Key Budget Announcements for MSMEs by the Finance Minister

The 2024 Budget focuses on creating jobs, improving skills, supporting small and medium sized enterprises or MSMEs and helping the middle class. It highlights MSMEs and manufacturing especially those industries that need a lot of workers. The government has put together a package for MSMEs that includes financial help, regulatory changes and technical support to help these businesses grow and compete globally. A key feature of this budget is a credit guarantee plan which will allow MSMEs to get loans for buying machinery and equipment without needing collateral or a third party guarantee.

Public sector banks will start assessing the creditworthiness of MSMEs on their own rather than relying on external evaluations. This is a new strategy to help MSMEs maintain access to bank credit during tough times. To further assist MSMEs Finance Minister plans to lower the threshold for onboarding buyers on the TReDS platform from ₹500 crore to ₹250 crore. This change will help MSMEs convert their trade receivables into cash more easily, thus improving their working capital. SIDBI plans to expand its reach by opening additional branches and enhancing its services across key MSME clusters over the next three years, aiming to offer direct financial support to these enterprises. This year alone, 24 new branches will open increasing the total number of large clusters served to 168.

Finance Minister announced new support for small and medium sized businesses. They will help create 50 facilities that use radiation to preserve and improve the quality of food products. It will become easier to set up 100 labs that test food safety and quality, all of which will be certified by the National Accreditation Board for Testing and Calibration Laboratories or NABL. To assist MSMEs and traditional artisans in reaching international markets new ecommerce export hubs will be created through collaborations between the government and private sector companies. This initiative aims to boost the global presence of these small businesses and craftsmen.

Expert's Reaction to SMEs Announcement

Here are the responses from leading figures in the MSME sector regarding the recent announcements.

According to Raghunandan Saraf, Founder & CEO of Saraf Furniture, India is launching a major new internship program aimed at providing 1 crore young people with work experience in the country’s top 500 companies. Each intern will get a year of hands on experience, which should help bridge the gap between what they learn in school and what employers actually need. With 12 million people entering the job market annually, this program could make a big difference by offering valuable training and improving job readiness.

65% of India's population is under 35 years old this initiative taps into the potential of the country's young workforce. By partnering with leading companies, the program aims to ensure high quality training and follow up job opportunities. It also addresses a major issue for many Indian businesses: the difficulty in finding qualified candidates due to skill mismatches. By improving skills and increasing employability, the program could help lower the current youth unemployment rate of 23.2% and boost overall economic productivity.

According to Delphin Varghese Cofounder and Chief Revenue Officer, AdCounty Media, government’s commitment to improving credit access for small and medium sized enterprises is crucial for their survival and growth. MSMEs are crucial to the economy, accounting for 30% of GDP and 48% of exports. However, they face a credit shortfall estimated at ₹20-25 trillion, according to the International Finance Corporation.

To address this various measures are being proposed. In the 2021, credit to MSMEs grew by 11% compared to the previous year. Enhanced credit access could lead to substantial job creation and boost economic stability, benefiting the over 110 million people working in this sector. COVID19 pandemic has already severely impacted 67% of MSMEs. By improving credit flow, the government can help revive these businesses which is essential for reaching India’s goal of becoming a $5 trillion economy.

Final Words

Experts from various industries have expressed support for the initiatives announced in the Budget 2024. They highlight that these measures will benefit the SME sector and contribute to India's goal of becoming a $5 trillion economy.