The country’s start-up ecosystem is actively being promoted by the central government. This will therefore boost the MSME sector of the economy of the nation. The Center should start suitable policy steps to support MSMEs and other emerging businesses in the Union Budget 2023–24.
Though MSMEs play a pivotal role in India’s socioeconomic development, the segment faces many barriers, including funding constraints and more. Keeping this in mind, the Union Government could extend credit schemes expiring this year. Consider ECLGS (the Emergency Credit Line Guarantee Scheme), which is due to expire in March 2023. While the scheme has had multiple extensions after its launch in May 2020, another one is imperative because of the ongoing challenges MSMEs face due to the Russia-Ukraine war, which shows no signs of ending.
Additionally, the RBI must put into practice its plans to fully digitize SME loans and KCCs (Kisan Credit Cards). The RBI Governor had earlier stated that farmers, small business owners, and proprietors of auxiliary industries must frequently visit bank branches with pertinent papers, such as confirmation of land ownership and more. By facilitating quick access to official channels of finance and accelerating the loan procedure, digitalization may help MSMEs compete worldwide by removing or restricting a number of barriers. Digitalization will hasten the MSME segment’s expansion and formalization.
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Permitting surety bonds issued by insurers in place of bank guarantees (BGs) for public procurement is another significant policy that has to be put into effect. Bank guarantees degrade MSMEs’ working capital combined with the demand for margin money and collateral to get BGs for public procurement. MSMEs would benefit greatly from hearing about this in the budget for 2023.
The Draft National MSME Policy, which was announced last year, is the other significant unresolved matter. By assuring technical advancement, fostering competitiveness, supporting infrastructure and cluster development, providing specialized finance assistance, and encouraging the purchase of MSME goods, the implementation of this strategy might fundamentally alter the sector.
The Budget should also support female entrepreneurs, who jointly produce just 3% of India’s industrial production while employing 10% of the country’s population across a range of occupations. The third-largest gender disparity in the world is seen in India, where women make up just 33% of early-stage entrepreneurs.
The largest obstacles are complicated restrictions, along with the collateral and numerous pieces of documentation that women must provide in order to obtain loans. Most women are not eligible for loans since they do not have any assets or collateral in their names. Due to these obstacles, it is estimated that only around 70% of women-owned businesses’ financial needs are satisfied. As a result, just 20% of the 63 million MSMEs in the country are owned by women.
Therefore, legislative changes to eliminate the pervasive gender bias in India’s credit environment might be included in the budget. Additionally, in order to improve the acceptance of loan programs, female entrepreneurs’ awareness of the many programs that offer credit to women must be increased.
Additionally, the PLI (production-linked incentive) programs’ incentives for MSMEs should be improved. The major industrial industries are now the focus of the PLI programs, with MSMEs benefiting from the spillover impact. Incentives that are given specifically to certain MSME verticals would be more advantageous.
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Allied credit, employment creation, and infrastructure development initiatives, in addition to the Draft National MSME Policy, must all be energetically executed to assist MSMEs and other industries at large. Since many great initiatives fail to take off strongly owing to insufficient institutional support, it is imperative that all support programs be properly implemented in word and spirit.