Indian Union Budget 2023: What's Ahead For SMEs?

The Budget 2023 introduced several measures for promoting the growth of SMEs. The budget also includes an increase in fund allocation for the MSME sector and will provide much-needed support to small businesses. The proposed measures will enhance the productivity of the SME sector in India, ultimately contributing to the growth and development of the Indian economy. 

Revamped Credit Guarantee Scheme:

The Revamped Credit Guarantee Scheme is a major development for SMEs. The scheme bridges credit gap by providing collateral-free SME loans to small businesses. The Budget 2023 defined the corpus for this to be worth Rs 9,000 crore. This will enable additional collateral-free guaranteed credit of ₹2 lakh crores," Sitharaman said in her budget speech, adding the cost of the credit will reduce by about 100 basis points (bps) due to the scheme. Banks and financial institutions will offer collateral-free business loans without needing any security. This means that business owners don't have to pledge any assets or property when they apply for a loan. Even though this type of loan already existed, the government is further promoting the opportunity.

This scheme will encourage SME lending, which were a major challenge for the businesses. The scheme also addresses the challenge of business loan eligibility, as SMEs often lack the collateral to avail of sufficient credit. 

Infrastructure:

The budget 2023 proposes the establishment of technology parks, incubation centers, and a National Research Foundation. Rs 50,000 crore has been allocated over five years to promote R&D activities in various sectors.

Good infrastructure development will provide SMEs with access to modern infrastructure and technology, support mechanisms, and incubation centers. This further enables them to enhance their productivity, operations, and competitiveness. The government has also proposed a seed fund of Rs 1,000 crore and increased the allocation for the Startup India program to Rs 1,500 crore. These measures will create a favorable ecosystem for startups and SMEs to thrive.

Technology Development

As per the budget, an Entity DigiLocker will be established to cater to the needs of MSMEs, large businesses, and charitable trusts. This will enable such entities to do away with physical copies of company documents and safely store their business loan documents online and share them effortlessly with regulators, authorities, banks, and other business entities as and when required.

Finance Minister Nirmala Sitharaman emphasized the advantages of digital payments in the country. She also noted how it has contributed to the formalization of the national economy. The Economic Survey (2022-23), presented on Tuesday, acknowledged the growth of the Unified Payments Interface (UPI) in recent years. The increase was in both value and volume, paving the way for global acceptance.

Simplification of Tax Compliance:

The Indian Union Budget 2023 has proposed measures to simplify tax compliance for SMEs. This includes including a single-window system for filing tax returns. The system aims to reduce the compliance burden for SMEs. Enabling them to file all their tax returns through a single online portal, also saves time. Other measures include a simplified tax assessment process, reduced compliance requirements, and a dispute resolution mechanism. These will have a positive impact on SMEs by allowing them to concentrate on core business activities. Freeing them to grow and expand their operations in the Indian market. The primary intent is to reduce the difficulties involved in reaching business loan eligibility.

Export Promotion:

The Indian Union Budget 2023 has proposed several measures to boost exports and promote global market access. One of these measures is the establishment of a dedicated Export Promotion Cell (EPC). This will serve as a one-stop shop for SMEs seeking to export their goods and services to new markets. The EPC will provide SMEs with information and help them expand their business. The budget 2023 also proposes the expansion of the Merchandise Exports from India Scheme (MEIS). It incentivizes exporters and the establishment of a National Trade Facilitation Centre.

Skill Development:

The Union Budget 2023 has proposed many measures for skill development and training. These are the establishment of a National Skill Development Corporation (NSDC). It will provide skill training to entrepreneurs and workers in the SME sector. Technology and Innovation Support Centers (TISCs) will be set up to provide access to technology resources. A Micro Entrepreneurship Development Program (MEDP) will provide training and support to micro-entrepreneurs.

Increase in Fund Allocation:

The Budget 2023 has announced a significant increase in funds for the MSME sector in India. The step will provide much-needed support to small businesses. The government has allocated Rs 16,000 crore for the sector. The budget also includes a scheme to provide SME loans up to Rs 1 crore to women entrepreneurs. It has set aside funds for research and development in the manufacturing sector also. 

These measures along with financial inclusion and credit enablement will provide SMEs with easier access to finance through simplified procedures for business loan documents and technology adoption.

The Indian Union Budget 2023 is good news for SMEs in the country. There are several measures aimed at boosting growth and development. The other big takeaway is focusing on finance, promoting exports, and simplifying tax compliance. The increase in fund allocation will provide support to small businesses. This matters more, especially in the aftermath of the COVID-19 pandemic.