The 2024 budget emphasizes job creation, skill development, support for small and medium-sized enterprises (MSMEs), and assistance to the middle class. A significant focus is placed on MSMEs and labor-intensive manufacturing industries. The government has crafted a comprehensive package for MSMEs that includes financial assistance, regulatory reforms, and technical support to enhance growth and global competitiveness. A notable feature of this budget is the introduction of a credit guarantee plan, enabling MSMEs to secure loans for purchasing machinery and equipment without needing collateral or third-party guarantees.
Public sector banks will now independently assess the creditworthiness of MSMEs instead of relying on external evaluations. This new strategy aims to help MSMEs maintain access to bank credit during challenging times. Additionally, the Finance Minister plans to lower the threshold for onboarding buyers on the TReDS platform from ₹500 crore to ₹250 crore, facilitating easier conversion of trade receivables into cash and improving MSMEs' working capital. SIDBI is set to expand its presence by opening more branches and enhancing services across key MSME clusters over the next three years, aiming to provide direct financial support. This year alone, 24 new branches will open, increasing the total number of large clusters served to 168.
The Finance Minister also announced new support for small and medium-sized businesses, including the creation of 50 facilities that use radiation to preserve and improve food product quality. It will be easier to establish 100 labs for testing food safety and quality, all certified by the National Accreditation Board for Testing and Calibration Laboratories (NABL). To assist MSMEs and traditional artisans in reaching international markets, new e-commerce export hubs will be developed through government and private sector collaborations, boosting the global presence of these small businesses and craftsmen.
Expert Reactions to MSME Announcements
Leading figures in the MSME sector have responded positively to the recent announcements.
Raghunandan Saraf, Founder & CEO of Saraf Furniture, highlighted India's major new internship program, aimed at providing 1 crore young people with work experience in the country’s top 500 companies. Each intern will receive a year of hands-on experience, bridging the gap between academic learning and employer needs. With 12 million people entering the job market annually, this program could significantly impact by offering valuable training and improving job readiness.
With 65% of India's population under 35, this initiative taps into the potential of the young workforce. By partnering with leading companies, the program aims to ensure high-quality training and follow-up job opportunities. It addresses a major issue for many Indian businesses: the difficulty in finding qualified candidates due to skill mismatches. By enhancing skills and employability, the program could help reduce the youth unemployment rate of 23.2% and boost overall economic productivity.
Delphin Varghese, Co-founder and Chief Revenue Officer of AdCounty Media, emphasized the government’s commitment to improving credit access for small and medium-sized enterprises, which is crucial for their survival and growth. MSMEs are vital to the economy, contributing 30% of GDP and 48% of exports, yet they face a credit shortfall estimated at ₹20-25 trillion, according to the International Finance Corporation.
Various measures are being proposed to address this. In 2021, credit to MSMEs grew by 11% compared to the previous year. Enhanced credit access could lead to substantial job creation and boost economic stability, benefiting over 110 million people working in this sector. The COVID-19 pandemic severely impacted 67% of MSMEs, and by improving credit flow, the government can help revive these businesses, which is essential for achieving India’s goal of becoming a $5 trillion economy.
Conclusion
Experts from various industries have expressed support for the initiatives announced in Budget 2024, highlighting that these measures will benefit the SME sector and contribute to India's goal of becoming a $5 trillion economy.
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