Union Budget 2022-23: Credit guarantee trust for MSMEs are set to see a revamp and will ensure the allocation of Rs 2 lakh crore more to the growth of the sector
The finance minister delivered a Union Budget that the MSME sector welcomed wholeheartedly, as India is coming out gradually from the reeling impact of COVID-19 pandemic. The worst-hit MSME sector stands to benefit most from the Budget announcements.
The Union Budget 2022-23 seems intent on not just prioritising the revival of MSMEs but also giving the sector a much-needed boost. As a sector that is responsible for around 45 percent of the country’s total manufacturing output, 40 percent exports, and almost 30 percent of the national GDP, there’s no doubt the MSME sector deserves to be a top priority. However, what exactly are the Budget announcements the MSME sector is counting on and why? Read on to know.
Over the next five years, the government intends to roll out a Rs 6,000-crore-worth programme to rate MSMEs. As part of this rollout, the Emergency Credit Line Guarantee Scheme, or ECLGS, will be extended up to March 2023. Additionally, the guaranteed cover amount will be expanded by Rs 50,000 crores right up to a total cover of Rs 5 lakh crore. Aside from facilitating faster recovery of the sector, these moves will be instrumental to ensure MSMEs are provided with the time and funding they need to establish their ground.
The Union Budget has also taken into consideration the need for an infusion of funds into the sector. Credit guarantee trust for MSMEs are set to see a revamp and will ensure the allocation of Rs 2 lakh crore more to the growth of the sector. This would also help MSME-dedicated lenders to have confidence to expand credit to MSME sector basis the credit guarantee of trust.
India’s MSME sector is rapidly moving towards a high degree of digitisation; the power of UDYAM and GST combined can transform the credit to MSME Sector. UDYAM, e-SHRAM, National Career Service (NCS), and Aseem portals will be inter-linked with an intent to help widen the scope of services they offer. Post the interlinking, these portals will be equipped with live organic databases providing G2C, B2C, and B2B services, such as credit facilitation.
With the government’s support through these initiatives, financial institutions will be better-equipped to mitigate risk, in turn increasing credit outreach to MSMEs and an enhancement in the entrepreneurial opportunities within the sector. In the long run, such policies will ensure MSMEs do not shut down due to shortage of funds and will hasten the sector’s formalisation and growth.
For the promotion of home-grown digital infrastructure, a DESH-stack e-portal will be launched accompanied by the promotion of startups for Drone Shakti. Efforts will be made to integrate 100 percent of the 1.5 lakh post offices in the country into the core banking system as part of the Budget’s initiatives to increase financial inclusion.
To help finance startups in agricultural and rural enterprises, a fund with blended capital raised under the co-investment model will be facilitated through NABARD. In an attempt to further push the growth of such enterprises, the Centre intends to promote Kisan Drones, chemical-free natural farming, as well as public-private partnerships to ensure digital services are delivered to farmers across the country. This will not only help MSMEs increase their digital footprint, but also ensure rural players have access to the same opportunities as the urban players in this sector.
Further to this, Raising and Accelerating MSME Performance (RAMP), an initiative to resusctitate the MSME sector and help it recover from the impact of the pandemic has also been announced as part of the Union Budget. In continuation of their attempts to help the MSME sector revive and come up to speed, the government has decided to extend custom duty exemption on the import of steel scrap by a year.
These announcements within the Union Budget are very much in tandem with the government’s Atmanirbhar Bharat imperative and will help the sector recover from the blow it has been dealt by the pandemic. The Rs 6,000 crore allocation goes out to show massive support for the sector and will help support future programmes for the acceleration of MSME performance.
Increased fund allocation and access to digital services will directly contribute to an increase in the level of financial inclusion within MSMEs, in turn boosting the sector’s resilience and operational efficiency. The Budget’s recognition of the importance of credit and liquidity for MSMEs is evident, and these new policies will make it easier for enterprises in this sector to access finance and funding.
Having dealt with demonetisation, GST, the credit squeeze preceding the pandemic, and then the COVID pandemic, the MSME sector was in dire need of a breather. And the Union Budget 2022-23 has provided exactly that.
(The writer is Executive Chairman and Managing Director, U GRO Capital)