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Union Budget bolsters the manufacturing industry and MSMEs
Industry News- Jul 24,24
MSMEs contributed 35.4% to all-India manufacturing output in FY 22, and MSME-made products accounted for 45.7% of exports in FY 24.
The Union Budget for 2024-2025 introduces a comprehensive package of support measures aimed at bolstering the Micro, Small, and Medium-scale Enterprises (MSMEs) and the labor-intensive manufacturing sector.
According to the Economic Survey tabled, MSMEs contributed 35.4% to all-India manufacturing output in FY 22, and MSME-made products accounted for 45.7% of exports in FY 24.
"This budget provides special attention to MSMEs and manufacturing, particularly labour-intensive manufacturing. We have formulated a package covering financing, regulatory changes, and technology support for MSMEs to help them grow and also compete globally," said Finance Minister Nirmala Sitharaman.
Key measures include:
Credit guarantee scheme: This scheme pools credit risks of MSMEs to facilitate term loans for purchasing machinery and equipment without collateral or third-party guarantee. A self-financing guarantee fund will provide guarantee cover up to Rs 1 billion per applicant, while the loan amount may be larger. Borrowers will need to pay an upfront guarantee fee and an annual fee on the reducing loan balance. Public sector banks will develop in-house capabilities to assess MSMEs for credit and create a new credit assessment model based on the digital footprints of MSMEs.
Enhanced credit availability: To support MSMEs during periods of stress, a government-promoted fund will guarantee credit availability. The limit for Mudra loans will be increased from Rs 1 million to Rs 2 million for those who have repaid previous loans under the ‘Tarun’ category.
TReDS platform: The turnover threshold for mandatory onboarding on the TReDS platform will be reduced from Rs 5 billion to Rs 2.5 billion, adding 22 more CPSEs and 7,000 more companies to the platform. This will help MSMEs convert trade receivables into cash, unlocking their working capital.
E-commerce export hubs: These hubs will be established on a public-private partnership (PPP) basis to enable MSMEs and traditional artisans to sell their products in international markets.
Energy audits and efficiency: Investment-grade energy audits will be conducted in 60 clusters of traditional micro and small industries, with financial support for transitioning to cleaner energy and implementing energy efficiency measures. This scheme will be extended to another 100 clusters in the next phase.
Rental housing for workers: Rental housing with dormitory-style accommodation for industrial workers will be facilitated on a PPP basis.
Sudhir Jha, National Convener, All India Manufacturers Organisation and Vice-President, MSME Development Forum, emphasised the need for a relook at the MSME policy to enhance the entire ecosystem and meet current challenges.
(Source: Hindu, Photo credits: Reuters)
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