In the first Budget of Modi government’s third term, Sitharaman introduced a new credit guarantee scheme for term loans to acquire machinery and equipment and proposed raising the Mudra loan limit from Rs 10 lakh to Rs 20 lakh
Bengaluru: Union Budget 2024 is giving special attention to micro, medium and small enterprises (MSMEs), with a new credit guarantee scheme for facilitating term loans for purchase of machinery and equipment, as stated by Finance minister Nirmala Sitharaman on Tuesday.
“The scheme will operate on pooling of credit risks of such MSMEs,” said Sitharaman in her budget speech. “A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to Rs 100 crore, while the loan amount may be larger.”
Moreover, the limit of Mudra loans (loans for non-farming and non-corporate micro and small enterprises) will be enhanced to Rs 20 lakh from the current Rs 10 lakh for entrepreneurs who have availed and successfully repaid previous loans.
Industry experts are pleased with the support for MSMEs. According to Vidita Kochar, co-founder of the lab-grown diamond brand Jewelbox, “MSMEs are the backbone of our economy and the measures, such as credit support and simplified regulatory processes, will not only strengthen the sector but also contribute to job creation and economic stability.”
Anuj Puri, chairman of Anarock Group, called attention to the benefits of the credit guarantee scheme for MSMEs, noting its potential impact on the real estate sector.
“The pandemic had a catastrophic impact on the MSME sector, which slowed down the demand for affordable housing since 2020. Affordable housing demand may gain momentum once the economic impact of the pandemic subsides for this target audience,” Puri said.
The government also introduced a new mechanism to ensure the continuation of bank credit to MSMEs during their stress periods.
While in the special mention account (SMA) stage for reasons beyond their control, MSMEs need credit to continue their business and avoid becoming non-performing assets, which will be supported through a guarantee from a government-promoted fund.
Rakesh Kaul, managing director of the water purifier brand Livpure, said, “The facilitation and continuation of bank credit to MSMEs during stress periods and the increase in the Mudra loan will enhance financial flexibility by enabling mid-sized enterprises to obtain term loans more easily.”
Sitharaman also proposed that, Small Industries Development Bank of India (SIDBI) will open new branches to expand its reach to serve all major MSME clusters within 3 years, and provide direct credit to them.
With the opening of 24 such branches by the end of this year, the service coverage will expand to 168 out of 242 major clusters.
In addition to this, the budget promised to build export hubs to enable MSMEs and traditional artisans to sell their products in international markets.
“E-commerce export hubs will be set up in public private-partnership (PPP) mode. These hubs, under a seamless regulatory and logistic framework, will facilitate trade and export related services under one roof,” said Sitharaman.
This aligns perfectly with the goals of e-commerce export businesses like ShopClues, which targets $100 million in export business by the year-end.
“Today’s budget introduces pivotal initiatives addressing the skills gap and enhancing MSME operations,” said Anuraag Gambhir, managing director of Shopclues. “The creation of e-commerce export hubs through PPPs aligns with ShopClues’ mission to expand global market access for MSMEs and traditional artisans.”
According to Amit Khatri, co-founder of the smart wearable brand Noise, establishment of e-commerce export hubs will open opportunities for Indian players to boost their reach globally while enhancing the ease of doing business.
“India has long been an attractive consumer market for global brands, supported by collaborative and business-friendly policies. The export hubs are an efficient step in unlocking similar avenues for homegrown companies, allowing a global stage for their innovation and strengthening India’s position in manufacturing,” added Khatri.
