Micro, Small & Medium Enterprises (MSMEs) and Small & Medium Enterprises (SMEs) are two of the most significant contributing sectors for the Indian economy. They are however facing a number of challenges that are restricting their growth.
The MSME sector, after being ignored in the Interim budget in February, has high expectations from the Union Budget 2019, which will be presented in the Lok Sabha on Friday, July 5.
The Interim budget was quite disappointing for the Micro, Small and Medium Enterprises. There hopes to see better incentives and cheaper finance from the government are thus high.
MSMEs have been facing financial woes with low provisions. Delay in receiving GST refunds, unfavourable forex policies, end of trade privileges are some of the reasons for their issues. Thus there is an urgent demand to provide cheaper finance and better reforms in the upcoming budget. The previous government had initiated some schemes for them including the 59-minute loan scheme but it was limited. President of the MSME Federation (FISME) Animesh Saxena had said it was due to the lack of easy financial access for many small businesses.
The introduction of GST also saw a roller coaster ride for MSMEs. GST incentives in the past few years allowed some small businesses concessions and benefits. The government increased the GST registration limit from 20 lakhs to 40 lakhs for small businesses. However, timely access to finance and hefty implications of GST are proving difficult for the MSME sector to cope with.
The sector generated around 1.40 crore new jobs over the past four years despite demonetisation and GST. The MSMEs now expect lower interest cost to 4 per cent to allow more businesses to enter the market, along with reduction in tax rates for firms with an annual turnover of up to Rs25 crore.
The sector also wants an extension in concession of 25 per cent rate to all taxpayers since the current tax rates discriminate MSMEs and favour corporates. They also want an extension in incentives on exports since MSMEs contribute to over 40 per cent of the country’s exports. With the budget 2019, government can re-introduce provisions to incentivise exporters who set up new units.
The sector wants reduction in Compliance Burden in GST as it requires heavy compliance from businesses. The MSME sector's primary goal is to find easy access to finance.
For the SMEs
For the SMEs, easy availability of loans is crucial. The small businesses are looking forward to the Union Budget 2019 for easy access to loans, grow their operations and contribute more to the economic health of the country.
Another expectation is that of enhancement of the digital lending sector. It is expected that the government can consider friendly reforms and allocate money to the digital lending sector in the forthcoming budget. With the expected government’s initiatives, digital lending can make small businesses financially sufficient with easier access to loans.
It is hoped that the government will present some tax sops for SMEs too, like mitigation of compliance burden, easing of working capital blockages and reduced tax rates, in the upcoming Union Budget.
SME’s are hopeful of getting more lenient tax breaks in the upcoming budget. It is very likely that if the government announces a tax break for the SMEs sector, it will be confined to a certain limit.
Union Budget 2019 is likely to be a turning point if the government announces the aforementioned reforms for the MSME and SME sector. These reforms would greatly help the MSMEs and SMEs to grow their businesses and in turn grow the country's economy.
(With inputs from online media reports)