How Budget 2023 can boost MSME sector and target job creation

MSMEs are a critical cog for the manufacturing wheel and needs special attention as India focusses on more domestic production.

India is starved of jobs and one of the major employers in the country is the MSME sector. Budget 2023 can address some of the challenges impeding the growth of MSMEs. It’s a critical cog in the manufacturing wheel and as India ramps up manufacturing, the supporting infrastructure needs to be made available.

The government, in the past, has announced major reforms to support the MSME sector including change in the definition that will ease the compliance burden. A slowing of exports due to tough economic conditions globally will merit more attention to be paid to the sector.

A big boost to the MSMEs can come in the form reduction in the cost of doing business. Right now, raising capital at affordable rates is a major challenge before the sector. The sector struggles from funding issues like delayed payments from buyers.

Industry body PHDCCI feels that finance is one of the major roadblocks before the MSME sector and hurts its competitiveness.

It has flagged the current banking norms which seek high primary security and collateral demand.

“Focus of the government should be on hassle-free disbursements of loans at affordable rates of interest for the businesses vis-a-vis enhanced liquidity for micro, small and medium enterprises (MSMEs), suggested the chamber,” the chamber said.

Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget on February 1.

Anil Bhardwaj, Secretary General of the Federation of Indian Micro and Small & Medium Enterprises (FISME), said that the banks should be capable to appraise MSMEs and the need to have a credit rating from an agency only adds to the costs.

“We feel the banks are capable to judge MSMEs ― it is not about large-scale loans. If for a loan of Rs 4-5 crore you can’t rely on the banks’ ability, this is a very pathetic situation. Also, the credit rating agencies are employing the same model for MSMEs that they employ for the large industries, and the result is that no MSME has got investment grade rating,” Bhardwaj told Moneycontrol in an interview earlier.

Health of MSMEs is important as they play a pivotal role in exports and employment generation. As India pushes for more domestic manufacturing, it needs to get the supplier network in place. It can only happen if the MSMEs don’t stumble.