Introduction:
The Union Budget 2024-25 presented on Tuesday by finance minister Nirmala Sitharaman addressed many constituencies. In a country with 1.4 billion people, the role of small and medium enterprises cannot be understated. They play an essential role in driving growth and generating employment. Unsurprisingly, the finance minister mentioned the term ‘MSME’ 21 times in the Budget speech. The Budget allocates Rs 1.48 lakh crore this year for youth, employment and skill development.
In the fiscal year 2021-22, the MSME sector contributed more than 29% to the country's GDP. By 2023-24, MSME-specified product exports had increased to 45.56%, showing their significant role in overall exports.
Despite these advancements, only 6% of MSMEs were actively selling on e-commerce platforms, highlighting the urgent need for digital transformation in the sector.
In a clear demonstration of the government's commitment to the MSME sector, the Union Budget for 2023-24 saw a substantial increase in the allocation to the MSME ministry. The budget increased to Rs 22,137.95 crore, a 41.6% rise from the previous fiscal year. To foster the sector's growth and development in the country, the ministry introduced various schemes, such as the MSME Champions Scheme, CGTMSE, PMEGP, MSE-CDP, and RAMP.
Looking forward to the Union Budget 2024-25, Finance Minister Nirmala Sitharaman announced a new credit guarantee scheme during the budget presentation on 23rd July 2024. This scheme is designed to facilitate term loans for Micro, Small, and Medium Enterprises (MSMEs), providing them with the financial support they need to thrive and grow.
Under the scheme, a self-financing guarantee fund will provide coverage of up to Rs 100 crore per applicant to mitigate credit risks for MSMEs, enabling more significant loan amounts to be accessed.
Here are the key highlights discussed in the Budget about the MSME sector:
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Credit Guarantee Scheme for MSMEs in Manufacturing:
- Introducing a credit guarantee scheme allows MSMEs to obtain term loans for purchasing machinery and equipment without collateral or third-party guarantees.
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Credit Support during Stress Periods:
- Implementing a new mechanism to ensure MSMEs continue to receive bank credit even during periods of financial stress.
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Enhancement of Mudra Loans (Tarun Category):
- Increasing the limit of Mudra loans under the 'Tarun' category from Rs 10 lakh to Rs 20 lakh for borrowers who have successfully repaid their previous loans.
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Expansion of TReDS Platform:
- Lowering the turnover threshold for mandatory onboarding of buyers onto the TReDS (Trade Receivables Discounting System that facilitates timely payments to MSMEs) platform from Rs 500 crore to Rs 250 crore.
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Support for Food Irradiation Units:
- Providing financial assistance to establish 50 multi-product food irradiation units within the MSME sector, focusing on enhancing food quality and safety standards.
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E-Commerce Export Hubs:
- Establishing E-Commerce Export Hubs through public-private partnership (PPP) models to enable MSMEs and traditional artisans to sell their products globally via e-commerce platforms.
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Critical Mineral Mission:
- Initiating a Critical Mineral Mission aimed at boosting domestic production, promoting recycling of critical minerals, and acquiring critical mineral assets overseas.
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Offshore Mining Initiatives:
- Auctioning the first tranche of offshore blocks for mineral mining, leveraging previous exploration efforts to enhance mineral resource availability.
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Digital Public Infrastructure (DPI) Applications:
- Developing DPI applications across various sectors, including credit, e-commerce, education, health, law and justice, logistics, MSME services delivery, and urban governance to bolster digital infrastructure.
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Expansion of SIDBI Branches:
- Opening 24 new branches of SIDBI (Small Industries Development Bank of India) to serve MSME clusters across the country better.
These measures aim to strengthen the MSME sector's capabilities, foster growth, facilitate more accessible access to credit, promote digital integration, and enhance international market participation for Indian MSMEs and traditional artisans.
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