Budget 2022 and its impact on MSME

Finance Minister Nirmala Sitharaman, in her Budget 2022 speech, announced plenty of measures with an enhanced focus upon PM Gati Shakti, inclusive development, productivity enhancement, investment, and financing of assets.

Sitharaman said the Budget 2022 would drive the economy forward in unison. The enormous opportunities for all would be created by the Centre, State governments with the private sector. Keeping that in mind, there were a series of announcements for the MSME sector to help them grow and scale. 

Here is a list of the announcements and their impact on MSMEs:

1. Extension of ECLGS: The Emergency Credit Line Guarantee Scheme (ECLGS) has been extended to March 2023. ₹ 50,000 Crore has expanded the guarantee cover of the scheme. Now, the total cover of the scheme will be increased to ₹5 Lakh Crore from ₹4.5 lakh crore. The additional amount has been earmarked exclusively for the hospitality sector and related enterprises. The ECLGS was announced to help COVID-19 hit businesses in the MSME sector. The scheme’s extension will help MSMEs mitigate the losses of the pandemic and regain the pre-pandemic level of business, especially those in the hospitality sector, which faced immense hardships due to no-contact and lockdown measures.

2. More funds to CGTMSE scheme:  More funds will be infused into the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme. This will provide additional credit of ₹2 Lakh Crore for Micro and Small Enterprises. The increased allocation of funds in the scheme will facilitate the MSMEs to get more significant access to interest-free loans.

3. ₹6,000 Crore for RAMP: The FM announced a new program – Raising and Accelerating MSME Performance (RAMP) – with an outlay of ₹6,000 Crore over five years. The RAMP initiative will help MSMEs to become more resilient, competitive, and efficient. The program will help MSMEs revive from COVID-19 shocks.

4. Interlinking  Udyam , e-Shram, NCS, and ASEEM portals: The government intends to widen the scope by interlinking the outlets. These will now perform as portals with live, organic databases, providing G2C, B2C, and B2B services. These services will relate to credit facilitation, skilling, and recruitment to formalize the economy further and enhance entrepreneurial opportunities for all. The interlinking will enable access to information for MSMEs and reduce paperwork. It will also help them stay updated with information related to their business and give access to the workforce.

5. One Station, One Product: The Railways will develop efficient logistics services for the MSME sector. The ‘One Station-One Product’ will help local businesses to streamline supply chains. Sitharaman also announced 100 PM GatiShakti Cargo Terminals for multimodal logistics facilities developed over three years. This initiative will help MSMEs with seamless solutions for the movement of parcels and ease the supply chain.

6. Boost to local manufacturing in defence: Budget 2022 has earmarked 68% of the capital procurement budget allocated for the domestic industry in 2022-23 under the AtmaNirbharta. It also opened up R&D in defence for sectors, start-ups, and academia, with 25% of the defence R&D budget earmarked. This announcement will give MSMEs in the defence and aerospace sector an opportunity to develop products and innovate as per global standards.

7. Sunrise Opportunities: The government will be contributing to R&D in sunrise sectors such as Artificial Intelligence, Geospatial Systems and Drones, Semiconductor and its eco-system, Space Economy, Genomics and Pharmaceuticals, Green Energy, and Clean Mobility Systems. These opportunities will give MSMEs to innovate products and expand to newer markets.

8. Energy transition and climate action: The Budget focused on climate change. In line with its commitment towards net-zero emissions, the government announced an additional allocation of ₹19,500 Crore for Production Linked Incentive for manufacturers of high-efficiency solar modules to meet the goal of 280 GW of installed solar power 2030. This announcement will provide the necessary push to MSMEs in the module manufacturing industry.

9. National Infrastructure pipeline: Sitharaman announced the PM GatiShakti Master Plan. Under this plan, the National Highways network will be expanded by 25,000 km in 2022-23, efficiently moving goods through different modes, reducing logistics cost and time, assisting just-in-time inventory management, etc. For 2022-23, she proposed allocation of ₹1 Lakh Crore to assist the states in catalyzing overall investments in the economy. The slew of infrastructural initiatives will help MSMEs grow, make a broad-based recovery, and create employment.