Finance minister Nirmala Sitharaman presented the new Budget 2021 on February 1. The budget focused on several refreshing schemes across all sectors including credit support for MSMEs (Micro, small and medium enterprises). The COVID-19 pandemic struck the MSME sector hard with many having to shut down due to lack of financial resources and loss of employment. The existing challenge of access to SME loans left many businesses worried about their mere survival. As businesses started shifting to digitalisation, the lack of online presence too jeopardized several businesses. Let us now understand how the government has provided these businesses support in the new budget 2021.
- MSME funding doubled
The new budget 2021 was the first-ever digital budget which focused on building the MSME sector. It wanted to bring solutions to the existing challenges of the insolvency process. The reassuring detail was that the new budget 2021 has relaxed the procedure of setting up businesses. It also increased the funding for startups. The budget has also brought good news for the sector by doubling the MSME funding to Rs. 15,700 crores. The budgetary allocation in 2020-2021 was Rs.7,572 crores.
- Increase in Emergency Credit Line Guarantee Scheme :
One more heartening aspect of the new budget 2021 is a good chunk of the funding was allocated for ECLGS or Emergency Credit Line Guarantee Scheme. It was of great help for MSME for various issues like a liquidity crisis, lack of labour and non-payment of dues caused by the COVID-19 pandemic. Till Nov 2020, more than 2 lakh crores of micro business loans were taken under this scheme.
- Skill development programme:
The government displayed their support in the new budget 2021 by providing accessibility to loans and even skill development programs for micro-businesses. It had allotted Rs.300 crores towards the creation and development of centres of technology for MSME units. The Federation of Indian Micro and Small & Medium Enterprises (FISME), appreciated this move. The relaxation of custom duties for steel, ferrous and non-ferrous scrap will lead to a decrease in the price of raw materials. The new budget 2021 had also mentioned important announcements like developing NCLT (National Company Law tribunal), which is an alternative solution for debt resolutions through e-court systems. This would prove as a key MSME support action in clearing off pending debts.
- COVID-19 debt excluded from default:
The essence of the development of the NCLT framework would definitely bring relief to cash deprived firms that carried the brunt of the pandemic that struck us. The new budget 2021 clearly states that Covid-19 debt is not included in the category of default. In an effort to relax micro business loans, the government has decided to raise the default threshold for insolvency to 1 crore from 1 lakh.
- OPC norms eased:
In order to support and encourage people to become entrepreneurs and build start-ups or one-person companies, the new budget 2021 states that OPCs would grow without any restrictions on paid-up capital and turnover. The finance minister, Nirmala Sithraman says OPCs can be converted into other types of companies quickly. An Indian citizen can start an OPC within 120 days as opposed to the previous 182 days. It will also allow NRIs to start OPCs in India.
- Tax holidays for start-ups postponed by a year:
To break out of the pandemic restrictions, the new budget 2021 proposed an extension of eligibility for claiming tax holidays for startups. This is along with capital gains exemption for investment in startups till March 31, 2022, to accelerate funding.
Apart from the government’s contribution to the sector, you can fund your dream start-ups and business through various ways like
- MSME business loans in 59 minutes- This widely popular loan started in September 2018, is given for MSME development in the country. Both new and current businesses can take loans up to Rs. 1 crore. The approval or rejection of the loan is granted within 59 minutes of the application.
- Mudra loans- MUDRA is a loan scheme constituted by the Indian government under the Pradhan Mantri MUDRA Yojana, that funds for the development of small businesses. It also provides MSME loans for businesses having a requirement of up to 10 lakh. It also provides refinance support to businesses in the manufacturing, trading, service sector
- Gold loans- You can opt for gold loans, as they are available at very low-interest rates than any kind of personal or business loan. For example, agencies like Rupeek offer gold loans at rates as low as 0.49%. You can even use the app and website to use the gold loan calculator to get an idea of the interest rates and EMI for the loan amount required. Apart from these plus points, you also have tax benefits for gold loans.
The new budget 2021 has mainly focused on helping MSMEs revive from the impact caused by the pandemic. The government has allocated most of its budget to healthcare and wellness, naturally. The pros for MSMEs are that MSMEs now have lesser compliance burdens and are exempted from increased taxes. It also focused on the digitalisation of the country. Now we need to focus on how the funding for each of these is being utilised and how the sector will be impacted by it both positively and negatively.