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SMBStory has decoded the Budget 2024 expectations of Indian MSMEs, and they have expressed heightened concerns for five key areas.
Policies for streamlining business operations, PLI schemes, incentives, and credit lines, among many others—Indian MSMEs have high expectations from the Union Budget 2024, which will be presented in the parliament on February 1.
The 63 million micro, small, and medium enterprises (MSMEs) are considered to be the backbone of India’s economy—contributing close to 30% to India’s GDP. However, there is a prevailing belief among them that much remains to be accomplished to empower and amplify their pivotal role.
SMBStory has decoded the Budget expectations of MSMEs, and they have expressed heightened concerns for five key areas.
PLI scheme
“The $5 trillion GDP plan will be incomplete without extending support to MSMEs,” says Amit Kumar, Founder of MSMEx—an education and advisory platform for small business owners.
With the government’s focus on modernisation, digitalisation and infra-investments, the Union Budget should include incentives, subsidies and grants for MSMEs.
“More PLI opportunities in the power sector, waste management and recycling sector, alternative products for the infra sector, electronics manufacturing sector, and health sector will support the inclusive growth of the future,” Kumar asserts.
Arjun Bajaj, Director of Videotex, a homegrown consumer electronics maker, says in contrast to the smartphone industry—benefitting from various government support like PLI schemes and manufacturing incentives—the television manufacturing sector, a substantial part of the economy, is yet to receive any advantages from PLI schemes or similar incentives.
“Additionally, industries see considerable export potential, particularly in the Middle East and neighbouring countries. The government’s support in this regard could propel industry growth, create more job opportunities, and contribute positively to the economy,” he adds.
Atul Puri, an Advisory Board Member at MSME Bharat Manch, also asserts that exporters have large expectations for rising freight and insurance costs.
Taxes
More than anything, MSMEs expect a tax waiver in their favour in the Budget.
Mandeep Arora, Managing Director and Co-founder of Delhi-based UBON—a mobile accessory brand—says businesses highly anticipate announcements regarding tax benefits, reduced tax rates, and an extension of the employee stock ownership plan tax reforms for startups.
“Considering the current state of the Indian economy’s recovery, the Union Budget 2024–25 would be crucial to the consumer electronics industry, acting as a possible impetus for its successful rebirth,” Arora highlights.
Talking specifically for the gifting industry, Umesh Singh, Founder and Director of Tara Candles, tells SMBStory that Section 194R, introduced last April, has made an impact on lower sales turnover for the MSME segment catering to the gifting industry, leaving them vulnerable.
According to Section 194R of the Income Tax Act, 1961—businesses or professions are responsible for deducting TDS at 10% if the total value of the gifts or perquisites given is more than Rs 20,000 during a financial year for every recipient.
Singh highlights that the section should be reformed to boost the MSME gifting industry.
Increase investment in tech
During YourStory’s TechSparks 2022 in Bengaluru, Finance Minister Nirmala Sitharaman termed the next decade as the “Great Indian Techade,” reiterating the notion of making India more citizen-centric for better health, education, and infrastructural facilities.
Dinesh Gulati, COO of IndiaMART, believes that digitalisation is critical to integrating unregistered MSMEs, aided by portals like UDYAM, eShram, and ASEEM portals.
MSMEs—which traditionally lag in adopting technology—can transform their processes by leveraging cloud-based technologies, artificial intelligence, machine learning, large language models and conversational commerce.
He says, “With just 6% of MSMEs selling online, increased investment in these technologies by the government can enable more MSMEs to enable online commerce and contribute to India’s economic growth.”
Incentivise sustainable firms
In last year’s Budget, the Finance Minister had proposed to slash the custom duties levied on lithium-ion batteries from 21% to 13% to push for green energy. This year, business owners who manufacture sustainable products are expecting and demanding subsidies.
Kapil Bhatia, Founder and CEO of UNIREC—which manufactures apparel from recycled polyester fabrics—wishes to see encouragement and incentives for the expansion of sustainable firms to continue businesses’ transition to a more environmentally conscious and socially conscious fashion industry.
“We expect policies that support environmentally friendly retail and online sales methods, building a whole ecosystem that amplifies the benefits of our efforts to the consumer,” he adds.
“A forward-looking budget that recognises the critical role of sustainable MSMEs, along with supportive policies for retail and ecommerce, will definitely boost our sector to new heights, promoting innovation, job creation, and a good influence on both the environment and society at large,” Bhatia says.
Credit on lower interest rates
Applauding the government’s 41.6% increase in MSME funding last year, Gulati from IndiaMART says this year, he is looking forward to more support.
Singh from Tara Candles also raises concern about the availability of credit at higher interest rates, which adds to the woes of MSMEs. He expects the government to enhance access to finance, including easier credit availability, and lower interest rates to facilitate business expansion from Union Budget 2024.