Industry Reaction Union Budget 2022-2023

While presenting Budget 2022-23, Finance Minister Nirmala Sitharaman on 1 February 2022 announced measures to strengthen India's MSME sector. It is the backbone of the country’s economy which has suffered the most during the pandemic. Therefore, the segment was expecting some major announcements in the Budget to help uplift business sentiments.

The Finance Minister announced the increase in budgetary allocation for MSMEs from last year’s Rs 15,699.65 crore to Rs 21,422 crore now (up by 26.71%). Here are the reactions coming on the MSME sector:

1)  Congress Leader P Chidambaram

India’s economy has not recovered yet to the level in the pre-pandemic year of 2019-2020.  In the last two years, millions of jobs have been lost, some   perhaps forever; approximately, 60 lakh MSMEs were closed down; in the two pandemic years, 84 per cent of households have suffered a loss of income; per capita income has declined from Rs 1, 08,645 in 2019-20 to Rs 1, 07,801 in 2021-22 (or even less); per capita expenditure has declined from Rs 62,056 in 2019-20 to Rs 59,043 in 2021-22 an estimated 4.6 crore people have been pushed into extreme poverty; huge learning loss among school children, especially children who live in rural India and are enrolled in government schools; malnutrition, stunting and wasting among children has increased and India’s rank in the Global Hunger Index has fallen to 101 (out of 116 countries) the unemployment rates have reached 8.2 per cent for Urban and 5.8 per cent for rural workers; WPI Inflation is estimated at 12 per cent and CPI inflation at 5.3 per cent.

2)  Sitaram Yechury, General Secretary, Communist Party of India (Marxist) said 35.4% increase in capital expenditure. This includes repaying Air India loan not backed by assets of nearly 52Kcr. Minus this and purchasing defense equipment capital expenditure is lower than last year allocation.

3)  Siddharth Maurya, Resource Specialist, Fund Management says, the Budget session has taken some prudent initiatives for MSMEs and India Inc for start-ups. The tax concession period has been extended by one more year, which is a very positive move. Likewise, a 15% tax has been decided for the newly incorporated manufacturing unit. The period of incorporation has been increased by one more year to 31-3-2024. This will further boost manufacturing activities."

4)  Virendra Ranawat, Co-Founder, WoodenStreet said startups were given keen importance in the budget The ECLGS credit scheme guarantee cover has been expanded by Rs 50,000 crore, which will provide collateral-free loans to stressed-out MSMEs.

5)  Bala Sarda, CEO & Founder at tea brand VAHDAM India said,   The government should reduce Long term Capital Gains Tax on Private Equity and make it at par with the public market. You pay 10 per cent tax on investments in stock markets but an entrepreneur pays around 27-28 per cent tax on a business he has built from scratch, there should be stronger subsidies on import of Capital Goods used for core manufacturing and value addition for exports,” said Bala Sarda, CEO & Founder at tea brand VAHDAM India. 

6)  Priyank Kothari, Director at NBFC Arvog said, to provide tax rebates to the MSME sector, one of the most impacted by Covid, especially in terms of cash flow. Encouraging banks to lend more to NBFCs could also help increase cash flow towards the MSME sector as NBFCs further lend to MSMEs. Finally, bringing in stronger policies to deal with willful defaulters and address the rising NPAs in the MSME sector could help complement the other initiatives.

7)  Ketan Patel of point of sale (POS) machine provider Mswipe suggested that the Special Credit Linked Capital Subsidy Scheme, which was announced in November 2021 for MSMEs in the services sector, should be extended to enterprises with turnover less than Rs 5 crore. He urged for subsidizing the cost of funds to NBFCs that focus on lending to small merchants for loans below Rs 20 lakhs to ensure easy access to credit. Government must also look at giving some form of incentive to small businesses to encourage the adoption of digital payments and further strengthen the payment infrastructure of the country, especially in smaller towns.