Budget 2020: A Glance at What is in Store for MSMEs

| February 1, 2020

updated on February 1, 2021 at 6:19 pm

Budget 2020

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On Saturday February 1st, 2020, Finance Minister Nirmala Sitharaman presented the Union Budget 2020 that covered all the sectors that contribute towards the nation’s economy. One of the main focus in the budget 2020 that has been put on the table was for Micro, Small and Medium Enterprises (MSMEs). Finance Minister Stated.

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Budget 2020

During the budget 2020 -21 session, Finance Minister stated that “MSMEs are vital to keep the wheels of our economy moving.” She further said that as of now, about 5 lakh MSMEs have reaped the benefits of the debt restructuring mechanism put forward by RBI since the last year.

The budget provides a much-needed sigh of relief amidst the global economic slowdown. The Union Budget 2020 -21 brings various remedial solutions along with multifaceted benefits for the MSME sector.

Budget 2020 : Major Announcements for MSMEs

Here are the some of the major takeaways from the Union Budget 2020 -21 aimed at the MSME sector.

  • The Finance Minister proposed necessary amendments to the Factor Regulation Act 2011 which will enable NDFCs to extend invoice financing to MSMEs through TReDS, thereby enhancing their economic and financial sustainability.
  • Since working capital credit remains a major issue for the MSMEs, the Finance Minister proposed to introduce a scheme to provide subordinate debt to entrepreneurs of MSMEs. This subordinate debt will be provided by banks & count as quasi equity. The subordinate debt will be fully guaranteed through the Credit Guarantee Trust for Medium & Small Entrepreneurs.
  • An app-based invoice financing loan’s product is to be launched that will eliminate the problem of late payments and consequential cashflow mismanagement for the MSMEs.
  • The debt restructuring window introduced by RBI last year was to end on 31st March, 2020 but the window has been proposed to the RBI to be extended to 31st March 2021.
  • Many mid-sized businesses are successful domestically but not in export markets. Therefore, for selected sectors such as pharma, auto components etc., hand-holding support was proposed by the Finance Minister for technological upgrades, research and development, strategizing etc.
  • A sum of ₹8,000 crore has been allocated for the National Mission on Quantum Computing and Technology.
  • Government is planning to introduce the National Logistics Policy that will create a single window on making MSMEs more competitive and augmenting employment generation.
  • The Finance Minister proposed a new investment clearance cell, which aims at simplifying the lives of Indian entrepreneurs. Government plans to do so, by providing end-to-end support and facilitation on pre-investment advisory, data related to land-banks with the help of a centralised portal.
  • It was also announced that businesses with an annual turnover of up to 5 crores, comprising over 90% of GST payers, will be allowed to file quarterly GST returns. 

Post the Annual Budget 2020 -21 session PM Narendra Modi also discussed the importance of MSME sector which is a crucial player in generating employment. He stated that in the budget 2020 session, various announcements were made to increase India’s exports. In addition, a new plan has been proposed to make every district of the nation, an export hub.

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