Budget 2024: MSME experts call for measures to address working capital-related challenges

Ahead of the interim budget, in an election year, to be presented by Finance Minister Nirmala Sitharaman on February 1, MSME stakeholders have voiced their suggestions to the government on what would make life of small business owners financially better.

Easing ways for an efficient flow of working capital has always remained among the most sought-after interventions by MSMEs from the government and this year is no different. Ahead of the interim budget, in an election year, to be presented by Finance Minister Nirmala Sitharaman on February 1, MSME stakeholders have voiced their suggestions to the government on what would make life of small business owners financially better. Below are inputs from some of the businesses engaged in the MSME sector:

Praveen Agrawal, Co-Head, India at lending platform OakNorth

“As we navigate the economic landscape, addressing the critical issue of delayed payments becomes paramount, especially for the MSME sector. The inaccessibility of timely credit support impacts MSMEs not just operationally; but also it resonates across the economic spectrum. As we eagerly anticipate the forthcoming budget, our hope is for a revision in the minimum GST registration revenue threshold, a decrease in corporate tax rates, and tailored tax incentives for MSMEs. These measures, combined with a strategic focus on enhancing access to finance, driving digital transformation, and alleviating regulatory burdens, have the potential to unlock growth opportunities for these enterprises.”

Sundeep Mohindru, Promoter and Director at TReDS platform M1xchange,

“With the government now bringing trade credit insurance as the fourth participant on TReDS to further support banks and NBFCs to go aggressive on supply chain finance, it is important to allocate budgetary push to support insurers to quickly adopt the platform. Under NCGTC, the CGFSF (Credit Guarantee Fund Scheme for Factoring) has been proposed to address coverage of the govt.-backed scheme for factoring transactions on TReDS. The govt shall advise to start active operations of this fund on TReDS at the earliest.

Moreover, TReDS ‘second window’ is envisaged as ‘buyer less’ and removes the need of the buyers to accept the invoices. Unlike, TReDS, the ‘Second Window’ will offer a ‘with recourse’ supplier financing for MSME sellers, backed by advanced analytics and access to consent-driven, publicly available databases such as GSTN, AA, PCR etc.”

Sachin Agrawal, CEO & Co-founder at vendor digitisation platform Bizongo

“Despite government initiatives to formalize the sector, a substantial number remains outside the formal ecosystem. Extending the benefits of Udyam to all MSMEs through fiscal measures and enhancing financial inclusion will be a major expectation from this year’s budget. Bridging the working capital deficit and encouraging digital adoption will empower MSMEs, thereby fostering economic growth.”

Palash Agrawal, Founder-Director at home decor brand Vedas Exports

“Within the MSME sector, there is a focus on exhibition incentive marketing. It has been observed that the budget for such initiatives should be substantially increased, potentially doubling, to cope with rising expenses. According to existing policies, the allocation for each show ranges from Rs 80,000 to Rs 1 lakh. Manufacturers hope the budget will see a significant boost to address the escalating costs. Given the three to fourfold increase in exhibition expenditure, our sector is directing attention to budgetary considerations.

Concerning machinery, there is a notable lack of incentives, and this situation should be rectified, mainly through an enhanced tax reduction scheme. On the labor front, the absence of taxation poses challenges for companies with a strong focus on labor incentives, as they miss out on GST benefits.”

Sajja Praveen Chowdary, Head, Policybazaar for Business

“Employee health insurance is an important aspect for MSMEs which goes a long way in ensuring teams/talent is stable while business takes its own course. While the business owners see this as an expense what makes it further expensive is that businesses aren’t allowed to take input credit for GST paid on employee health insurance. While it might be a burden on the Government to waive it across the line for all businesses, it should at least be provided for MSMEs as they are the future.”