View: Budget 2022 lays the foundation for MSMEs Amrut Kaal

The Union Budget for 2022-23 lays the foundation for economic growth over the next 25 years or the Amrut Kaal. The Budget had a strong focus on infrastructure development. While a relative dearth of major financial incentives for small business may have led to disappointment, the future looks bright. The Budget contains critical small steps to boost liquidity among small businesses today, while providing a long term vision for MSMEs to flourish in the future.

India’s micro, small, and medium industries (MSMEs) need strong market support. With digitisation gaining momentum, it is essential MSMEs are able to deliver and sell their products quickly and efficiently. Prime Minister’s GatiShakti National Master Plan aims to create a world-class modern infrastructure to facilitate “seamless multimodal connectivity and logistics efficiency” which shall help in developing the market for MSMEs and bring down logistical costs and time.

The development of 25,000 kilometres of national highways, PM GatiShakti cargo terminals, multimodal logistics park, and the one station-one product idea of railways will boost the local business and supply chains. Further, the seven engines development shall also bring in more business opportunities for the MSMEs and increase their productivity. There are other helpful provisions like the Emergency Credit Line Guarantee Scheme (ECLGS) increment up to Rs 5 lakh crore and an additional credit of Rs 2 lakh crore through Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme.

The government has also attempted to address the demand for skilled manpower and credit facilitation by paving the way to link the Udyam, e-Shram, NCS, and ASEEM portals which if materialized, can be a propelling factor for the MSMEs efficient output. The idea of bringing in trust-based governance in ease of doing business will also benefit the MSME sector as they spend considerable time in documentation and approvals.

The introduction of surety bonds for suppliers brings in a lot of advantages as it ensures that the critical cash reserves of MSMEs are not blocked in financial guarantees thereby enabling a sustained cash flow. Another impetus to the MSMEs cash flow cycle comes from the announcement that 75 percent of running bills shall be mandatorily paid within ten days. The setting up of Centre for Processing Accelerated Corporate Exit (C-PACE) which aims to reduce the voluntary winding–up time from the current 2 years to 6 months will encourage MSME to come on-board the formal fold. Setting up 75 digital banking units in 75 districts of the country can provide innovative solutions for improving the liquidity of MSMEs.

The Rs 50,000 crore expansion in ECLGS is exclusively earmarked for struggling MSMEs in the hospitality sector. The budgetary allocation for Prime Minster Formalisation of Micro Food Processing Enterprises (PM-FME) has been increased from Rs 399 crore to Rs 900 crores. The Raising and Accelerating MSME Performance (RAMP) program has been launched with an outlay of Rs 6,000 crores over five years, aimed at improving the competitiveness and efficiency of the sector with an allocation of Rs 723 crores in FY'23.

A fresh allocation of Rs 262 crores has been made for the Micro and Small Enterprises Cluster Development Programme (MSE-CDP). Recognising the need for skilling and technology up-gradation, fresh allocation of Rs 235 crores and Rs 205 crores has been made for tool rooms and technical education, and ‘Technology Centre Systems Programme’ (TCSP) respectively.

The government’s thrust in sunrise sectors like drones, gaming, elective vehicle and batteries, artificial intelligence, semiconductors, and productivity linked incentives for solar photovoltaic modules and opening up of the defense sector to domestic suppliers is a great opportunity for entrepreneurs and enterprises in the broader start-ups and MSME ecosystem. These would require a new set of players that are efficient, technologically adept, and globally competitive who could be champions of the Atmanirbhar Bharat mission during this Amrut Kaal.

It is essential that the blueprint laid down by the government materialises in a time-bound manner in order to create an Amrut Kaal for the MSMEs and is further built upon in upcoming policies and budgets of the government. However, no action with big announcements will actually dissipate the government's vision of making the MSME sector contribute 50 percent to the Indian GDP by 2025.