Presenting the Union budget on Tuesday, Finance minister Nirmala Sitharaman announced a slew of measures aimed at boosting the Micro, Small and Medium Enterprises (MSME) sector.
One of the key changes was to increase the limit of MUDRA loans from Rs 10 lakh to Rs 20 lakh. This will be available for those entrepreneurs who have availed and successfully repaid the entire loan under TARUN category.
The finance minister said the measures related to the MSMEs were aimed to ease financing, ease regulatory compliance and enable technology support. These measures, she said, would enable these industries to grow and compete globally.
The minister also said that a credit guarantee scheme would be introduced for manufacturing MSMEs to provide term loans without collateral, or third party guarantees for their purchases. A self-financing guarantee fund, formed by pooling the credit risk of companies, would provide guaranteed cover up to ₹100 crore for each applicant, though the loan amount might be higher. The borrower will have to pay an upfront guarantee fee and an annual guarantee fee for the reduced loan amount.
Public sector banks will take lead to develop their own credit assessment of the borrower. This will be based on the borrower’s digital footprint rather than the traditional method based on asset and turnover. This new mechanism will also cover MSME’s who do not have a formal accounting system.
To enhance credit support to stressed MSME units in the Special Mention Account (SMA) stage, the government will ensure credit availability through a credit guarantee from a government supported fund. This will be available to MSME units under financial distress for reasons “beyond their control”. Sitharaman said this aims to prevent these units from becoming Non-Performing Assets (NPA)s.
The government also reduced the turnover threshold for buyers from ₹500 crore to ₹250 crore to join the TReDS platform. This will facilitate 22 more PSU’s and 7000 more companies to join TReDS. Medium enterprises will also be included in the scope of suppliers, and this will unlock more working capital by converting their trade receivables into cash.
According to the RBI, TReDS is an electronic platform for facilitating the financing / discounting of trade receivables of Micro, Small and Medium Enterprises (MSMEs) through multiple financiers. These receivables can be due from corporates and other buyers, including Government Departments and Public Sector Undertakings (PSUs).
New branches of Small Industries Development Bank of India (SIDBI) will be set up in next three years to provide direct credit support. Twenty-four such branches will be opened this year, expanding their services to 168 out of 242 major MSME clusters.
Sitharaman also said the government would set up new food irradiation, quality and safety testing units under MSME category. Financial support for setting up 50 multi product food irradiation units will be provided and formation of 100 NABL accredited labs will be facilitated.
To help MSMEs reach new markets, the government announced the formation of e-commerce export hubs in Public-Private-Partnership (PPP) mode. These hubs will facilitate trade & export related services under one roof to enable MSME’s and traditional artisans to sell their products to international markets.
Sitharaman said that manufacturing and services were one of the nine priority areas of the NDA government with special attention on labour intensive manufacturing industries.
Sitharaman also announced revised income tax slabs that could potentially help tax payers see a net gain of around Rs 17,500 in a year. The tax for a salary of up to 3 lakh is nil, between Rs 3 to 7 lakh is 5 %, between Rs 7 to 10 lakh is 10%, between Rs 10 to 12 lakh is 15%, between Rs 12 to 15 lakh is 20%, and over Rs 15 lakh is 30%. The revised slabs come as part of the rationalisation exercise that aims to reduce burden on those who earn lesser incomes. The government has also proposed that the standard tax deduction be hiked from Rs 50,000 to Rs 75,000. Sithamaran also said the government has proposed to abolish angel tax to give boost to start-ups.
The Budget has allocated ₹10,000 crore to set up a ‘price stabilisation fund’ to keep food inflation under check.
Allocations to the Ministry of Consumer Affairs, Food and Public Distribution have seen a bump, from ₹258 crore (under ‘revenue’) in the revised estimates for 2023-24, to ₹10,237 crore for 2024-25. This is because of the price stabilisation fund.
Khelo India, which is the government’s flagship project to promote sports at the grassroots level, was once again the biggest beneficiary in the Union Budget for the Sports Ministry as it was assigned ₹900 crore from the overall allocation of ₹3,442.32 crore on Tuesday.
Khelo India’s share, announced in the Budget presented by Finance Minister Nirmala Sitharaman here, is ₹20-crore more than the revised allocation of ₹880 crore during the previous financial year.
With 66% of the Indian population still under the age of 35 and an estimated 7-8 million youth entering the job market annually, Union Budget 2024-25 provides a much needed impetus to advancing employment opportunities and youth upskilling, supported by focus on comprehensive development for the country. Although healthcare did not seem to have a major focus this time, it is promising to see the 12.5% hike in budget allocation for the sector at Rs. 89,287 crores as compared to the last Budget.
To boost domestic manufacturing and promote local value addition, Budget 2024-25 has proposed reduction or withdrawal of customs duties on a slew of items including gold & silver, mobile phones & chargers, medicines & medical equipment, critical minerals and inputs for leather & textiles industry.
Some of the other key highlights of the budget include:
- Allocation to NHAI retained at ₹1.68 lakh crore for FY25
- ₹26,000 crore allocation for various road projects in Bihar
- Defence budget pegged at ₹6.21 lakh crore for 2024-25
- Solutions to address New Pension Scheme issues
- Budget pledges ₹15,000 crore for AP capital Amaravati
- Customs duties on gold, silver slashed to 6 per cent in Budget 2024-25
- Jobs for youth, tax rejigs for salaried class
- Govt to abolish angel tax on investments in startups
- Customs duty on gold, silver cut to 6%
- ₹5,000 monthly internship allowance announced for 1 crore youth
- FM allocates ₹1.52 lakh cr for agri, allied sectors
- Budget provides ₹1.48 lakh cr for education, employment, skill
- New Tax Regime standard deduction increased to ₹75,000
- 3 crore additional houses under PMAY
Also Read: MGNREGS Gets Highest Ever Initial Budget Allocation
