Budget Needs To Focus On MSMEs And Start-Ups

Micro, Small & Medium Enterprises (MSMEs) contribute around 30 per cent to India’s Gross Domestic Product (GDP) and accounts for more than 40 per cent of total exports. Under the current regime, MSMEs were on a constant growth path until COVID-19 pandemic posed as a roadblock.

In the absence of any long-term financial back-up, MSMEs were the worst affected. However, the sector holds the potential of recovering quickly from any setback. As the economy gradually reopened, the sector started showing signs of revival.

Start-ups are yet another critical component of the economy. They employ more than 3 million and serve as the hub for research and innovation. However, their contribution to the nation’s GDP has not been quantified so far.

One major expectation of MSMEs from the budget is a strong focus on Aatmanirbhar Bharat through expansion of its programs and an increase in fund allocations. This is expected to revive MSMEs and start-ups and help new entrepreneurs set up businesses. An announcement of special financial packages for these sectors could help lessen their hardship.

Due to limited workforce, lack of awareness and complicated processes, MSMEs and start-ups are often unable to take advantages of government schemes and cheaper finances from the state-owned banks. Making the loan application process faster and less complicated would go a long way in easing their finance issues.

Although the sector is recovering, it needs strong support from the government to bounce back to pre-Covid levels. Tax holidays for 2-3 years could help them gain financial stability and return to their growth path.

Easing regulatory compliance for setting up new MSME units will bolster entrepreneurial instincts and make the business environment more conducive to start-ups.

For smaller manufacturing units, electricity is often the single largest cost. High power cost often reduces profitability, forcing many to shutter businesses due to inadequate margins. Union budget 2021 needs to consider power subsidies for the sector, at least in the rural areas.

MSMEs are still largely dependent on the government for infrastructure and availability of a skilled workforce. Budget 2021 should focus on and skill development and on building supply chains by providing efficient infrastructure.

MSMEs and start-ups contribute significantly to GDP. They are the powerhouse of innovation and provide employment to a significant percentage of the workforce. These sectors hold the potential to be the flag-bearers of India’s economic revival in the post-pandemic period. The Union budget 2021 can be the starting point of India’s MSME and start-up revolution. This revolution will be critical for India to achieve its target of a $ 5 trillion economy. Thus, the upcoming budget needs to pay special attention to the growth and development of these sectors.

The author is Co-Founder of Brands2Life

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