Union Budget 2024-25: Focus on MSMEs and Labour-Intensive Manufacturing

New Delhi: Union Minister for Finance and Corporate Affairs, Smt. Nirmala Sitharaman, today presented the Union Budget 2024-25 in Parliament, emphasizing significant support for Micro, Small, and Medium Enterprises (MSMEs) and labour-intensive manufacturing sectors. She outlined comprehensive measures designed to bolster the MSME sector through financing, regulatory adjustments, and technological support to enhance their global competitiveness.

Credit Guarantee Scheme for MSMEs: A central feature of the budget is a new credit guarantee scheme aimed at MSMEs in the manufacturing sector. This scheme facilitates term loans for machinery and equipment purchases without requiring collateral or third-party guarantees. A self-financing guarantee fund will offer up to ₹100 crore in guarantee cover per applicant. Borrowers will need to provide both an upfront and an annual guarantee fee.

New Assessment Model for MSME Credit: Public Sector Banks (PSBs) are set to develop an independent, in-house credit assessment model for MSMEs. This new system will focus on digital footprints rather than traditional asset or turnover criteria, expanding credit access even to MSMEs lacking formal accounting systems.

Credit Support During Stress Periods: To help MSMEs maintain bank credit during periods of stress, a government-promoted fund will offer guarantees, preventing these enterprises from sliding into the Non-Performing Assets (NPA) category. This initiative is targeted at businesses in the ‘special mention account’ (SMA) stage due to uncontrollable factors.

Enhanced Mudra Loans: The Finance Minister proposed raising the limit of Mudra loans to ₹20 lakh from ₹10 lakh for credit-worthy entrepreneurs who have previously availed and repaid loans under the ‘Tarun’ category.

Turnover Threshold Reduction for TReDS: To improve working capital for MSMEs, the turnover threshold for buyers’ mandatory onboarding on the TReDS platform will be halved from ₹500 crore to ₹250 crore. This reduction is expected to onboard 22 additional Central Public Sector Enterprises (CPSEs) and 7,000 more companies, including medium enterprises.

Expansion of SIDBI Branches: The Small Industries Development Bank of India (SIDBI) will establish new branches to enhance direct credit access to MSME clusters. This year, 24 new branches will be opened, expanding service coverage to 168 out of 242 major MSME clusters within three years.

Support for Food Irradiation and Testing Units: Financial support will be provided for the establishment of 50 multi-product food irradiation units and 100 NABL-accredited food quality and safety testing labs within the MSME sector.

E-Commerce Export Hubs: To facilitate international market access for MSMEs and traditional artisans, the budget proposes the creation of E-Commerce Export Hubs under a public-private partnership (PPP) model. These hubs will offer a streamlined regulatory and logistical framework to support trade and export services.

Smt. Sitharaman’s budget underscores the government’s commitment to strengthening the MSME sector, crucial for economic growth and job creation in India.