Let's talk MSMEs! What does this year's budget mean for the MSME sector?

The Micro, Small, and Medium Enterprises (MSME) sector is integral to India's economic growth story. With a vast network of over 63 million MSMEs, the sector contributes significantly to the country's GDP, exports, and employment generation.

According to the Ministry of Micro, Small and Medium Enterprises, Government of India, the MSME sector contributes around 30% to India's GDP and employs over 110 million people. The sector also accounts for 45% of India’s total manufacturing output and 40% of the country's total exports. The sector is predominantly made up of micro-enterprises, with over 99% of the MSMEs classified as micro-units. The data reflects that small and micro-enterprises are important pillars of the Indian economy.

The Push from the Government

The Union Budget 2023 provisions have the potential to boost the MSME sector and help it become a major driver of employment generation and offer financial freedom to millions.?

The budget proposed several measures to increase credit availability and support for the MSME sector.

Expansion of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): The credit guarantee trust for small micro-enterprises scheme will be revamped with a required infusion of

Rs 9,000 crore, effective April 1, 2023.

The budget proposed an increase in the allocation to the MSME sector, with an allocation of INR 22,138 crores for the sector in 2023-24.

In the first phase of the Vivad Se Vishwas programme, the government will return 95% of the forfeited amount of businesses that could not fulfill their contractual obligations.?

In the second phase of the Vivad Se Vishwas programme, there will be settlements of contractual disputes of government and government undertakings where an arbitral award is under challenge in a court, and a voluntary settlement scheme with standardized terms will be introduced.

The Budget also proposed a reduction in the compliance burden for MSMEs by simplifying the regulatory environment and providing a single-window clearance for various approvals and licenses.

Collectively, these provisions will only add to the Ease of Doing Business and improve the funding to the segment. As of 2022, India ranked 63rd position in the global Ease of doing business index. The country is already working to evolve and better its ranking on the index.?

Religare understands that the Indian MSME sector is an essential part of the economy. The provisions of the Union Budget 2023 will help in creating employment opportunities, generating income, and reducing poverty for millions. Despite the current financial stress and other related challenges, the government has taken several initiatives to fuel its growth. With continued support from the government and other stakeholders, the MSME sector will only prosper and grow in the coming years.

#ReligareGroup #MSMEs #Budget

Sources:

https://www.business-standard.com/article/economy-policy/msmes-contribute-30-to-india-s-gdp-to-grow-further-narayan-rane-122091601337_1.html

https://pib.gov.in/PressReleaseIframePage.aspx?PRID=1598636#:~:text=The%20MSME%20sector%20in%20India,40%25%20of%20the%20country's%20exports.

https://prsindia.org/theprsblog/definition-of-msmes?page=153&per-page=1#:~:text=The%20micro%20sector%20with%206.3,total%20estimated%20number%20of%20MSMEs.