Here is what MSMEs, the backbone of Indian economy, expect from Union Budget 2022
“Abhi toh market uth rahi thi, ye teesri leher ne phir se mann mein darr baitha diya, (The market was getting back into shape but this third wave has again made us scared),” Neeraj Mishra, a small business entrepreneur from Kanpur, Uttar Pradesh who runs a fabric store tells SMBStory.
The third wave of COVID-19 has added to the misery of the MSME (micro small and medium enterprise) sector, which was trying to recover from the setback caused due to the first two waves of the pandemic in 2020 and 2021.
“Had I been commenting about 20 days back, probably my comments would be more towards how the government should rebuild and focus on reducing the budget deficits. However in the 20 days gone by, we know exactly how uncertain things are with the new wave hitting India like a tsunami. The government should do well. I hope that they will be able to make adjustments to their planning (as the budget document to my knowledge would almost be ready),” says Ratish Pandey, Business & Executive Coach, Ethique Advisory.
Neeraj says that given his business health right now, he is in dire need for money to buy more inventory for running his shop. He also needs funds to make payments to his vendors and pay the shop rent. Curfews and declining customer footfall, he says, are adding to his problems.
The upheaval that the COVID-19 pandemic created in the business environment has seen MSMEs struggling to stay afloat, says Ratish. Each new wave, he says, is worsening the situation.
Ahead of the Union Budget 2022, SMBStory tried to find what small business owners expect from the budget. Here is what we found:
“Keeping in view the “Make in India” initiative by the Indian Government, we would love to contribute to the growth,” says Mihir Jain, the second generation entrepreneur and Marketing & Sales Director, Insight Cosmetics. For this, Mihir says that they are looking forward to having low-interest loans in the upcoming fiscal year.
“Low-interest loans would not only help us grow but help us come up with a better product range suited for our customers,” he adds.
For the MSMEs, the government can work on better loan experience, tax reductions, and allocation of funds. It is becoming very challenging for MSMEs to even sustain in the market.
GST and taxes waiver
If the government supports MSMEs with taxes and waivers, they would be able to sustain themselves in the market. “The government can help the MSMEs to recover from the liquidity crisis by introducing a refined process,” Mihir adds.
Loan repayments, interest payments and taxation are all pain points for the MSME sector. Industry-specific relaxations could help take off the edge and offer relief.
Ratish says that Prime Minister Narendra Modi recently had set up an Economic Task Force to assess the impact of COVID-19 on the economy. Indian Banks Association, on the other hand, has approached RBI for relief regarding non-performing asset (NPA) classification in the MSME sector.
Some of the supportive actions offered by the government in this regard include:
- Emergency Credit Line Guarantee Scheme — Collateral-free automatic loan of Rs 3 lakh crore. While a great initiative, it needs to consider revising the loan threshold upwards from the current Rs 2 crore under Credit Guarantee Fund Trust for Micro and Small enterprises.
- The current GST exemption for enterprises with an annual turnover of up to Rs 40 lakh could do with a revisit. The government could review tax slabs and consider a reduction in GST to help ease the financial burden.
- Currently, the GST composition mechanism permits taxpayers with less than Rs 1.5 crore turnover to pay a fixed GST rate on their turnover. This limit could also do with a revision upwards.
Ease burden on the manufacturing sector
“India is among the top five largest manufacturing nations in the world and our MSME sector contributes to nearly 30 percent of our GDP. Therefore, it is imperative we support MSMEs for our overall economic growth,” says Hardika Shah, Founder and CEO of Kinara Capital.
Hardika hopes the new Union Budget will ease some of the burdens on the manufacturing sector, particularly for the MSME sector that was disproportionately affected by the pandemic.
“Raw material costs have shot up 30-50 percent in a year’s time while businesses are still trying to recover to pre-pandemic levels. This issue is further exacerbated with the GST costs which have risen across sectors due to the higher material costs. Adjusting and capping the GST is a must to give some break to the MSME sector this year,” she points out.
The anti-China sentiments in the past two years have affected the trade between the two countries. Hardika believes that an impactful way that can support MSMEs is if the government can help pursue deals and options beyond China to see if raw materials can be procured at a lesser cost from other sources.
Another way to induce economic growth is to reduce the costs of commercial electricity, which can be capped or adjusted to give a reasonable latitude to the manufacturing sector which is trying to recover and rebuild their businesses, while still living with a pandemic.
Addressing the CII Partnership Summit in 2020, Finance Minister Nirmala Sitharaman had promised a "never before" like Union Budget 2021 to steer the pandemic-battered economy and push for growth. This time, in Union Budget 2022, MSME expect the government will take new measures to help MSMEs get back to pre-pandemic growth levels.