Budget 2024 Reactions: Industry hails forward-thinking approach to MSMEs

Turning attention to the full year and beyond, the first Budget of the Modi 3.0 government particularly focuses on employment, skilling, MSMEs, and the middle class.

This budget provides special attention to MSMEs and manufacturing, particularly labour-intensive manufacturing. A package covering financing, regulatory changes and technology support has been formulated for MSMEs to help them grow and also compete globally.

Among the specific measures announced is the proposed introduction of a credit guarantee scheme for facilitating term loans to MSMEs for purchase of machinery and equipment without collateral or third-party guarantee. The scheme will operate on pooling of credit risks of such MSMEs. A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to Rs 100 crore, while the loan amount may be larger. The borrower will have to provide an upfront guarantee fee and an annual guarantee fee on the reducing loan balance.

The limit of Mudra loans will be enhanced to Rs 20 lakh from the current Rs 10 lakh for those entrepreneurs who have availed and successfully repaid previous loans under the ‘Tarun’ category.

SIDBI will open new branches to expand its reach to serve all major MSME clusters within 3 years, and provide direct credit to them. With the opening of 24 such branches this year, the service coverage will expand to 168 out of 242 major clusters.

To enable MSMEs and traditional artisans to sell their products in international markets, E-Commerce Export Hubs will be set up in Public-Private-Partnership (PPP) mode. These hubs, under a seamless regulatory and logistic framework, will facilitate trade and export related services under one roof.

The industry is upbeat about the measures announced to further the MSME sector in the country.

Ambika Sharma, Founder & Chief Strategist, Pulp Strategy:

“As we reflect on the Union Budget 2024, the government’s forward-thinking approach to digital advertising, MSMEs, and the services sector is encouraging. The significant focus on enhancing digital infrastructure and incentivizing the adoption of advanced technologies such as AI, AR, and VR is a significant boost for the digital advertising and transformation segment. These initiatives will not only foster innovation but also create a robust ecosystem for targeted and impactful marketing in the times to come.

The budget’s emphasis on MSME support, particularly through the new Credit Guarantee Scheme and improved credit assessment models based on digital footprints, is a critical step forward. By addressing payment delays and facilitating seamless access to credit, these measures will empower MSMEs to scale their operations, and overall economic growth. The digital footprint assessment link to credit seems it will lead to an immediate boost in marketing investments.

The services sector is poised for substantial growth with the development of Digital Public Infrastructure applications and the Prime Minister’s ambitious employment and skilling package. These initiatives will drive productivity, unlock new business opportunities, and enhance the consumer base for digital services.

In summary, the Union Budget 2024 presents a well-rounded strategy that supports digital transformation, stimulates consumption, and accelerates business growth across sectors. It is a positive and promising outlook for the future of digital advertising and the broader economic landscape.”

Sanket S, Co-founder, Scandalous Foods:

“Today’s budget marked a significant step forward for the MSME sector and the broader start-up ecosystem. The government’s decision to get rid of the angel tax gives start-ups a big push, encouraging more investment and innovation.

Banks will now have a new way to provide credit during tough times, and with the increased Mudra loan limit to Rs 20 lakh, they will offer essential support for MSMEs to sustain and grow their businesses.

Adjustments to the new tax system, like bumping up the standard deduction to Rs 75,000, will give taxpayers some much-needed breathing room with their finances. However, investors will need to watch out for the higher STCG and LTCG tax rates. On the whole, these steps show a well-rounded plan to boost economic growth and back up the core of our economy – the MSMEs.”

Prateek N Kumar, Founder and CEO, NeoNiche Solutions:

“Budget 2024 is a comprehensive approach aimed at fostering growth across various sectors of our society. By focusing on employment, skilling, MSMEs, the middle class, the poor, women, youth, and farmers, it is indeed a wholesome and inclusive budget. The outlined nine priorities for the coming years – Productivity and resilience in Agriculture, Employment and skilling, Manufacturing and services, Urban development, Energy security, Infrastructure, Innovation and R&D, and Next-generation reforms – highlight a commitment to holistic development. This focus on job creation and boosting consumption is poised to significantly benefit the consumer goods, real estate, and auto sectors. It’s an encouraging roadmap for our nation’s future.”

Shruti Mishra, CEO and Founder, IImage Stereo Marcom:

“As our FM Nirmala Sitharaman outlaid Modi 3.0’s first budget, and the 13th Budget of the Modi government, brought the special attention to MSMEs, along with women-specific skilling programs and initiatives to increase workforce participation, is a commendable step towards inclusive growth. This budget represents a commitment to continuity and a forward-thinking strategy aimed at reinforcing India’s growth trajectory. By focusing on employment and skill development, inclusivity and social justice, infrastructure, innovation, and next-generation reforms, it not only tackles current challenges but also establishes the groundwork for a knowledge-driven growth economy.

Creating an ecosystem that supports women in the workforce and is culturally aligned is crucial for sustainable development of the nation. Women plays a pivotal role in the economy, and their empowerment through higher education and skill development is essential for driving comprehensive progress. The introduction of women-specific skilling programs will enhance their employability and ensure that they have the necessary tools to succeed in various sectors. By encouraging more women to participate in the workforce, we not only promote gender equality, but also unlock a significant potential for economic growth. Additionally, the emphasis on stress credit loans to SMEs will provide much-needed financial support, fostering innovation, and growth in small and medium enterprises.”

Shivashish Tarkas, Founder, The InterMentalist:

“The Union Budget 2024 has brought in some critical updates. For MSMEs and start-ups, the industry has received much-needed support with a focus on expanding loan availability and advancing digital infrastructure. Increasing the loan limit in the MUDRA loans for MSMEs is a welcome step. This will help companies in processing and functioning smoothly.

These steps will guarantee sustained growth and the creation of jobs in addition to boosting creativity and innovation.  The government’s pledge to assist MSMEs through a range of financial incentives and initiatives to build capacity motivates us. The government’s commitment to supporting start-ups continues in this budget and we anticipate that it will have a favourable effect on our growth curve.”

Shachindra Nath, Founder and Managing Director, UGRO Capital:

“Today’s Union Budget is a remarkable step forward for MSME credit. At UGRO Capital, we believe MSMEs play a vital role in our economy, particularly in addressing employment challenges in a country of our size. The budget's focus on MSMEs addresses these issues head-on. Increasing the limit of MUDRA loans, the credit guarantee scheme for capital expenditure and machinery purchases, and the emphasis on public sector banks' credit assessment and solving the problem of MSME which comes under distress are all groundbreaking measures. These announcements collectively signify a significant focus on MSMEs, empowering lending institutions in priority sector to provide more credit and continue building our nation. We are hopeful that the fine print will favour lending institutions dedicated to MSMEs, allowing us to continue our mission of national development.”

Mukul Goyal, Co-founder, Stratefix Consulting:

“The Union Budget 2024 presents an ambitious framework aimed at revitalizing India's economic landscape, particularly for MSMEs, startups, artificial intelligence, and job creation. With a proposed allocation of Rs 22,000 crore for the MSME sector, this budget has the potential to catalyze significant growth and innovation.

However, while the expansion of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is commendable, it could have been further enhanced by introducing specific incentives for eco-friendly technologies, which are crucial for aligning economic growth with sustainability.

The budget’s focus on ease of doing business is promising, with measures to streamline regulatory processes and extend tax holidays for start-ups. Yet, the absence of substantial changes in GST rates is a missed opportunity. Simplifying compliance and reducing the GST burden on essential goods for MSMEs would have provided immediate relief and improved cash flow management.

Moreover, while the introduction of employment-linked incentives and a Rs 2 lakh crore allocation for job creation is noteworthy, the framework for skill development remains insufficient. A more robust approach to job-ready education and targeted training programs is essential to bridge the growing employability gap, particularly in high-demand sectors like AI and renewable energy.

Additionally, the budget lacks a comprehensive strategy to address the potential job displacement caused by AI advancements. A proactive approach, including retraining programs and direct benefit transfers for affected workers, could have been beneficial.

In conclusion, while the Union Budget 2024 lays a strong foundation for growth, it is imperative that the government prioritizes effective implementation and creates synergies across sectors. By addressing these gaps, we can ensure that the coming fiscal year transforms not just the economy, but also the lives of millions of Indians.”