Budget 2024: MSME expects special package from Sitharaman on February 1

The MSME sector is urging Finance Minister Nirmala Sitharaman to unveil a special package in the upcoming interim Budget 2023-24, with the aim of ensuring increased access to institutional credit at competitive rates.

This initiative is seen as crucial for empowering small and medium enterprises (SMEs) to play a more significant role in India's journey toward achieving a USD 5 trillion economy. Scheduled for presentation on February 1, this budget holds particular importance as it marks the government's final major economic document before the upcoming general elections.

The MSME sector accounted for 29.15% of the country's gross domestic product (GDP) in the fiscal year 2021-22. Expectations include addressing the uneven power dynamic between banks and MSMEs, where the balance often favors lenders, according to the Federation of Indian Micro and Small & Medium Enterprises (FISME).


"Lack of competition in the banking sector (75 per cent of banks being public sector) and weak regulatory institutions, which have not been very successful in ensuring customer centredness of banks, and near-defunct grievance redressal mechanism (Office of Banking Ombudsman) all coalesce into an unhappy experience for an ordinary MSME owner with the banks -- whether private or public," FISME Secretary General Anil Bhardwaj said.

It is likely that Sitharaman may address some issues which are faced by this sector in the Budget announcement.

In the fiscal year 2023-24, up to September 2023, the Ministry of Micro, Small and Medium Enterprises reported that the share of exports from products specified for MSMEs constituted 45.56% of the country's total exports, showing an increase from 43.59% in 2022-23.

Deloitte, a consultancy firm, recommended promoting risk mitigation tools such as credit guarantees and insurance schemes to minimize capital flow risks for MSMEs, especially in sectors like automotive, electronics, industrial and electrical machinery, and chemicals. Highlighting that only 6% of MSMEs actively engage in e-commerce, Deloitte stressed the need for the government to reimagine and enhance the digital commerce ecosystem, addressing challenges for stakeholders to foster growth in this sector.


Puneet Kaura, Chairman of CII Delhi State and MD & CEO of Samtel Avionics, emphasized that the MSME sector, vital for employment and manufacturing sector growth, faces a significant challenge in obtaining timely and cost-effective credit. Kaura told PTI this while highlighting the sector's role as a crucial contributor to employment and export promotion.

"We want Finance Minister Nirmala Sitharaman to come up with a special package for MSMEs in the Interim Budget, so that the small and medium units do not suffer for want of credit. "This sector has the talent and risk-taking appetite and can play a big role in strengthening India's capabilities even in critical sectors such as semiconductors, space technology, defence, and medical equipment," Kaura said.

In the Union Budget 2023-24, Rs 22,137.95 crore was allocated for the MSME ministry, marking a 41.6% increase from the previous fiscal year. Anticipation exists for even higher allocations in the upcoming fiscal year.

The MSME ministry oversees various schemes like MSME Champions Scheme, CGTMSE, PMEGP, MSE-CDP, and RAMP, all designed to foster the growth and development of the sector in the country. These initiatives aim to support MSMEs in diverse aspects, reflecting the government's commitment to strengthening the sector through targeted financial allocations.