[Budget 2020] 5 Expectations of MSMEs from the Union Budget
You're reading Entrepreneur India, an international franchise of Entrepreneur Media.
With the Union Budget 2020 round the corner, medium, small and micro enterprises (MSMEs) are strongly anticipating measures that will boost their growth and solve the liquidity crisis they are ailing with. Budget 2020 could also unveil an entirely new definition of MSMEs, one wherein the businesses are classified on the basis of their turnover.
Here are five pertinent expectations that MSMEs have from Union Budget 2020.
Introduction and Implementation of a ‘Payment Act’
At present, there is MSME Samadhaan (a delayed payment monitoring system), which is placed for the sole purpose of filing cases that are related to delayed payments. However, according to a recent article by Financial Express, out of the 32,385 applications which were filed by MSMEs, only 2031 were disposed of.
If a Payment Act is introduced that mandates timely payments by the government and other large companies, we are certain that it would largely solve the cash-flow problems of small and medium businesses.
Flexibility in GST Compliance Norms and GST Refunds
We think that rationalization of GST will do a world of good to this sector. The government should consider giving some relaxation on GST, especially in the manufacturing sector, and even dole out some incentives for filing GST returns on time. GST refunds are also proving to be bottlenecks, affecting the working capital available with SMEs to operate business and faster processing of these refunds would be a great relief.
Empowerment of Emerging Micro-entrepreneurs
According to FISME (Federation of Indian Micro and Small & Medium Enterprises), majority of the small businesses are facing scaling challenges, due to lack of capital. They are unable to produce matching collateral securities as they grow in the ratio of the increasing funds they need.
Lack of access to skilled labor, capital, power supplies, and infrastructure has rendered many micro-enterprises immobile. Budget 2020 could introduce policies or allocate funds for these micro-entrepreneurs, enabling them to grow.
Provision of Distressed Asset fund and Fund of Funds
The government is reportedly planning to announce INR 5,000 crore worth of distressed asset fund, which will cater to any small business facing a liquidity crunch. We believe that this measure will prove as a catalyst in enabling liquidity in this sector, and could even call for a 6.5 per cent growth in GDP.
Furthermore, there are talks of a Fund Of Funds being created, worth INR 10,000 crore, which would be dedicated to the corporations and private equity firms that are interested in investing in the MSME sector, on modified term sheets developed by SIDBI. It would be advantageous to have this measure in place, to encourage innovation in production structures and term-sheets.
Increasing scope and fund allocation of CGTSME scheme
Initiatives such as the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) that facilitates funding without collateral security or third party guarantee for loans toMSMEs,are gradually fueling the growth of this sector, and the country as a whole. Government should increase the fund allocation to CGTSME and increase the guarantee limits under the scheme to increase lending to MSME sector by banks and NBFCs.