The previous two years have seen a major change in the micro, small, and medium-sized enterprise sector. The ecosystem of small and medium-sized firms has shifted toward digitization and is seeking for ways to alter their businesses in the coming years. The MSME sector is hopeful for legislation and incentives that would help them develop.
The government had created Rs 20 lakh crore Emergency Credit Line Guarantee Scheme (ECGLS) to assist micro, small, and medium-sized firms during the COVID-19 pandemic.
The Union Budget for 2022-23 highlighted a number of measures for micro, small, and medium-sized enterprises (MSMEs), including the extension of the Emergency Credit Line Guarantee Scheme (ECLGS) until March 2023.
Nirmala Sitharaman, Union Finance Minister, stated Tuesday during the presentation of the Union Budget 2022-23 that the ECLGS had provided much-needed supplementary credit to over 130 lakh MSMEs. This aided them in mitigating the COVID-19’s negative influence. Hospitality and allied services, particularly those provided by micro and small businesses, had not yet recovered to pre-pandemic levels of business.
Considering these factors, the government declared an additional 50,000 crore in guarantee cover, bringing the total to 5 lakh crore, with the additional funds intended exclusively for hospitality and allied companies.
Additionally, the Govt. stated that the Credit Guarantee Trust for Micro and Small Enterprises plan would be restructured with the necessary funding infusion. This would provide an additional 2 lakh crore in credit to Micro and Small Enterprises and create more employment opportunities.
To assist the MSME sector in becoming more resilient, competitive, and efficient, the Centre will implement the Raising and Accelerating MSME Performance (RAMP) initiative over a five-year period with a budget of 6,000 crore.
Additionally, the budget paper stated that the tariff exemption granted to steel scrap last year will be extended for another year to assist MSME secondary steel companies.
Ease of Doing Business for MSMEs: The Union Budget 2022-23 is being presented at a critical point in the Indian economy’s recovery from the pandemic’s devastating impact and as prospects for a solid, sustained, and higher GDP growth trajectory build. At this point in time, boosting MSMEs – the backbone of the Indian economy – is critical for sustaining the economic recovery, owing to the sector’s unparalleled contribution to the country’s economic and social progress.
MSMEs have played a pivotal part in numerous facets of the Indian economy, including around 30% of GDP, approximately 37% of all India manufacturing gross value output manufacturing, more than 49% of total exports, approximately 11.1 crore jobs, and research and innovation, to name a few.
MSMEs may expand and succeed with a solid integration into the global supply chain by focusing on innovation, product development, and partnerships with dependable suppliers and other essential stakeholders. MSMEs, through different government reforms and actions, can significantly contribute to job creation and the future path of a New and dynamic India.
Although the government has implemented a number of meaningful and effective reform measures for the MSME sector over the last 21 months to mitigate the frightening impact of Covid-19, MSMEs are still in the recovery phase and look forward to continued government assistance, particularly in the uncurtaining caused by the looming impact of the omicron variant.
Under the Covid environment, challenges such as delayed access to finance and credit, timely payment and adjudication of past dues, onerous procedural procedures, and rigid regulatory compliance have become more sensitive for MSMEs. At this point, it is recommended to assure hassle-free credit availability to industry, particularly MSMEs, as MSMEs experience several difficulties when asking for loans, which contributes significantly to their inability to develop consistently. A single window system for MSME facilitation is likewise required, as are lower business expenses, a level playing field for industry, and quick justice for industry. Additionally, the deadline for the Emergency Credit Line Guarantee Scheme (ECLGS) should be extended for another year, until March 31, 2023.
Reduced costs of doing business (including compliance costs, logistics costs, power costs, credit costs, and logistics costs) and a level playing field in the country will not only increase our exporters’ competitiveness, but will also result in decreased imports of items for which India has domestic capabilities. Additionally, reduced compliance costs for MSMEs would result in observable ease of doing business on the ground, while a lower tax regime will enhance people’s personal discretionary income, thereby creating an overall virtuous circle of economic growth and development.
Additionally, a cost-effective logistics network would bolster the country’s MSME sector by increasing MSMEs’ international competitiveness. A comprehensive development of the country’s logistics sector would enlighten, clarify, enhance, and prioritise the country’s primary objectives, emphasis areas, and governance structure for logistics. It is proposed that the country’s logistics costs be decreased from their present level of 14% of GDP.
On the fiscal front, we applaud the corporation tax rate being reduced from a peak of more than 30% to an effective rate of roughly 25%. To assist the whole MSME sector, however, we propose a tax decrease on MSME proprietorships/partnerships (including LLPs). As a result, taxes on these types of firms should be reduced in the future. The maximum tax rate for such enterprises is suggested to be reduced to 25%.
Additionally, the effective rate for newly constructed units is approximately 17%. Allowing organizations to benefit from Section 115 BAB is our recommendation. The time limit for a new unit to begin manufacturing may be extended by at least 24 months, meaning that the new unit must begin manufacturing by March 31, 2025.
IAMSMEofIndia provides financial incentives, support, and subsidies to manufacturing SMEs valued nearly Rs.1.0 crore. The MSMEs in Faridabad appear to be profiting significantly from IamSME’s Business Excellence Cluster Development initiative, which began a few years ago. The project’s purpose is to assist MSMEs in increasing their productivity, decreasing product rejection rates, and increasing profit margins.
“As a developing economy, India should promote raw material imports based on domestic demand and availability, rather than exporting raw materials to established economies, while focusing on exporting finished ‘Make in India’ products. This is to boost Make in India and domestic manufacturers’ cost competitiveness, particularly small and medium-sized enterprises,” said Rajiv Chawla, chairman of IamSME.