MSME

MSME (Micro, Small, and Medium Enterprises) has been one of the key sectors driving India’s growth and providing employment opportunities. Time and again, the government has been increasing its focus on channelling growth of the MSME sector. The development of MSME is crucial for the overall economic development of the nation. The following points highlight the significant contribution of MSMEs:

	India has approximately 6.30 crore MSMEs
	MSMEs contribute
		45% towards India’s total manufacturing output
		40% of India’s exports
		30% of National GDP
	MSME’s employ 110 Mn. people, largest source after agricultural sector

The Budget 2022 saw a major focus on the upliftment of the pandemic stricken MSME sector and contained measures for their revival and growth. Following are the major budget highlights for the MSME sector:

Ease of doing business	With the focus on ease of doing business, the government took a step further by initiating Ease of Doing Business 2.0. This will be the next phase of Amrit Kaal. The focus in this new phase will be: Active involvement of the states Integration of the state and central level systems through IT bridges Digitization of manual processes and interventions Removal and standardisation of overlapping compliances A single point of access for all citizen-centric services. With the active involvement of businesses and citizens, ground-level assessment of the impact and crowdsourcing of suggestions will be encouraged. MSMEs will be supported through: Credit availability Reducing input costs Financial inclusion by post office transformation
ECLGS Extension  (Emergency Credit Line Guarantee Scheme)	ECLGS aimed at providing credit to more than 130 lakh MSMEs. This was in line with helping the MSMEs mitigate the adverse impact of the pandemic. The scheme has been extended up to March 2023. The Guarantee cover has been expanded by Rs. 50,000 crores to a total cover of Rs 5 lakh crore. The additional amount has been earmarked exclusively for hospitality and related enterprises. This will help the MSMEs, especially the hospitality and related sectors, rebound their businesses to the pre-pandemic levels.
CGTMSE Revamp (Credit Guarantee Trust for Micros and Small Enterprise)	The required amount of funds will be infused into the CGTMSE. Additional Credit of Rs 2 lakh crore will be infused for Micro and Small Enterprises (MSEs). Access will be extended to the Micro sector that couldn’t avail of ECLGS earlier to benefit from the scheme. Loan disbursal limit has been extended to Rs. 2 crores. This will in turn, boost employment opportunities.
RAMP Rollout (Raising and Accelerating MSME Performance)	RAMP will be rolled out for the MSME sector to become efficient, competitive and resilient. The outlay of Rs 6,000 crore aims at: Improved market access Access to credit Strengthening institutions Governance at the central & state level
Digitization of MSME’s	Marking a step further towards the digitization of MSMEs, four portals will be interlinked. i.e.  > Udyam > e-Shram > National Career Service (NCS) > Atmanirbhar Skilled Employee-Employer Mapping (ASEEM) These portals will have live & organic databases and provide B2B, B2C, and G2C services. The services will facilitate skilling, credit and recruitment to enhance entrepreneurial opportunities and formalise the economy.
Customs Duty	Several duty exemptions were earlier granted to capital goods in various sectors like textiles, leather, power, footwear, fertilisers, etc., impeding the growth of the domestic industry.  Therefore, in line with the ‘Make in India’ initiative, concessional rates in the capital goods and project imports are proposed to be phased out along with the introduction of a moderate tariff of 7.5%. However, exemptions will be applicable for certain advanced machinery not produced in the country. Exemptions on certain products have been introduced, viz. ball screw, specialised castings, and linear motion guide to encourage domestic production of capital goods. More than 350 exemption entries have been proposed to be phased out from the customs. This includes chemicals, fabrics, medical devices, certain agricultural produce, drugs, and medicines. These are sectors where sufficient domestic capacity exists.  Some sector-specific changes proposed in the customs are: MSME: Customs duty on umbrellas has been increased to 20%, and the exemption on the parts of umbrellas has been withdrawn. The exemption has been rationalised on tools and implements for the Agri sector manufactured in India. Exemptions on steel scrap have been extended to another year offering relief to MSME secondary steel producers. Countervailing Duty (CVD) and anti-dumping duty have been revoked on coated steel and stainless steel products, high-speed steel, and bars of alloy steel. Electronics: Custom duty rates are being calibrated to provide a graded rate structure. This will facilitate the domestic manufacturing of wearable devices and electronic smart meters. Duty concessions for parts of mobile phone charger transformers, mobile camera lenses, and other items. This will boost domestic production of high-growth electronic items.  Gems and Jewellery: Customs duty has been reduced to 5%, for cut and polished gemstones and diamonds. Nil customs duty will be charged for simply sawn diamonds. A simplified regulatory framework will be implemented from June 2022 to facilitate the export of jewellery through e-commerce. A customs duty of at least Rs. 400 per kg will be charged on the import of undervalued imitation jewellery to disincentivise its import. Chemicals: Customs duty has been reduced on critical chemicals like acetic acid, methanol, and heavy feeds stock for petroleum refining. As adequate domestic capacity for sodium cyanide exists, customs duty has been raised on the same. This will increase the domestic value addition. Exports: Exemptions have been given on embellishments, fasteners, zippers, specified leather, trimming, buttons, lining material, furniture fittings, and packaging boxes to promote their exports. This will benefit the bona fide exporters of handicrafts, leather footwear, textiles, and leather garments. The government has introduced duties and removed exemptions from imports for products and services that have sufficient domestic capacity. This aims to promote and support the domestic industries. Further, incentives and exemptions have been provided to domestic players to boost the country's production and encourage export.
Production Linked Incentive (PLI) for Solar PV Module	Rs 19,500 crore to be allocated for Production Linked Incentive to manufacture high-efficiency modules. Priority will be given to the fully integrated manufacturing units such as polysilicon and solar photovoltaic modules. This will help achieve the goal of installing 280 GW solar capacity by 2030. The focus is on reducing dependencies on imports and opening export opportunities in this segment.
​​​​​​​Surety Bonds in Public Procurement	For government procurement, Surety bonds will be accepted as a substitute for bank guarantees. This will help in reducing the indirect costs for the work contractors and suppliers, especially those of the MSME sector. Gold import businesses may find it useful. IRDAI has issued a framework for the issue of surety bonds by the insurance companies.

In a nutshell

The Budget 2022 highlights progress for the MSME sector by proposing incentives required for the sector’s growth. This aligns with the government’s initiatives of ‘Make in India’ and ‘Digital India’, which are steps further towards Atmanirbhar Bharat.