The Impact of Budget 2018 on MSMEs - Make Money Online

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The Impact of Budget 2018 on MSMEs


On 1st February 2018, Finance Minister ArunJaitley presented the Union Budget. It was focused on the growth of agriculture, education, infrastructure, rural development, employment, and health. The Budget also focused on providing a boost to the micro small and medium enterprises (MSMEs). Almost INR 3800 crore was allotted for credit support to the MSMEs. The focus was also on quick online approvals for shorter turnaround times. The tax rate has been reduced to 25% for companies with a turnover of less than INR 250 crore.
MSMEs are important for the overall development of the country. These enterprises contribute 40% to the Gross Domestic Product (GDP) and offer employment to almost 69% of the population. Lack of capital is often the most important factor that hinders the growth of this sector.

Capital support to the MSME sector through easier and faster business loans will empower these ventures and boost the economic growth of the country. Here are six measures taken by the Budget to boost this sector.

1.    Formalization

After the demonetization drive and implementation of the Goods and Services Tax (GST), the MSME sector has seen formalization. This provides beneficial information about the MSME sector and its financial situations. This information will help banks and non-banking financial companies (NBFCs) to provide MSME loans to meet short-term and long-term capital needs.

2.    Online approvals

A major hindrance to the growth of the MSME sector is the delay in the availability of funds. Lenders often take a long time to approve and sanction loan applications.  Online approvals will reduce the time taken allowing prompt decision-making, which ensures SME loans are disbursed quickly to offer financial inclusion to this sector.

3.    Credit support

The Indian government will provide INR 3794 crore to the MSMEs for providing capital and interest subsidy and credit support. NBFCs are expected to provide working capital finance through Micro Units Development & Refinance Agency Ltd. (MUDRA). The eligibility criteria and refinancing policy as determined by MUDRA will be reviewed to enhance NBFC lending.MUDRA offers low-rate funds to micro-finance companies and NBFCs, which will allow these lenders to offer competitive business loan interest rates to the MSME sector.

4.    Fintech companies focus

The Finance Minister stated the importance of fintech in lending for the growth of the MSME sector. A committee will examine the policy and institutional measures to create the right environment that will boost the growth of such fintech businesses in India.

5.    Non-performing assets (NPA)

The government is also focusing on taking effective steps to address NPAs. Additionally, it will look at loans for a business that are already sanctioned but are stressed MSME accounts.

6.    Reduced corporate tax rate

The Budget 2018 also offers incentives for reducing the corporate tax rate to 25% for companies having turnovers less than INR 250 crore. This measure is expected to encourage urban and rural entrepreneurs to avail of capital finance and grow their MSME ventures.

In addition to the aforementioned measures, the government plans to take several more steps to build a strong alternative investment regime through angel investors and venture funds. This is expected to provide MSME with an alternative to loan for business through equity investing.

The positive direction adopted by the Union Budget 2018 is expected to play an important role in the growth of the MSME sector. Easy and timely availability of funds at competitive and affordable business loan interest rates bodes well for the growth of this sector and the overall economy.

The Impact of Budget 2018 on MSMEs The Impact of Budget 2018 on MSMEs Reviewed by Lokesh kumar on 5:09 AM Rating: 5