Budget 2023 Introduced Opportunities To Make MSMEs More Self-reliant: Experts

The Union Budget 2023-24 has introduced opportunities to make the micro, small and medium enterprises (MSME) sector more self-reliant and competitive in a global market, according to the experts. 

While presenting the budget in Parliament Finance Minister Nirmala Sitharaman revamped the credit guarantee scheme with Rs 9,000 crore in the corpus for micro, small and medium enterprises (MSMEs). Last year, the central government proposed revamping the credit guarantee scheme for MSMEs.

"Two clear proposals are that the payments to MSMEs are covered under Section 43B. There is also an enhancement in presumptive taxation to Rs 3 crore. There is also a further allocation of Rs 9000 crore in the revamped credit guarantee scheme. This will enable at least Rs 2 lakh crore of additional collateral-free guarantee," said Sanjay Kumar, Partner, Deloitte India. 

Talking about budget, Prashant Kumar, MD and CEO, Yes Bank said that the Union Budget 2023 attempts an inclusive growth structure for the economy through various measures that are expected to reach the last mile. "Emergency Credit Line Guarantee Scheme (ECLGS) continues with an additional INR 9000 crore added to the corpus which would boost the fund flow for the MSME sector," said Kumar. 

To support MSMEs in the timely receipt of payments, FM Sitharaman proposed to allow a deduction for expenditure incurred on payments made to them only when payment is made.

Vijay Kalantri, Chairman, World Trade Center Mumbai said, "The budget has ticked all the boxes by providing relief to MSMEs, individual taxpayers, farmers and women self-help groups. The rationalisation of Customs duty rates is a welcome move which will help more investments in Make in India initiatives. The relief provided to the MSMEs through the two Vivad se Vishwas schemes will reduce the financial and contractual burden."

While welcoming the enhanced corpus under the credit guarantee scheme for MSMEs, Kalantri suggested that this scheme should be implemented effectively to reduce the rejection rate of applications by MSME borrowers for collateral-free loans.

Notably, FM also stated that the digital ecosystem for skilling will be further expanded with the launch of a unified Skill India Digital platform for enabling demand-based formal skilling, linking with employers including MSMEs and facilitating access to entrepreneurship schemes. An Entity DigiLocker will be set up for use by MSMEs and charitable trusts.

Alok Mittal, CEO, Indifi Technologies said, "Digital lenders and NBFCs are vital in the credit story of MSMEs, therefore the benefits introduced should ideally be accessible to them as well. The creation of the National Information Registry is a positive step towards better decision-making by lenders. For the registry to be truly effective, we hope to see credit footprint and non-financial information in real-time along with financial information of MSMEs."

Experts also noted that the use of PAN as a common business identifier for digital systems of specified government agencies will bring ease and consistency to the compliance process for businesses. According to the experts, this is a step towards a more efficient and streamlined system from both a cost and consumer protection standpoint for fintech companies to operate in. 

"The measures announced in the budget aimed at promoting efficiency through integrated systems via a one-stop solution for reconciliation and updating of identity and address of individuals using DigiLocker service are commendable. These measures will help companies in the finance sector to boost further their efforts to deliver innovative solutions to customers and drive financial inclusion in India," said Padmanabhan Balasubramanian, Partner, Protium. 

Meanwhile, Hardika Shah, Founder and CEO, Kinara Capital said that the acknowledgement of PAN as a common business identifier as well for all digital systems is a laudable initiative as it will help in integrating financial information under one single entity. It will significantly reduce the compliance burden on small businesses that do not have the resources to maintain a large team who can maintain multiple numbers and filings.