in the manufacturing sector, offering a guarantee cover of up to Rs 100 crore. This scheme allows MSMEs to secure loans without needing to provide collateral or third-party guarantees. Additionally, term loans will be facilitated for the purchase of machinery and equipment.
“To facilitate term loans for MSMEs for the purchase of machinery and equipment without collateral and guarantee, a new scheme will be introduced. This guarantee fund will provide guarantees of up to Rs 100 crore,” Sitharaman stated.
Financial Stability Measures
The Finance Minister also announced a new arrangement to ensure the continuation of bank credit to borrowers during periods of financial stress. Furthermore, a package to finance technology support for MSMEs has been formulated.
Industry Reactions
Abhishek Gupta, Founder and Managing Partner at Pierag LLP Consulting, encouraged MSMEs to take advantage of these opportunities to invest in advanced machinery and equipment. “Overall, this credit guarantee scheme is a promising development for the MSME sector, and we look forward to witnessing its positive impact on the growth and sustainability of businesses across the country,” Gupta said.
Additional Announcements
Sitharaman also announced financial support for 50 multi-product food irradiation units within the MSME sector and emphasized the government’s ongoing commitment to the MSME sector, employment, skilling, and the middle class.
To facilitate MSME operations further, the turnover threshold for mandatory onboarding on the TReDS platform will be reduced from Rs 500 crore to Rs 250 crore. Additionally, e-commerce hubs will be established in a public-private partnership (PPP) mode to enable MSMEs and traditional artisans to sell their products in international markets.
Rural and Inclusive Development
The Finance Minister allocated Rs 2.66 lakh crore for rural development and announced the opening of 24 new SIDBI branches to serve MSME clusters. The government will also launch the Pradhan Mantri Janjati Adivasi Nyaya Maha Abhiyan (PM JANMAN) saturation drive.
Expert Opinions
Sameer Jain, Managing Director at Primus Partners, highlighted the importance of additional support for the greening of the MSME sector, including easier access to climate financing. “MSMEs consume approximately 50% of the nation’s power needs and generate over 75% of GHG emissions. While the budget has committed support to MSMEs to grow and compete globally, additional support is required for the greening of the MSME sector,” Jain commented.
Deepthi Alexander, Partner, Indirect Tax at BDO India, noted the budget’s emphasis on manufacturing and services. “The introduction of the credit guarantee scheme for MSMEs, enhancement of MUDRA loans, and the introduction of e-commerce hubs under the PPP model will not only boost revenue in these sectors but also fuel employment and provide for higher wage opportunities,” Alexander said.
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