In her 2023 budget speech, Finance Minister Nirmala Sitharaman called MSMEs the “growth engines of the economy”, and seeing how far the sector has spread, generating crores of employment opportunities in the country, it isn’t hard to see why. The MSME sector accounts for about 33% of India’s GDP.
The COVID-19 pandemic hit the MSME segment pretty hard, because of which there is still a lot of turbulence in the segment. In the last two budgets, several provisions were announced by the government to aid recovering MSMEs, from the easy availability of MSME loans in India or ensuring a competitive interest rate for the MSME business loan. This theme has been carried forth into this year’s budget as well. Apart from introducing new provisions, the 2023 budget also built upon some of the measures that had previously been announced to boost the recovery, stability, and growth of the MSME sector.
It has been observed in recent years that there has been a significant increase in MSME credit offtake as many MSMEs have been opting to apply for MSME loan schemes. This increase can majorly be attributed to the introduction of the MSME ECLGS, or the Emergency Credit Guarantee Scheme for MSMEs, which was announced by the government in 2020 in response to concerns raised by the pandemic. It is estimated that around 1.2 crore businesses [source] are backed by the ECLGS, with MSMEs forming a whopping 95% of the same.
Measures included in the 2023 budget help further strengthen the premise of this scheme, funnelling an additional ₹9000 crore in the ECLGS for MSMEs. This will make it even more convenient for MSMEs to avail a business loan from any finance company as this move translates into another ₹2 lakh crore worth of collateral-free loans being added to the overall budget for small businesses to avail.
Apart from a 1% decrease in credit costs is also expected, which will go a long way in helping enhance the credit penetration of available financial solutions in the MSME sector, encouraging entrepreneurship.
The Vivad se Vishwas Scheme is another budget provision that was announced to aid the MSME sector. This scheme has been introduced to provide some amount of relief to the MSMEs that have been struggling because of the economic disruptions left in the wake of the COVID-19 pandemic. Under this scheme, any MSME that failed to complete their contracts because of the pandemic will be granted an amount of up to 95% of the bid amount that was forfeited or of the performance security by the government and its undertakings.
●The reduction and decriminalisation of about 39,000 compliances and 3400 legal provisions.
●Announcing the PAN card as the common identifier that MSMEs can use for all digital transactions at government agencies to enable a simplified KYC procedure with a reduced compliance burden.
●Introduction of the ‘National Data Governance Policy’ to improve data access, usage, quality, and management to empower inclusive development while reducing privacy breaches.