Adversities are nothing new for Indian MSMEs. Their determination to triumph in every situation has been put to the test. An opportunity has emerged for India’s MSMEs to make their mark on the global trade map amid rising interest rates, China’s slowing economy, the crisis in the global supply chain caused by COVID, and the ongoing war conflict.
With a current GDP of around $3.5 trillion, India has the fifth-largest economy in the world. India’s yearly GDP growth is predicted by the Centre for Economics and Business Research to average 6.4% during the next five years before increasing 6.5% over the subsequent nine years.
India is currently viewed as a popular investment location, particularly in manufacturing and production—the two pillars of commerce and growth associated with trade. Also, India is being considered by nations trying to diversify their supply chains, according to the Deputy Managing Director of the International Monetary Fund, who was speaking at the World Economic Forum. Everyone is seeing India as a nearshoring or friendshoring alternative to China, with MSMEs—the true guardians of India’s economic growth—playing a key role.
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE):
One of the most important tasks to support MSMEs’ growth is to make fundamental changes to the CGTMSE scheme, which attempts to provide institutional credit through unsecured loans. Yet, in an effort to broaden its reach and embrace all facets of society, the scheme’s lending framework has become more all-encompassing. The government must put more emphasis on meeting the requirements of smaller MSMEs and giving them timely access to loans in the Budget 2023–24.
In order to help more MSMEs, the interest rate range of 14% to 18% must also be lowered, while being relatively competitive for unsecured loans. This is feasible because the policy encourages traditional lenders to offer financing to newer companies. The action is essential for MSMEs to scale their operations fast by easing the total working capital fulfilment.
Emergency Credit Line Guarantee Scheme (ECLGS):
The ECLGS gained momentum during COVID-19 and has a great deal of potential to keep providing benefits for MSMEs (registered under the new udyam registration portal). The government must raise awareness of the programme through the Budget, including a current version of what it involves and how MSMEs might benefit from it. Making the plan accessible and clearly communicating with MSMEs on how to receive the credit line are additional issues that the Budget 2023–24 must resolve given the enticing interest rate offers of 9.25% for banks and 14% for NBFCs.
Product-Linked Incentives (PLI) Schemes:
Budget 2023–24 needs to focus on the government’s goal of increasing local manufacturing, investments, and exports through industry-specific PLI programmes. Also, the allocation of INR 1,000Cr for MSMEs needs to be reviewed because doing so might enable MSMEs to compete on a global scale as India’s manufacturing capabilities advance.
Remission of Duties and Taxes on Exported Products (RoDTEP) Scheme:
The RoDTEP plan had numerous additions before being put into place in January 2021. To further enhance exports, address the shifting demands of a recession-hit world, and safeguard the interests of exporters, the system still has to be revised significantly.
A long-standing and well-received industry demand is the RoDTEP system, which provides reimbursements of the embedded federal, state, and municipal taxes to the exporters. More confidence needs to be developed.
Convenient certifications and testing for MSMEs:
Using testing and certifications provided by the government, quality checks and innovation standards need to be developed. This will increase consumer confidence worldwide and put Indian MSMEs on level with their international counterparts.
Making procedures less expensive, more convenient, and more effective for exporters is urgently needed. This would increase global trade, lower the rejection rate for MSME exports, and boost the reputation of Indian goods abroad.
Enhancing GST to increase compliance:
Although GST has frequently been altered to help MSMEs, its procedures are frequently overly complicated. A better GST filing process, streamlined refund procedures, and user-friendly methods for MSMEs who aren’t as tech-savvy would all help to maximise effort and time.
One request has been made often, and that is a tax reduction for MSMEs. The time is now for the government to take action and assist MSMEs in outpacing their competitors. The tax rate in India is 25% for large enterprises, 33% for sole proprietorships, and 42% for partnership firms. MSMEs will be given a fair playing field by providing them with a reduced corporate income tax rate of 25%, enabling them to develop competitive products for international markets.
Reducing Tax across industries and lowering the interest charges for late GST payments from 18% to 12% are two more issues that MSMEs face. Taking care of these problems would assist MSMEs expand their export contribution while helping to further grow the economy.
In conclusion, the budget announced by the Indian government has provided several incentives and support measures that can help Micro, Small, and Medium Enterprises (MSMEs) contribute more to world trade. The budget has proposed a series of initiatives such as increasing the allocation for the Export Promotion Capital Goods Scheme, setting up a National Logistics Policy, and establishing an Export Promotion Cell to provide end-to-end facilitation and support for exporters.
These measures can help MSMEs overcome the challenges they face in exporting their products and services and increase their participation in global trade. The proposed initiatives will provide MSMEs with access to better infrastructure, technology, and financial resources, enabling them to expand their operations and reach new markets.
Moreover, the budget has also proposed tax holidays for start-ups, reducing compliance burden, and encouraging foreign investment, which can create a more conducive environment for MSMEs to grow and thrive. This will help MSMEs to contribute more to world trade, create more job opportunities, and boost the Indian economy. If any MMSEs require financial help then they can get a detailed project report for bank loan.
In conclusion, the budget measures announced by the Indian government are a positive step towards promoting the growth and development of MSMEs and enabling them to contribute more to world trade. The government must continue to work towards creating a more favourable business environment for MSMEs to expand their operations and reach new markets, ensuring that they remain a key driver of the Indian economy.
The long-awaited chance for India’s MSMEs to reconsider and reimagine growth prospects that would further broaden their global scope is in fact 2023. The Budget for 2023–24 would be crucial for MSMEs in achieving this objective.