Budget 2019 has fallen short of expectations of the Micro Small and Medium Enterprises (MSME) sector. Industry experts believe Finance Minister Nirmala Sitharaman could have gone beyond reiterating existing schemes—like the sanctioning of loans up to Rs 1 crore in 59 minutes for GST-approved SME units—as far as issues like access to credit and job creation are concerned.
Harish Agarwal, chairman, Confederation of Indian Industry (CII) Himachal Pradesh State Council, says that while the government had announced the availability of loans in 59 minutes without mandatory requirement for collateral through a digital platform last November, getting those loans sanctioned remains a challenge.
“It is easy for the government to make announcements but bankers are wary of disbursing loans accordingly. The government must make these provisions more robust,” he says, explaining that the allocation of Rs 350 crore for a 2 percent interest subvention for MSMEs under the GST on fresh or incremental loans might not be sufficient. “MSMEs, and not large industries, are what will generate sufficient employment in the country. I am hopeful that since the Budget has been considering MSMEs, the government will work towards empowering the sector further.”
India has 63.38 million unincorporated, non-farm MSMEs engaged in different economic activities, including 19.66 million in manufacturing and 23 million in trade activities, according to the ministry of micro, small and medium enterprises. The sector provides employment to over 49.77 million people.
In a chapter titled ‘Nourishing Dwarfs to Become Giants: Reorienting Policies for MSME Growth’, the Economic Survey 2019—tabled by Sitharaman a day before she presented her maiden Budget on Friday—had called for providing fresh direction to priority sector lending norms to focus more on hand-holding “infants” (new companies that are small in size), rather than “dwarfs” (small firms that are more than 10 years old). The survey stated that younger firms create more jobs at a higher rate than older ones, even as larger firms provide permanent employment in large numbers.
Serial entrepreneur Karthik Nagendra, the founder of Pink Ladder, a career-enhancement ecosystem for women entrepreneurs and professionals, believes that many measures proposed for MSMEs in the Economic Survey did not feature in the Budget. “The Modi 2.0 Budget is a big letdown for small and medium enterprises. Companies that had taken a major hit due to demonetisation and GST were hoping for some lifelines, especially when the government had a majority mandate and no opposition,” he says. “SMEs will continue to suffer and this is no good news for employment opportunities in the country.”
In her Budget presentation, Sitharaman announced pension benefit for 3 crore shopkeepers and retail traders whose income is below Rs 1.5 crore under the Pradhan Mantri Karam Yogi Maan Dhan Scheme. She also emphasised on SMEs being hit by delays in government payments, announcing a dedicated ecommerce platform for “filing of bills and payments”.
Mehernosh Tata, head, SME lending, Edelweiss, says creation of an e-payment platform will be a way to bring the smaller entrepreneurs into the formal financial system. “The interest subvention scheme, especially for women entrepreneurs, is a commendable step towards financial inclusion. I am hopeful that our 63 million MSMEs will benefit from the proposed Budget initiatives and we shall have more inclusive and sustainable growth overall.”
To boost local manufacturing activities under Make In India, the Budget has also announced a scheme that will invite and incentivise global companies to set up “mega manufacturing plants” in sunrise and advanced technology areas such as semiconductor fabrication, solar photo-voltaic cells, computer servers and laptops.