On July 23, 2024, Finance Minister Nirmala Sitharaman presented the Union Budget for 2024-2025. This budget outlined several initiatives and reforms aimed at propelling India towards sustainable economic growth, focussing on employment, skill development, Micro, Small, and Medium Enterprises (MSMEs) and the middle class.
“We are committed to supporting our MSMEs, the backbone of our economy,” Sitharaman said. “This budget introduces measures that will ensure they have access to the necessary resources and support to thrive.”
Let’s break down the key changes that could make a big difference for small business owners:
1.New Credit Guarantee Scheme:
A fresh credit guarantee scheme is on the table. This means MSMEs can now get loans for buying machinery without needing to put up collateral or third-party guarantee, with a guarantee cover up to ₹100 crore.
“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,” Sitharaman added. “An annual guarantee fee on the lowering loan balance as well as an upfront guarantee cost will be required of the borrower.”
2.Smarter Loan Assessments:
Public sector banks will develop in-house capabilities to assess MSME credit based on digital footprints, rather than relying solely on asset or turnover criteria. It will also cover MSMEs without a formal accounting system.
“This can be a huge step in giving access to credit to a large pool of MSMEs who are devoid of timely and affordable access to formal credit,” Sitharaman stated.
3.Credit Support for MSMEs:
Introduction of a new mechanism for facilitating continued bank credit to MSMEs during their stress period through a government-promoted fund “While being in the ‘special mention account’ (SMA) stage for reasons beyond their control, MSMEs need credit to continue their business and to avoid getting into the NPA stage,” the Finance Minister explained.
“Credit availability will be supported through a guarantee from a government-promoted fund.” SMA is a classification banks use to identify loans showing signs of stress before turning into bad debts.
4.Bigger Mudra Loans:
The limit of Mudra loans is enhanced to ₹20 lakh from the current ₹10 lakh for entrepreneurs who have successfully repaid previous loans under the “Tarun” scheme. “This increase in Mudra loan limits will empower more entrepreneurs to expand their businesses,” Sitharaman noted.
5.SIDBI Branches Expanding:
The Small Industries Development Bank of India (SIDBI) is spreading its wings. With 24 new branches opening this year, more MSMEs will have direct access to credit. The goal is to cover 168 out of 242 major MSME clusters in three years. “Expanding SIDBI’s reach will ensure that more MSMEs have access to the financial support they need,” Sitharaman said.
6.Boost for Food Processing:
If you’re in the food business, there’s something for you too. The budget includes plans for 50 new food irradiation units and 100 food quality and safety testing labs with National Accreditation Board for Testing and Calibration Laboratories (NABL) accreditation. This could help MSME food processors improve their product quality and safety.
“This will help MSME food processors improve their product quality and safety, making their products more competitive in the market,” Sitharaman highlighted.
7.Setting up E-commerce export hubs:
The FM also said they plan to set up e-commerce export hubs in a private-public partnership (PPP) mode to help small businesses and traditional artisans sell their products in international markets.
8. Facilitating Working Capital for MSME Growth:
The Finance Minister suggested lowering the turnover threshold of buyers for required onboarding on the Trade Receivables electronic Discounting System (TReDS) platform from Rs 500 crore to Rs 250 crore in order to assist MSMEs in unlocking their working capital by turning their trade receivables into cash. “This will bring 22 more Central Public Sector Enterprises (CPSEs) and 7,000 more companies onto the platform,” Sitharaman said. “Medium enterprises will also be included in the scope of the suppliers.
These changes aim to make life easier for small business owners, from getting loans to expanding operations. It’s clear that the government sees MSMEs as a crucial part of India’s economic growth story.
Also Read: Top 15+ MSME Schemes to Empower Small Business
Tax Reforms and Financial Sector
The budget introduces several tax reforms aimed at simplifying and rationalizing the tax structure:
- Customs Duty: Measures to support domestic manufacturing, deepen local value addition, and promote export competitiveness. “These tax reforms will put more money in the hands of our hard working citizens,” Sitharaman said.
- Personal Income Tax: Standard deduction for salaried employees is proposed to increase from ₹50,000 to ₹75,000, and the deduction on family pension for pensioners is enhanced from ₹15,000 to ₹25,000
- Financial Sector Vision: A new financial sector vision and strategy document will be developed to prepare the sector in terms of size, capacity, and skills for the next five years
The 2024-2025 budget presents a comprehensive roadmap for India’s economic growth, focusing on employment, skilling, MSMEs, agriculture, energy security, infrastructure, and tax reforms. These initiatives are designed to create a more resilient and inclusive economy, ensuring sustained development and prosperity for all Indians.
