MSMEs’ ease of doing business: Similar to 2022, 2023 is anticipated to bring about a number of significant policy changes by the government relating to micro, small, and medium companies (MSMEs). Some of those are guaranteed to happen in the next year, but others are uncertain but nonetheless important to furthering the development of the growth plan for the MSME sector in India. The top ten of them, as determined by the government’s declarations or remarks in 2022, are listed below. Look at this!
Expiration date of ECLGS: The Emergency Financial Line Guarantee Scheme, one of the largest credit assistance programs for MSMEs historically, is due to end in March 2023 unless the government grants it a further extension. Since the program’s initial edition, which debuted in May 2020, several modifications and expansions have already been made. Its initial expiration date was October 2020, but it was later extended to November 2020, then to March 2021, June 2021, and March 2022. The most recent extension, which included additional coverage for the hotel, travel & tourist, and civil aviation sectors, was included in last year’s budget. Additionally, the scheme’s cap was increased from its initial value of Rs 3 lakh crore to Rs 5 lakh crore. By November 30, 2022, 71% of the total amount of the program had already been approved.
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Validity of subordinate debt schemes: The government’s Rs 20,000 crore Credit Guarantee Scheme for Subordinate Debt (CGSSD) for stressed MSMEs, which was introduced with ECLGS in May 2020, would expire in March. The plan, which was initially valid through March 2021, was designed to assist stressed MSMEs or NPA accounts through restructuring. The program, however, hasn’t been able to draw in a sizable number of potential recipients. Only 782 guarantees of Rs 90.47 crore have been granted as of July 26, 2022, when the government had hoped that the program would help 2 lakh MSMEs. The MSME Ministry’s annual report for 2021–22 states that “the proposal for adjustment in the program rules is in progress,” but the government may decide to prolong it further.
Udyam-registered MSMEs number 5 crore: The goal for the Udyam registration platform, which had 1.29 crore MSMEs registered at the time this report was filed, is to achieve 5 crore registrations in 2023 or roughly four times the growth that is anticipated to occur in the next 12 months. “Our objective is to attain 5 crores registered MSME in the system by 2023,” MSME Secretary BB Swain stated in a speech at the FICCI’s 95th annual conference in December 2022. This would “open the gates to official and cheap loans to registered MSMEs,” furthering the ministry’s intention to formalize the MSME sector. The majority of registered units—over 95%—are now tiny businesses.
Digitized loans for SMEs: According to Shaktikanta Das, governor of the Reserve Bank of India (RBI), depending on the lessons learned from the ongoing pilot project of digitized KCC lending (that started in September), the RBI may enable end-to-end digitalization of loans to MSMEs and complete digitalization of loans based on KCCs in 2023. Speaking at the FICCI’s banking conference FIBAC 2022 in November, Das stated that the goal of the central bank is to roll out digital KCC and SME loans sometime in 2023. In a statement released in September, the central bank observed that small enterprises, auxiliary industries, and farmers in remote regions must visit a bank branch with documentation proving their ownership of the property, often making numerous trips.
Surety bonds for public contracts: In its most recent budget, the government has proposed allowing surety bonds to take the place of bank guarantees in public procurement. The action has not yet been put into effect, despite expectations that it would benefit MSMEs as bank guarantees generally deplete their operating capital as well as the necessity for collateral and margin money to get such guarantees in a public procurement procedure. In her statement, Finance Minister Sitharaman mentioned that IRDAI has provided the environment for insurance firms to provide surety bonds. On January 3, 2022, the IRDAI (Surety Insurance Contracts) Guidelines, 2022, were reportedly already published in order to “control and expand Surety Insurance Business.” Additionally, MSME organizations like FISME have recently reminded the government of its adoption; as a result, it may be put into effect in 2023.
To allow Rs 3 trillion in MSME loans, AA and OCEN: With the advent of cash flow-based lending to MSMEs, the potential loan amount for MSMEs would increase to roughly Rs 3 trillion in 2023 on the basis of bank statements and GST invoices made available on account aggregators (AA) and banks embracing OCEN (Open Credit Enablement Network), The third edition of the Global Fintech Festival was in September, as Chief Economic Advisor to the Government of India, V. Anantha Nageswaran, had said. The entire credit gap in the MSME sector was estimated to be between Rs 20 and Rs 25 lakh crore in the UK Sinha Committee report from June 2019.
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Supply for intra-state online vendors that are not registered: With effect from October 1, 2023, intra-state supply will be permitted for e-commerce sellers who supply goods with a turnover of up to Rs 40 lakh and services with a turnover of up to Rs 20 lakh but are unregistered under the Central Goods and Services Tax (CGST) Act and those registered under the GST Composition scheme. At its 48th meeting, the GST Council presided over by Finance Minister Nirmala Sitharaman, “approved the adjustments in the GST Act and GST Rules, together with the issuing of appropriate notifications, to allow the same.”
Exemption from customs taxes on scrap steel will end: If the government does not have plans to prolong the exemption further, the 2021 exemption from customs duties on scrap steel would expire in 2023. The exemption was offered to MSME secondary steel manufacturers and was extended for another year in the 2022 budget. Additionally, Sitharaman had stated that the budget for 2022 had eliminated some anti-dumping and countervailing duties on stainless steel and coated steel flat goods, alloy steel bars, and high-speed steel “in the wider public interest given the current high prices of metals.”
An increase in credit of up to 18%: Given the MSMEs’ participation in the Atmanirbhar Bharat initiative and the flow-through effects of programs like the Productivity Linked Incentive (PLI) scheme, bank credit to MSMEs is anticipated to grow at a “reasonable clip” of 16–18% during FY23 and FY24, the credit rating agency Crisil had noted in November. According to Crisil, the rise in MSME credit in FY23 and FY24 would be larger than the 10–12% growth anticipated in lending to the corporate category during those two fiscal years.
Governmental MSME Policy:
MSMEs could swiftly see some policy action in 2023. In February 2022, the government released a draught of the national policy on MSMEs and requested comments on the recommended actions to increase MSMEs’ competitiveness, advance technical advancement, establish clusters and infrastructure, purchase MSME products, and offer specialized financing support.
“The goal of the MSME Policy is to promote the productivity and efficiency of the MSME sector in order to create income, jobs, etc., and integrate into both local and international value chains. Bhanu Pratap Singh Verma, a minister of state in the MSME ministry, responded in writing to a question in the Lok Sabha on March 31, 2022, stating that the draught policy had been posted on the ministry’s website in order to solicit feedback from stakeholders. However, there has been no formal update on the policy’s rollout progress.