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FISME Praises Budget's MSME Support, Urges Sector-Agnostic PLI Scheme For Job Creation

By S.K. Jain July 23, 2024

The Federation of Indian Micro and Small & Medium Enterprises (FISME) has termed the Union Budget as functional and one that will give a boost to Micro, Small, and Medium Enterprises (MSMEs)

FISME Praises Budget's MSME Support, Urges Sector-Agnostic PLI Scheme For Job Creation
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FISME welcomed the Credit Guarantee Scheme for the purchase of machinery up to Rs. 100 crore. Instead of going through a complicated project assessment process, businesses can now seek loans under the scheme to buy machinery without any collateral or third-party guarantee. This will significantly boost technology upgradation.  

The announcement to do away with the practice of bank loan rating through credit rating agencies was also well-received. The finance minister has asked banks to develop their own risk assessment models, a demand continuously raised by FISME. This will end the expenses and harassment MSMEs faced at the hands of rating agencies.  

FISME welcomed the announcement of a fund to help stressed MSMEs red-flagged under the ‘special mention account’ (SMA) category. However, they termed the measure a "halfway house" as the major issue of a lack of empowered officials at branch levels remains unaddressed.  

Doubling the threshold of Mudra loans from Rs. 10 lakh to Rs. 20 lakh was also welcomed.  

FISME found the announcement related to the TReDs platform noteworthy. Medium enterprises have been included, and the turnover threshold for companies required to be listed has been revised downward from Rs. 500 crore to Rs. 250 crore 

While FISME requested a sector-agnostic PLI scheme for MSMEs to provide impetus to job creation, the Finance Minister has proposed three different types of schemes to encourage industries that employ new or more people.  

FISME had sought a dedicated MSME bank with branches in all districts. The Finance Minister has asked SIDBI to expand its network to reach out and serve all major MSME clusters within 3 years, providing 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.  

On the e-commerce front, FISME's proposal has also found favour. E-Commerce Export Hubs will be set up in a public-private-partnership (PPP) mode to provide a seamless regulatory and logistical framework, facilitating trade and export-related services under one roof.  

MSMEs have long demanded affordable industrial space through a plug-and-play model. The Budget has proposed investment-ready "plug and play" industrial parks with complete infrastructure in or near 100 cities.  

One of the major issues raised by FISME was the need to get 60 MSME export clusters audited for energy consumption and carbon intensity. The budget has proposed an investment-grade energy audit of traditional micro and small industries in 60 clusters in the first phase and 100 later. The Finance Minister has also proposed financial assistance to MSMEs for transitioning to cleaner forms of energy and implementing energy-efficiency measures.  

FISME appreciates the initiatives announced in the area of incentivizing states for implementing their Business Reforms Action Plans and digitalization to improve Ease of Doing Business. Additionally, the call for reduction in Stamp Duty in states, the reduction in TDS rate on e-commerce operators from one to 0.1 percent, proposing finality in Income Tax assessment (where an assessment can only be reopened beyond three years from the end of the assessment year if the escaped income is ₹50 lakh or more, up to a maximum period of five years from the end of the assessment year), were all well-received.  

Overall, FISME believes the Budget steers the course of the large Indian economy steadily, with many boosters to speed up its growth trajectory, especially through MSMEs.

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