MSME 2022 budget expectations: focus on credit, tax relief and digital payments must, experts say


Ease of doing business for MSMEs: Despite the credit-related measures announced by the government since Covid hit in 2020, a large number of MSMEs have not been able to access it, especially those who had never obtained credit. bank credit. Additionally, millions of small businesses, which are not registered as MSMEs, have been abandoned during the pandemic.

Ease of doing business for MSMEs: Credit and further tax relief for MSMEs remain the top two demands of Finance Minister Nirmala Sitharaman’s experts for the Union Budget 2022-23. Despite the credit-related measures announced by the government since Covid hit in 2020, a large number of MSMEs have been unable to access it, especially those who had never obtained bank credit. Additionally, millions of small businesses, which are not registered as MSMEs, have been abandoned during the pandemic. Tax refund is another area experts want Sitharaman to look into to help MSMEs recover faster.


“To boost lending to MSMEs, personal and small business lending needs to be treated differently from large business lending. There is a need for an effective refinancing mechanism (similar to NHB refinancing) to ensure liquidity and easier access to finance… The budget should focus on reviving the financial sector, the backbone of the economy by focusing on rural development and MSMEs to increase livelihood opportunities and provide safety nets,” said YS Chakravarti, MD and CEO of Shriram City in a statement.

Recently, the Finance Industry Development Council, which represents Non-Banking Financial Companies (NBFCs) in India, had also called on the government in its pre-budget recommendations to treat retail loans to small businesses and individuals differently from loans to large corporations. . The suggestion came after the Reserve Bank of India in November, in its clarification on asset classification standards, asked lenders to classify borrowers’ accounts as delinquent as part of their end-of-day process, whatever regardless of when this process is performed. Similarly, the central bank had also instructed lenders to classify accounts as SMA as well as NPA under the end of day process for the relevant date instead of month end.

Nilaya Varma, who runs management consultancy firm Primus Partners, said the government should help MSMEs balance manufacturing and environmental priorities, and explore innovative solutions such as incentivizing MSMEs to manufacture low carbon. Furthermore, “enabling MSMEs to have stable access to finance will continue to be a priority; finally, since the Indian economy enjoys a huge contribution from the service sector, the budget should include support measures focused on MSMEs engaged in services,” Varma told Financial Express Online.

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While recovering from two waves of Covid and multiple lockdowns, MSMEs are hoping for two key reliefs right now: GST streamlining and a reduction in the compliance burden, according to Ketan Gaikwad, CEO and Managing Director of one of the three TReDS RXIL platforms licensed by RBI for invoice discounting mechanism.

“The government should reduce the long-term capital gains tax on private equity and bring it up to par with the public market. You pay 10% tax on investments in the stock market, but an entrepreneur pays around 27-28% tax on a business they built from scratch. It’s something I was hoping for even last year and will continue to do. Also, there should be greater subsidies on the import of capital goods used for basic manufacturing and value addition for exports,” said Bala Sarda, CEO and Founder of VAHDAM India Tea Brand .

Among other suggestions from the experts for the budget was “to grant tax breaks to the MSME sector, one of the most affected by Covid, especially in terms of cash flow. Encouraging banks to lend more to NBFCs could also help increase cash flow to the MSME sector, as NBFCs continue to lend to MSMEs. Finally, putting in place stronger policies to deal with willful defaulters and combat the rise of NPAs in the MSME sector could help complement the other initiatives,” said Priyank Kothari, Director of NBFC Arvog.

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Digital payments

Ketan Patel of point-of-sale (POS) machine supplier Mswipe suggested that the special credit-linked capital grant scheme, which was announced in November 2021 for MSMEs in the service sector, should be extended to businesses whose turnover is less than Rs 5 crore. The aim was to help small units obtain service equipment through institutional credit for the advancement of their technology. Further, he urged to “subsidize the cost of funds to NBFCs which focus on lending to small traders for loans below Rs 20 lakhs to ensure easy access to credit…Government should also consider giving a form of small business incentive to encourage the adoption of digital payments and further strengthen the country’s payment infrastructure, especially in smaller cities.

In December 2021, IT Minister Ashwini Vaishnaw urged banks to set up an innovative digital platform like UPI for quick and easy credit to MSMEs, small entrepreneurs and those at the bottom of the pyramid, PTI reported. . “Can we create a platform as powerful, transparent, good, as digital as the UPI platform to provide very quick and easy credit to MSMEs, small industries, small entrepreneurs… people really at the bottom of the pyramid.” The Minister has expressed his willingness to consider the promising concepts that are brought after three months, in response to the poser from him,” Vaishnav had said during a speech at Digital Payment Utsav.

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