Union Budget 2022: Govt takes major steps to support MSMEs amid Covid-19 pandemic

MSME sector in India offers includes 6.3 million units and employs over 11 crore people in India, contributing to over 28 percent of the Indian GDP.

In her budget speech, the Sitharaman said Emergency Credit Line Guarantee Scheme (ECLGS) had provided much-needed additional credit to more than 130 lakh MSMEs and has been extended up to March 2023 from March 2022. Its guarantee cover has also been expanded by Rs 50,000 crore to the total cover of Rs 5 lakh crore, with the additional amount being earmarked exclusively for the hospitality and related enterprises.

Rakesh Sharma, MD&CEO, IDBI Bank said the extension of ECLGS till March 2023, and expansion in the guarantee cover of CGTMSE, will indeed be a boon for MSMEs, which have been primary beneficiaries under the scheme. I am sure that the Budget announcements will go a long way in achieving the goal of “Atmanirbhar Bharat.”

George Alexander Muthoot, MD, Muthoot Finance noted that the widening of the ECLGS scheme & revamping CGTMSE (Credit Guarantee Trust for Micro and Small Enterprises) the government has focused on supporting the MSME sector and reduce stress in this segment, which has been hit by the Covid-19 pandemic.

"We believe that the NBFC sector will also benefit from the allocation of Rs. 48,000 cr (under the PM Awas Yojana) for affordable housing unveiled by the honourable Finance Minister during the budget announcement. This move will accelerate the credit demand in the economy and positively affect the performance of NBFCs catering to the sector," he added.

Ajay Srinivasan, Chief Executive – Aditya Birla Capital said, "The Budget complemented macro growth with social welfare, while being accommodative on fiscal consolidation. The budget has differentiated itself with its focus on the digital economy, startups, and tech-enabled development as well as energy transition and climate action. The capex-heavy budget has reiterated focus on public investment to modernize infrastructure over the medium term. The overall focus is clearly to nurture growth and support the economic recovery."

Ajay Pareek, Chief Business Officer, Fullerton India said, "The extension of the ECLGS scheme till March 2023, as well as the expansion of the guarantee cover by Rs 50,000 crore to Rs 5 lakh crore is a welcome sign for the NBFC sector and over 130 lakh MSMEs. The thrust to digitise India and the focus on the fintech segment will help enhance financial inclusion. The affordable housing segment also received a boost today, with the allocation of Rs 48,000 crore under the PMAY urban and rural schemes.”

Kuldip Maity, MD & CEO, Village Financial Services (VFS) said the extension of ECLGS scheme is a much needed move for the pandemic affected MSME sector. The credit and fiscal support of 5 lakh crore will bring relief to the sector and will also encourage new business enterprises to come up besides employment generation. Support for the digital payments ecosystem is another welcome move. This will encourage further adoption of digital payments.

Umesh Revankar, VC & MD at Shriram Transport Finance said that the Union Budget 2022 is a bold and growth-oriented budget which will result into a multiplier effect on the economy and benefit the Aam Aadmi, despite no direct benefit transfers.

He called the budget an investment led budget which will propel sectors like cement, steel and construction which will lead to increased movement of goods, boost bulk transportation movement and help in the revival of the transport industry.

Ease of doing business has taken centre stage as the Government has committed to a ​long-term growth of over 8 percent for the next 3 years, he said, adding that widening the ECLGS scheme & revamping CGTMSE (Credit Guarantee Trust for Micro and Small Enterprises) are steps taken to accelerate growth and reduce stress particularly in the MSME segment.

Anirudha Taparia, Joint CEO, IIFL Wealth noted that measures to give an impetus to MSMEs and infrastructure spending are likely to have a multiplier effect on the economy, simultaneously boosting employment, production, and consumption.

As of February 1 in the current financial year, over 5.5 lakh CGTMSE guarantees were approved amounting to Rs 42,429.23 crore, of which 22,863 claims involving Rs 471.39 crore were disbursed, as per the scheme’s data.

in February 2019, former MSME Minister Giriraj Singh had said, the government had increased the loan disbursal limit under CGTMSE from Rs 1 crore to Rs 2 crore, according to a statement by the MSME Ministry.

Further, the corpus of the scheme was also raised from Rs 2.5 lakh crore to Rs 7.5 lakh crore rupees, the minister had said.

In today's Budget, the Finance Minsiter announced a Rs 6,000-crore programme to rate MSMEs, which will be rolled out over the next five years. Raising and Accelerating MSME Performance (RAMP) programme is an initiative by the government that was approved assistance of $500 million by the World Bank in June last year to support Covid-hit MSMEs. It is a part of the MSME Competitiveness – A Post COVID Resilience and Recovery Programme (MCRRP) by the government.

Hardika Shah, Founder & CEO, Kinara Capital said,"Aside from the critical announcements about the extension of the ECLGS scheme and the revamp of the CGTMSE program, along with the infusion of additional funds, the government’s focus on RAMP is also commendable, as it will define the path to sustainable and responsible development for the sector. We also look forward to the interlinking of MSMEs formalization and compliance platforms, as this stands to facilitate operability, therefore improving entrepreneurial opportunities in the sector. The digital focus of the Budget, with support for the digital ecosystem and payment platforms, also bodes well for small businesses, as we foresee the future of the sector being tech-led.”

In another major step, the government has reduced import tariffs on inputs and increasing/imposing tariffs on end products, which will lead to a higher degree of protection and improved competitiveness for MSMEs, according to experts.

Reduced import tariffs for sectors, such as textiles, leather products and handicrafts, are likely to push growth and facilitate competitive global sourcing of inputs, they added.

“Removal of exemption on items which are or can be manufactured in India and providing concessional duties on the raw material that go into the manufacturing of intermediate products will go many a step forward in achieving our objective of ‘Make in India’ and ‘Atmanirbhar Bharat,’” Sitharaman said.

Vijay Chandok, MD & CEO - ICICI Securities said the budget has adopted new economic growth template for “Amrit Kaal” (run up to India@100) by promoting capital expenditure led economic growth. Outlay of Capital expenditure of Rs 7.5 lakh crore, up approx. 35 percent YoY (and at 2.9 percent of GDP) along with expanding the scope of private capex through PLI for new age segments is expected to deliver inclusive growth, job creation and welfare for all.  

"The Budget also seem to be presented in the backdrop of likely pandemic aftereffect which is reflective in the relatively conservative estimation of growth (merely ~11 percent nominal GDP in FY23) and receipts. Thus, there is a likelihood of lower than projected fiscal deficit. With growth oriented focus intact in the Budget, we expect economic and capital market buoyancy to remain," he added.