Authors: Mohammad Athar, Partner and Leader, Capital Projects and Infrastructure, Industrial development and Rohan Shah, Director, Management Consulting
The Union Budget 2024 incorporates numerous initiatives for the micro, small and medium enterprises (MSME) sector, particularly for manufacturing units, to boost the sector’s long-term growth and sustainability. One of these initiatives is the Credit Guarantee Scheme where MSMEs in manufacturing can access collateral free loans with up to INR 100 crore as guarantee. This initiative is aimed at reducing barriers to finance faced by small and medium enterprises and enhance their access to capital.
Another initiative is credit support that will also be provided to MSMEs under distress. This assistance is meant to prevent the conversion of Special Mention Account (SMA) status into non-performing assets (NPAs), thus maintaining their financial stability and the continuity of their operations.
In a bid to encourage responsible borrowing and repayment behaviour, the Government of India (GoI) has doubled the Mudra loan cap from INR 10 lakhs to INR 20 lakhs for borrowers who have successfully repaid their earlier set of loan. Through this, it is expected that more companies will embrace this programme to foster development while being financially responsible.
The Trade Receivables Discounting System (TReDS) onboarding criteria has been changed as well. The INR 500 crore turnover threshold has been lowered to INR 250 crore so that small businesses can use this platform easily. By doing this, the MSMEs’ liquidity, which ensures prompt payments and proper cash flows, can be enhanced.
Further, GoI has increased their focus on infrastructure development for MSMEs. Over 100 National Accreditation Board for Testing and Calibration Laboratories (NABL) accredited food testing labs would be set up with the aim of ensuring quality and safety of food products. This is an important measure in maintaining high standards for the food manufacturing industry, thereby increasing consumers’ confidence and expanding market opportunities for MSMEs.
Public-private partnerships (PPPs) will further be used to create e-commerce hubs that will encourage exports. These partnerships will be aimed at assisting MSMEs to reach international markets, increase their worldwide competitiveness and help them in entering the export market.
Lastly, 12 plug-and-play industrial parks are set to be developed under the National Industrial Corridor Development Programme in India (NICDP) These parks are meant to significantly reduce costs involved in starting operations for MSMEs by providing shared, ready-to-use infrastructures provided by NICDP initiatives.
