Decoding Budget 2020: Indian MSMEs hail Finance Minister’s Rs 7572.20 Cr allocation for the industry

The Union Budget 2020-21, announced on February 1 by Finance Minister Nirmala Sitharaman in the Parliament, allocated Rs 7,572.20 crore for the Micro, Small and Medium Enterprises (MSMEs). This year’s Budget was eagerly awaited for by the MSME sector, which contributes 29 percent to the nation’s GDP and is said to form the backbone of the economy. 

The Budget announced several initiatives for the sector, including raising the turnover threshold for the audit of accounts to Rs 5 crore and a scheme to provide subordinate debts to MSME entrepreneurs.

Prime Minister Employment Generation Programme, a flagship employment generation scheme of the Ministry has been allocated Rs 2,500 crore for creating self-employment opportunities through the establishment of micro-enterprises in the non-farm sector. This will help traditional artisans and the unemployed youth in the rural and urban areas.

Enhancing MSME financing

While presenting the Budget on Saturday, Nirmala Sitharaman said, "Currently, only businesses having a turnover of more than Rs 1 crore are required to get their books of accounts audited by an accountant. In order to reduce the compliance burden on small retailers, traders, shopkeepers who comprise the MSME sector, I propose to raise by five times the turnover threshold for audit from the existing Rs 1 crore to Rs 5 crore." 

This scheme, she said, will be introduced to provide subordinate debt to MSME entrepreneurs. Sitharaman said that over five lakh MSMEs have benefitted from debt restructuring. She announced the allotment of Rs 900 crore to the industries for debt funding.

The Minister also asked banks to extend restructuring MSME NPAs for one more year, which initially had a deadline of March 2020. Additionally, the government has also asked the Reserve Bank of India to extend the debt restructuring window for MSMEs by a year to March 31, 2021, Sitharaman said.

"An app-based invoice financing loans product will be launched. This will obviate the problem of delayed payments and consequential cash flow mismatches for the MSMEs," she explained, adding that amendments will be made to the Factor Regulation Act 2011 to enable non-banking financial companies (NBFCs) to extend invoice financing to MSMEs through TReDS. This will ensure that the existence of MSME businesses is sustainable and economically stable.

ALSO READ

Budget 2020: FM allocates Rs 900 Cr debt-funding for MSMEs, audit threshold increases from Rs 1 Cr to Rs 5 Cr

Bolstering innovation in MSMEs

Products manufactured by Indian MSMEs significantly contribute to the export numbers. To strengthen India’s position in the world export market, a scheme of Rs 1,000 crore was also announced to extend support to mid-sized companies in selected sectors such as pharmaceuticals, auto components and others for technology upgradations, among others.

To improve the competitiveness of MSMEs through innovation and technology, Rs 805 crore has been allocated under the Credit Linked Capital Subsidy and Technology Upgradation Scheme (CLCS-TUS). Furthermore, there has been an increase of 71 percent in the allocation of funds for MSE-Cluster Development Programme from Rs 228 crore in 2019-20 to Rs 391 crore this year. This programme is aimed at improving the capacity building of Micro and Small Enterprises (MSEs).

For the benefit of the rural economy

The Khadi Vikas Yojana and Gramodyog Vikas Yojana have been allocated Rs 472 crore to develop a sustainable model of Khadi-based business enterprises and strengthen India’s rural economy.

Traditional industries functioning under 'Scheme of Fund for Regeneration of Traditional Industries' (SFURTI) have been allocated Rs 465 crore to help them become profitable, productive and eventually capable enough to generate sustainable employment for artisans.

The National Scheduled Caste/Scheduled Tribe Hub is given Rs 150 crore to provide professional support to SC/ST entrepreneurs and capacity building among existing and prospective SC/ST entrepreneurs through training programmes.  

(Edited by Saheli Sen Gupta)

ALSO READ

Budget 2020: Why GST continues to be the top concern for MSMEs and small businesses