MSME Budget 2023 Expectations: MSME sector experts seek better access to credit for expanding their business, a more simplified tax system, and incentivising structure.
Finance Minister Nirmala Sitharaman will table the Union Budget 2023 on February 1. While speaking with Moneycontrol, the majority of experts from the MSME sector resonated in one voice that the sector expects the Budget of 2023-24 to further simplify the tax structure and ease of getting credit for small businesses.
Here is what the sector’s experts have to say
Dinesh Agarwal, Founder and Chief Executive Officer, IndiaMART
My expectation from Budget for MSMEs has always been the same, which is the simplification of Tax regulations and other compliances. Usually, small businesses are a one-man army, or at best, functions with limited manpower. Hence, getting the compliances done is costly and time-consuming. Its simplification will help MSMEs to devote more time to their business and innovation.
Implementation of GST has simplified the tax regime as in the erstwhile vat regime, it was quite complicated. Although, it still needs further simplification.
Similarly, as they work on a long credit cycle and slim profit margin, easy access to credit at a cheaper rate becomes crucial. This must be addressed by the government to help to do business easy.
Sandip Chhettri, CEO, Tradeindia.com
India’s economy has consistently been regarded as one of the most resilient economies when compared to other nations; this is mostly because of the effective economic policies implemented by the Indian government. Due to its robust MSME sector, which is less vulnerable to global trade flows than other economies, India is somewhat insulated from global spillovers. Prudent regulatory measures and policy reforms have played a crucial role in developing resilience in the economy. From the Union budget 2023, we expect the government to announce a better implementation plan of the policies, which shall aid India in navigating the current Macro Economic crisis.
I believe that easy credit and technological adoption should be the keys to making MSME robust.
The government should balance this coming union budget should definitely focus on increased spending on technology infrastructure for the MSME sector so that it makes access to technology easier for MSMEs, making it easier for small businesses to adopt. For MSMEs, digitalisation can act as a catalyst for generating new opportunities for growth. It can help with capturing and retaining a skilled workforce. If India wants to compete globally and become the world’s manufacturer, it needs to help its MSME expedite digitisation to unlock its true potential by leveraging technology in hiring.
Saksham Malik, Programme Manager at The Dialogue
A renewed attention on skill development and research and development will be crucial to ensure that an increased number of startups succeed in the emerging technologies space. It will be crucial that the government not only invests in sensitising children about responsible use of AI and catching them young along with nurturing an enabling environment for business to thrive through phased incentives.
What we need is a budgetary allocation that will bridge the digital divide as a short term goal and brilliance divide as a long term one.
Pranav Dwivedi, Founder at Netratvshaala
The demand for cloud services and deep technologies such as AI and blockchain is only increasing, and the Union Budget 2023 should focus on incentivising their growth and integration. This would enable businesses to become more agile and efficient and operate at an optimal level.
Overall, it is essential for the government to recognise the technology sector’s potential and invest in it to accelerate the growth of the Indian economy. With the right incentives, we can be confident that Union Budget 2023 will unlock immense value and propel India to the ranks of the world’s most successful economies.
Ranjit Barthakur, Founding Director, The Balipara Foundation
The government’s announcement of various incentives for agroforestry in the 2022 budget was a welcome move for the rural economy to increase productivity while also encouraging farming practices that are resilient to climate and ecology. We need to capitalise on this and also focus on building a broader ecosystem of incentives around processing and connecting farmers to markets for produce.
Farmers also need greater clarity on the materials they can access in agroforestry, the insurance they will receive for crops and support during the maturation period – or else receive support in agroforestry design, which becomes self-sustaining within the first year.
Budget 2023: One of the major expectations of this sector includes increasing MSMEs’ access to finance and restructuring the existing credit schemes for the sector.
The State Bank of India (SBI) in its recent report on MSMEs stated that several Micro, Small and Medium Enterprises (MSMEs) have grown to become mid-size corporate and there has been a credit growth of nearly 20 per cent between 2021 and 2022. However, there is an urgent need to restructure the credit guarantee scheme to push the next level of growth of the enterprises, it added.
The report identifies that a key challenge for MSMEs is complicated paperwork to raise credit, hence a lot of them remained out of the MSME ambit. Alongside, the information related to credit schemes is also not easily available which further makes the process confusing for many MSME owners.
“We wanted to apply for a loan. But neither the bank employees had a clear idea about Udyam nor some concrete information was available easily online. So, we failed to apply for the loan,” said Najooka Javier, co-founder of Tohfa, a small-scale business that manufactures sustainably-made accessories and home décor.
The study proposed to increase the maximum loan amount for coverage under Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) from Rs 2 crore to Rs 5 crore for all activities under the manufacturing, services, and trade sector.
As per the regulations of the Ministry of MSME, a business set-up can only be considered an MSME if they meet the specific criteria of investment and turnover. A business comes under MSME if the investment amount ranges between Rs 1 crore to Rs 50 crore, and the turnover is between Rs 5 crore to Rs 250 crore.
Various MSME business owners said that there is immense scope for MSME business growth and penetration, but for that preliminary investment needs to be higher.
Vijaya Kumar TR, director of Rare Planet Handicrafts Pvt Ltd, a medium enterprise, said, “The coverage which is given to an MSME is only Rs 2 crore without collateral. However, the MSME of the country has grown so big that the credit requirement is high and the amount of Rs 2 crore is too low. The limit needs to be at least Rs 5 crore without collateral.”
MSME business owners said that arranging collateral is also difficult at the early stage of the business.
The Rare Planet founder stated that their company is also struggling with this. “Our limit is at Rs 1.75 crore and if we have to go ahead with this, we need to provide collateral. When we reached out to a private bank, they told us that they can’t issue the loan of Rs 5 crore that we demanded only because of the CGTMSE limit,” he added.
Various business owners said that there has been an immense push for the MSME sector after the pandemic. Be it in the section of travel or retail, the MSME sector witnessed huge growth, primarily driven by domestic consumption. While employee layoffs and job cuts have become rampant in big corporate houses like Infosys, Wipro, and Google after the pandemic, the MSME sector has become a major hub for job creation too.
In an exclusive interaction with Zee Business, Minister of State, Dr. Bhagwat Kishanrao Karad stated that in the recent past, the MSME sector has created six crore jobs. The government is also focusing on MSMEs for more job creation in the coming quarters.
Dinesh Agarwal, founder of Indiamart, an online B2B marketplace also agreed that after the economy started recovering post-pandemic, a large section of the salaried people shifted to small and medium-scale businesses.
With Budget 2023 around the corner, several industry leaders have also suggested the same for the sector. One of the major expectations of this sector includes increasing MSMEs’ access to finance and restructuring the existing credit schemes for the sector.
“The government overlooked a crucial aspect of the OCEN process that prevents 60 million SMEs from using this programme for loan purposes. While account details are available to individuals, they are not available for small and medium companies,” added Arvind TCA, ex-senior banker of Deutsche Bank India, and co-Founder of Artfine, a supply chain finance company.
The government introduced the Open Credit Enablement Network (OCEN) two years ago. It is a retail credit programme that uses online marketplaces to connect borrowers and lenders and expand access to microcredit for the hitherto underserved MSME sector.
MSME players also expect a relaxation of an interest rate cap of 18 per cent on the Credit Guarantee Fund Scheme.
“Certain measures, such as offering a GST subsidy on PoS (Point-of-Sale devices), refinancing options for MSMEs on the lines of the National Housing Board’s refinancing scheme and the relaxation of an interest rate cap of 18 per cent on the Credit Guarantee Fund Scheme (CGS) will facilitate more accessible credit besides laying down the framework for the growth of MSME sector, which accounts for 30% GDP of the country,” said Shweta Gupta, Co-Founder, MUDS Management, a management consulting firm.
Companies like Paytm, Zomato, Rapido, and Swiggy among others, have been among the top partners posting maximum jobs for women
In a survey conducted by the jobs and professional networking platform, apna, it was said that participation of women from tier 2 cities in the gig economy increased by 34 per cent.
The report found that there was an overall 36 per cent YoY (year on year) hike in women users on the platform from tier 1, tier 2 and beyond cities, while 34 per cent women users on the platform took jobs as drivers, delivery partners, lab technicians, factory workers, etc. Companies like Paytm, Zomato, Rapido, and Swiggy among others, have been among the top partners posting maximum jobs for women to diversify their workplaces, it said.
Ajoy Thomas, VP and Business Head – Staffing, TeamLease Services said, “More women are entering the industry due to the continuous rising demand from e-commerce companies, which are setting up fulfilment centres, coupled with corporates looking to improve their gender diversity. Women hold a third of the sorting, packing, loading, and customer support jobs this year, up from about a tenth even three-four years ago.”
Rise in Gig Economy during Pandemic
The pandemic has prompted multiple companies to adopt flexible work cultures, with gig workers finding new opportunities in nearly every industry.
If statistics are to be believed, India has over 15 million freelancers working on technology projects. According to ASSOCHAM, India’s gig economy is projected to reach USD 455 billion by 2024, growing at his CAGR of 17 per cent. Nearly 60 per cent of tech industry organisations are now investing in gig workers, and 97 per cent of these companies want to keep gig workers at their current level or hire more gig workers .
Dinesh Gulati, COO, IndiaMART said, “For the young population of India, freelancing has become a lucrative alternative and helped them unleash their aspirations, banking on the recent fast-clipped emergence of freelance online platforms. The trend of gig workers which was initiated by start-ups has now become a new norm among organisations of all sizes and scales.”
Budget role towards Gig Workers
In the union budget 2021, Finance Minister Nirmala Sitharaman announced allocation of Rs 150 crore for the national database of unorganised workers. Also a proposal was made for launching a portal to collect relevant information about gig economy workers, including those working in construction, among others. Sitharaman had said that, for the first time globally, social security benefits will extend to gig and platform workers.
For the year 2023 too, it is expected that the union budget brings relief to the lower and middle-income classes in regard to income tax. Also, provisions and policies on social security, healthcare, etc are required for the gig workers.
Avadhesh Dixit, CHRO, Acuity Knowledge Partners said, “The annual budgetary exercise is one of the most awaited regulatory updates, especially for the salaried class. Given the high-inflation environment, the income tax exemption or modification would provide some relief to lower and middle-class income earners, along with long-term benefits like healthcare, superannuation, and retirement benefits from the government in the upcoming budget. There is also a need to simplify the capital gains structure for different asset classes and different durations. With the increasing deployment of gig workers by a number of sectors, it is time for the government to initiate discussions on extending provisions such as social security to gig workers. It is equally critical to build consensus among important stakeholders on this subject before a concrete announcement is made, to ensure their acceptance.”