The Union Budget 2021-22 is just a few days away from now and expectations are riding high from all sectors. The MSME sector is hoping to get rid of challenges like lack of access to capital, infrastructure, skilled labor, and power supply issues. Experts say that the government should ensure that the right thrust is given to build a robust tech ecosystem with favourable tax policies and upskilling or reskilling the workforce in the segment to pave the way towards strong economic growth. They said that the Union Budget should provide some long-term benefits to the sector with better access to credit and lenient taxation policies.
MSMEs contribute over 40 per cent to the Indian export basket. The sector wants the government to focus on sustainable methods to increase the contribution to global trade. There is a demand to consider rationalizing duty and tariff rates, promote research and development, help small industries with tech upgradations plans. This, in return, could help Indian MSMEs improve their positions in the international market.
The MSME sector is looking for specific announcements regarding financial aid and stimulus. Experts are hoping for relief on tax rates for MSMEs for an easier bounce back after the pandemic stalled operations for many businesses around the country.
“Considering the slowdown in the economy and growth, MSMEs which form part of the backbone of the Indian value chain are expecting a big relief and reforms in the upcoming budget. We expect that the upcoming budget will take stringent actions to empower the MSME sector to revive the economy from the current slowdown. Apart from GST rationalization, we expect an extension of credit facilities from the upcoming budget, since the government should focus on infusing liquidity into the markets and promoting Make in India," Vinay Jain, founder of Grafdoer (Sanitaryware manufacturer), said.
Shashank Agarwal, MD at Salasar Techno Engineering, said that the sector expects the government to ease the movement of capital and finance options for recovering businesses. "We are expecting short-term bank loans for working capital financing over the year and as government can be a big client, the strain of the economy could result in a delay in payments from them. We believe that we could potentially benefit from the new tax schemes," he said.
While some had to shut their businesses due to the pandemic, many had to fire employees and cut the pay to keep the business afloat. Despite the continuous innovation, several start-ups failed due to funding crunch, tax burden, rigid compliances, and poor technological development.
"To cope up with this, budget 2021 should focus on enabling the development of MSMEs by providing them access to easy credit, reducing the income tax rate and GST rate, and offering rebates to MSMEs willing to adopt new technologies. During the pandemic, we have seen a boom in the digital adoption where MSMEs are contributing the most," Dharmendra Ahuja, founder & CEO of PitchWorx, said.
Kapil Bhatia, CEO, UniMask, said that MSMEs have always been the backbone of the Indian Economy with around 29 per cent share to India’s GDP. The government needs to re-establish favorable policies and allocate substantial funds for the growth of MSMEs.
"2020 was a blessing in disguise for MSME industry where the initial most of 2020 was quite brutal but the later half came to the rescue especially with the #boycottchinesegoods campaign and push towards Make-In-India," he said.
"The government should factor in a GST rate cut for the MSME sector and also extend some incentives for filing GST returns timely. Even the process of providing GST refunds should be improved as this has a direct bearing on the working capital available with MSMEs," Rajesh Gupta, Co-Founder and Director, Busy Infotech, said. Gupta also suggested that the government should introduce strict compliance rules regarding the digitization of accounts, processes, deliveries and trade, to encourage further transparency.