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MSME Sector Gets Big Boost: Allocation Doubled; Custom Duty Rejig to Help too

For FY21-22, the MSME sector has seen a virtual doubling of the budgetary allocation to Rs 15,700 crore compared to Rs 7572 crore allocated in last year's budget

Photo Credit : Shutterstock

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The Micro, Small and Medium Enterprises or the MSME Sector has seen a big spike in the allocation for FY21-22. To further support the MSME sector, the Finance Minister also announced a reduction in Customs Duty on certain specific items that are produced by the MSME sector.

“We are reducing Customs Duty uniformly to 7.5 per cent on semis, flat, and long products of non-alloy, alloy, and stainless steels. To provide relief to metal recyclers, mostly MSMEs, I am exempting duty on steel scrap for a period up to 31st March 2022," said FM Nirmala Sitharaman in her Budget speech.

To further help the MSME sector, FM announced an increase in duty—from 10 per cent to 15 per cent—on steel screws and plastic builder wares. “We are rationalizing exemption on import of duty-free items as an incentive to exporters of garments, leather, and handicraft items. Almost all these items are made domestically by our MSMEs. We are withdrawing exemption on imports of certain kind of leathers as they are domestically produced in good quantity and quality, mostly by MSMEs,” the FM said.

Stakeholder reacted positively to the big hike in the allocation to the MSME sector. “Doubling of allocation for MSME will hopefully be a great boost towards new employment generation post the very challenging covid-19 period that had seen poor demand and job cuts,” says Shubhradeep Nandi, CEO & Co-Founder, PiChain Labs. 

Reportedly, the MSME sector accounts for about 45 per cent of manufacturing outputs and 40 per cent of the total exports of the country.

Ashwajit Singh, Managing Director of development consultancy firm IPE Global said, “With nearly 63 million MSMEs in India employing about 111 million people, the increased allocation will support more job creation, export promotion and hopefully meet the desirable goal of upping their GDP contribution to 40 per cent in the next 5 years.” 


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msme Union Budget 2021-22 Union budget 2021