The Union Budget 2024-25, presented by Finance Minister Nirmala Sitharaman on July 23rd in Parliament, outlines a robust and comprehensive strategy to bolster the manufacturing and services sectors, with a special focus on MSMEs. By introducing targeted credit schemes, enhancing assessment models, providing support during stress periods, and promoting e-commerce and digital infrastructure, the government aims to create a resilient and globally competitive MSME sector. Additionally, measures to develop industrial parks, enhance skilling, and support critical minerals and offshore mining initiatives align with the needs of modern industries, ensuring sustainable growth and employment generation.
Support for Promotion of MSMEs
1. Credit Guarantee Scheme for MSMEs in the Manufacturing Sector:
– Objective: Facilitate term loans for MSMEs for the purchase of machinery and equipment without collateral or third-party guarantees.
– Mechanism: Introduction of a credit guarantee scheme pooling credit risks of MSMEs. A self-financing guarantee fund will provide guarantee cover up to ₹100 crore per applicant.
– Implementation: Borrowers must provide an upfront guarantee fee and an annual guarantee fee on the reducing loan balance.
2. New Assessment Model for MSME Credit:
– Development: Public sector banks will develop in-house capabilities to assess MSMEs for credit based on the scoring of digital footprints, improving over traditional asset or turnover-based assessments.
– Coverage: This model will include MSMEs without formal accounting systems, broadening access to credit.
3. Credit Support to MSMEs During Stress Periods:
– Mechanism: A new mechanism to facilitate continued bank credit to MSMEs during stress periods will be introduced, supported by a government-promoted guarantee fund.
– Objective: Prevent MSMEs in the ‘special mention account’ stage from falling into the NPA stage by ensuring credit availability.
4. Mudra Loans:
– Enhancement: The limit for Mudra loans will be increased to ₹20 lakh from the current ₹10 lakh for entrepreneurs who have successfully repaid previous loans under the ‘Tarun’ category.
5. Enhanced Scope for Mandatory Onboarding in TReDS:
– Measure: Reduce the turnover threshold for mandatory onboarding on the TReDS platform from ₹500 crore to ₹250 crore, facilitating MSMEs to unlock working capital by converting trade receivables into cash.
– Impact: This will bring 22 more CPSEs and 7,000 more companies onto the platform, including medium enterprises as suppliers.
6. SIDBI Branches in MSME Clusters:
– Expansion: SIDBI will open new branches to serve all major MSME clusters within three years, expanding service coverage to 168 out of 242 major clusters with 24 new branches this year.
7. MSME Units for Food Irradiation, Quality, and Safety Testing:
– Support: Financial support will be provided for setting up 50 multi-product food irradiation units and 100 food quality and safety testing labs with NABL accreditation.
8. E-Commerce Export Hubs:
– Objective: Establish e-commerce export hubs in public-private-partnership (PPP) mode to enable MSMEs and traditional artisans to sell products internationally under a seamless regulatory and logistic framework.
Measures for Promotion of Manufacturing and Services
1. Internship in Top Companies:
– Scheme: Launch a comprehensive scheme providing internship opportunities in 500 top companies for 1 crore youth over five years.
– Incentive: Interns will receive an allowance of ₹5,000 per month and a one-time assistance of ₹6,000, with companies expected to bear the training cost and 10% of the internship cost from CSR funds.
2. Industrial Parks:
– Development: Facilitate the development of investment-ready “plug and play” industrial parks with complete infrastructure in or near 100 cities, in partnership with states and the private sector.
– National Industrial Corridor Development Programme: Sanction twelve industrial parks under this program.
3. Rental Housing:
– Provision: Facilitate rental housing with dormitory-type accommodation for industrial workers in PPP mode with Viability Gap Funding (VGF) support and commitment from anchor industries.
4. Shipping Industry:
– Reforms: Implement ownership, leasing, and flagging reforms to improve the share of the Indian shipping industry and generate employment.
5. Critical Mineral Mission:
– Objective: Set up a mission for domestic production, recycling of critical minerals, and overseas acquisition of critical mineral assets. The mandate includes technology development, skilled workforce, and suitable financing mechanisms.
6. Offshore Mining of Minerals:
– Initiative: Launch the auction of the first tranche of offshore blocks for mining, building on prior exploration.
7. Digital Public Infrastructure Applications:
– Development: Develop Digital Public Infrastructure (DPI) applications at population scale for productivity gains, business opportunities, and innovation in credit, e-commerce, education, health, law and justice, logistics, MSME, services delivery, and urban governance.
8. Integrated Technology Platform for IBC Ecosystem:
– Setup: Establish an integrated technology platform to improve outcomes under the Insolvency and Bankruptcy Code (IBC) for consistency, transparency, timely processing, and better oversight.
9. Voluntary Closure of LLPs:
– Extension: Extend the services of the Centre for Processing Accelerated Corporate Exit (C-PACE) for voluntary closure of LLPs to reduce closure time.
10. National Company Law Tribunals:
– Reforms: Initiate appropriate changes to the IBC, strengthen the tribunal and appellate tribunals, and establish additional tribunals to speed up insolvency resolution and handle cases under the Companies Act.
11. Debt Recovery:
– Strengthening: Reform and strengthen debt recovery tribunals by establishing additional tribunals to expedite recovery processes.
Budget 2024-25 prioritizes MSMEs, fosters modern manufacturing, and invests in digital infrastructure, propelling India’s industrial and service sectors towards global competitiveness.
–Varaprasad Pakanati
