Vivek Bindra, Founder of Bada Business, Reveals MSME Wishlist for Budget 2024-25

As we approach the Union Budget 2024-25, the MSME sector, a cornerstone of India's economy, holds high hopes for significant relief and strategic support from the government. This sector, comprising 6.3 crore registered and 7 crore unregistered SMEs, employs around 22 crore people, accounting for approximately 40% of India’s working population. MSMEs contribute 34% to India's GDP and nearly 50% to its exports, underscoring their critical role in the nation's economic landscape. Over the past decade, the BJP government has increased budget allocations to MSMEs sixfold, reflecting their commitment to supporting this vital sector. However, with the growing aspirations of SMEs, there is a pressing need for more targeted measures.

The MSME sector is facing several challenges, including access to credit, complex GST processes, and high compliance burdens. However, MSMEs are also witnessing a positive trend. The number of listed SME IPOs has been steadily increasing, from 59 in 2021 to 109 in 2022 and 182 in 2023. This indicates growing investor confidence in the MSME sector.

In light of these expectations, I, Dr. Vivek Bindra, have launched the 'Idea to IPO' initiative, mentoring 100 unlisted Indian SME companies, streamlining their operations, boosting their revenues, and guiding them towards stock market listing in 30 months. This initiative underscores the importance of fostering an enabling environment for MSMEs to thrive. Here, I outline the key priorities and expectations of MSMEs from the upcoming budget, based on inputs from industry experts and stakeholders.

1. Streamlined Tax and GST Processes

One of the foremost expectations from the Union Budget 2024-25 is the simplification of tax structures and GST processes. MSMEs seek tax reductions and uniformity in GST registrations. Currently, out of 63 million MSMEs, only 15 million are GST registered, highlighting a significant gap. The Ministry of MSME has emphasized the need for a simplified and transparent tax regime to improve ease of doing business. A streamlined tax framework would enhance operational efficiency and encourage more enterprises to formalize their operations

2. Improved Access to Credit

Credit availability remains a significant hurdle for MSMEs, with a reported credit gap of $530 billion. The budget should focus on enhancing credit facilitation initiatives, increasing funding for MSME loans, and expanding credit guarantee schemes. Introducing a dedicated banking policy for easy credit access and speedy disbursement would be beneficial. Enhanced budget allocations to schemes like Pradhan Mantri Mudra Yojana, which has seen a disbursement of over Rs 18.27 lakh crore since its inception, are also anticipated

3. Incentives for International Growth

To bolster India's global competitiveness, MSMEs expect dedicated funds for export capacity development, promotion, and marketing. The India SME Forum has proposed a Rs 5,000 crore fund for these purposes. Additionally, implementing export facilitation and development centers at the district level and offering support for MSMEs to participate in international exhibitions could significantly boost exports, which already constitute 50% of India’s total exports

4. Expansion of Production-Linked Incentive (PLI) Schemes

Expanding PLI schemes to sectors like power, waste management, electronics manufacturing, and health could drive inclusive growth and create new job opportunities. These schemes have already shown success in the smartphone industry, contributing to the sector's growth by over 5% annually. Similar incentives in other high-potential sectors could stimulate growth and innovation

5. Enhanced Digital Infrastructure

The establishment of a Unified Digital Lending Infrastructure, akin to the NPCI for digital payments, is expected to streamline digital lending processes. Scaling up initiatives like the Public Tech Platform for Frictionless Credit and enhancing the scope of account aggregators can improve MSME lending decisions. Increased investment in digital technologies, including AI and cloud-based solutions, would also help integrate unregistered MSMEs into the formal economy.

The establishment of a Unified Digital Lending Infrastructure, akin to the NPCI for digital payments, is expected to streamline digital lending processes. Scaling up initiatives like the Public Tech Platform for Frictionless Credit and enhancing the scope of account aggregators can improve MSME lending decisions. My widely-attended 'Leadership Funnel Program' has emphasized the importance of digital infrastructure in enhancing business operations, showing the critical need for increased investment in digital technologies, including AI and cloud-based solutions. This would help integrate unregistered MSMEs into the formal economy.

6. Support for Sustainable Practices

Encouraging sustainable business practices through subsidies and incentives for environmentally friendly products is crucial. The budget could introduce policies to support green energy and sustainable manufacturing, promoting a more environmentally conscious business ecosystem. Last year’s reduction in customs duties on lithium-ion batteries from 21% to 13% is an example of such measures that could be expanded further

7. Lower Interest Rates and Better Credit Terms

Lowering interest rates on MSME loans and enhancing access to finance are critical expectations. High interest rates currently add to the financial burden of MSMEs. The government is expected to introduce measures that facilitate easier and cheaper credit, supporting business expansion and growth. Last year, the government's 41.6% increase in MSME funding was a positive step, but more needs to be done

8. Focus on Skill Development

A skilled workforce is crucial for the growth of the MSME sector. The government can introduce skilling initiatives specifically designed for MSMEs. Bada Business has been instrumental in providing training through programs like the ‘Leadership Funnel Program’, which could be aligned with government initiatives to involve training programs in areas like digital marketing, entrepreneurship, and vocational skills. The allocation of funds for these training programs would help MSMEs stay competitive and adapt to the changing market dynamics.

9. Extend NPA classification

period To help MSMEs facing late payments, the government should extend the period for classifying a loan as bad debt from 90 to 180 days. This could ease their burden as timely payments are often a challenge, especially when it is expected from war-ravaged zones such as Ukraine-Russia. At present, over 10 lakh crore such payments are stuck.

10. Expanding MSME Credit Options

To bolster credit availability, meet working capital requirements, and stimulate growth within the MSME sector, it is crucial for the government to introduce comprehensive measures such as interest subvention schemes, which would reduce the cost of borrowing for small businesses. Additionally, alleviating collateral requirements can significantly ease the financial constraints faced by MSMEs, making it easier for them to secure necessary funding.

In alignment with this need, the 'Idea to IPO' initiative would ensure that my handpicked SMEs are never short of funding. To make this possible, initiatives similar to the Emergency Credit Line Guarantee Scheme, which has already proven effective in providing liquidity support, should be expanded and refined to ensure broader access and enhanced financial stability for MSMEs.