{"id":6968,"date":"2021-02-26T05:50:30","date_gmt":"2021-02-26T05:50:30","guid":{"rendered":"https:\/\/kredx.com\/blog\/?p=6968"},"modified":"2023-10-26T05:51:47","modified_gmt":"2023-10-26T05:51:47","slug":"union-budget-2021-extension-on-msme-schemes","status":"publish","type":"post","link":"https:\/\/www.kredx.com\/blog\/union-budget-2021-extension-on-msme-schemes\/","title":{"rendered":"Union Budget 2021: Extension On MSME Schemes"},"content":{"rendered":"<p><span style=\"font-weight: 400;\">In light of the COVID-19 pandemic, the Finance Ministry had launched the Emergency Credit Line Guarantee Scheme (ECLGS) as a part of the <\/span><i><span style=\"font-weight: 400;\">Atma Nirbhar<\/span><\/i><span style=\"font-weight: 400;\"> package on 12 November 2020 to fillip growth in India\u2019s <a href=\"https:\/\/www.kredx.com\/msme-registration\/\">MSME sector<\/a>.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Under this scheme, the government proposed Rs. 20,000 crore debt provision and equity infusion worth Rs. 50,000 crore. Moreover, Finance Minister, Nirmala Sitharaman made tweaks to the small-scale enterprise\u2019s definition to benefit a larger percentage of businesses.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Indian MSMEs relied on Union <\/span><b>Budget 2021<\/b><span style=\"font-weight: 400;\"> to bring additional measures for this sector\u2019s revival, especially regarding liquidity crunches faced by a majority of this sector\u2019s components.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Let\u2019s look at some key expectations of India\u2019s <\/span><b>MSME<\/b><span style=\"font-weight: 400;\"> sector from this year\u2019s union budget.\u00a0<\/span><\/p>\n<h2><b>Critical Expectations From Union Budget 2021<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">Here are some key expectations of small and medium-scale organisations from this year\u2019s Union Budget:<\/span><\/p>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Extension Of Emergency Credit Line Guarantee Scheme\u00a0<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Before the presentation of this year\u2019s budget, the government had already extended ECLGS twice so that businesses could fulfil their <a href=\"https:\/\/www.kredx.com\/short-term-business-loan\/\">short-term liabilities<\/a> and get by those trying times.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">MSMEs can be a beneficiary of this scheme until 31 March 2021 or on reaching the predetermined threshold, whichever comes first.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Under ECLGS, organisations can avail <a href=\"https:\/\/www.kredx.com\/working-capital-loan\/\">working capital loans<\/a> with a repayment tenure of up to 48 months. They are also eligible to opt for a principal moratorium of 12 months.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Experts believed that the credit guarantee scheme\u2019s extension for at least one year was essential to encourage financial institutions to provide loans despite a sharp rise in NPAs.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">As a result, it became easier for small businesses to raise funds and meet their <a href=\"https:\/\/www.kredx.com\/how-to-calculate-working-capital-requirement-of-a-company\/\">working capital requirements<\/a> efficiently.\u00a0\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Extension Of Interest Subvention Scheme<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Besides the extension of ECLGS, India\u2019s <\/span><b>MSME<\/b><span style=\"font-weight: 400;\"> sector was also expecting an extension of the interest subvention scheme. This government initiative allows interest subsidy of 2% p.a. to MSMEs if they avail a new <a href=\"https:\/\/www.kredx.com\/term-loan-vs-working-capital-loan\/\">term loan or working capital loan<\/a>.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Similar to ECLGS, the government had previously extended the Interest Subvention Scheme till 31 March 2021.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Under this scheme, companies can obtain loans of up to Rs. 1 crore. The Indian Chamber of Commerce suggested that the government increase interest subvention from 2% to anywhere between 3% &#8211; 4% and extend loans up to Rs. 3 crore to benefit more MSMEs.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Although many individuals, including the business owners belonging to the MSME sector, were expecting such reforms, no such announcements were made during the presentation of Union <\/span><b>Budget 2021<\/b><span style=\"font-weight: 400;\">.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Nevertheless, the government made other announcements concerning India\u2019s MSME sector to accelerate its revival.<\/span><\/p>\n<h2><b>Key Announcements About MSMEs From Budget 2021\u00a0\u00a0<\/b><\/h2>\n<p><span style=\"font-weight: 400;\">The Finance Minister made the following announcements about the MSME segment in India:<\/span><\/p>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Total Allocation<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Nirmala Sitharaman, in her third budget speech, announced an allocation of Rs. 15,700 crore for the micro, small, and medium enterprises. This sizable allocation, which is double previous year\u2019s, will be utilised to fund vital schemes like the Emergency Credit Link Guarantee Scheme and Interest Subvention Scheme.\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Reduction Of Customs Duty\u00a0<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">Following the announcements made in <\/span><b>Budget 2021<\/b><span style=\"font-weight: 400;\">, customs duty will be levied at a uniform rate of 7.5% on semis, flat, and long products manufactured using alloy, non-alloy, or stainless steel.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This measure particularly assists the MSMEs, significantly affected due to the rise in iron and steel prices. In addition to this, the Finance Minister proposed customs duty exemption on steel scrap till the end of FY 21-22.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Furthermore, she announced an increase in import duty by 5% on plastic builder wares and steel screws to boost small and medium-scale businesses.\u00a0<\/span><\/p>\n<ul>\n<li aria-level=\"1\">\n<h3><b>Withdrawal Of Import Exemptions<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">The Finance Minister announced the withdrawal of exemptions related to import duty on specific types of leather to safeguard local manufacturers\u2019 interest and promote the sales of domestically produced goods.<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\">\n<h3><b>Establishment Of Mega Textile Parks<\/b><\/h3>\n<\/li>\n<\/ul>\n<p><span style=\"font-weight: 400;\">India\u2019s textile industry is one of the largest worldwide. Aside from providing employment opportunities, it plays a vital role in the overall development of the economy.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">However, since the past few years, this sector has been facing tough competition from Vietnam and Bangladesh, which managed to capture the export market.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">The Finance Minister proposed that besides the Product-linked Incentive (PLI) initiative, a new scheme will be launched to establish seven mega textile parks within three years.\u00a0\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These textile parks would feature modern technology that would ensure a quick turnaround time to prevent losses caused by logistics.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This reform will undoubtedly boost employment and make India\u2019s textile industry much more competitive, globally.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Besides these measures, <\/span><b>Budget 2021<\/b><span style=\"font-weight: 400;\"> included One Person Company amendments, privatisation of ports, and tax holiday extension.\u00a0 Although the MSME sector\u2019s expectations were unmet, these proposals have been designed keeping in mind the best interests of small and medium enterprises.\u00a0<\/span><\/p>\n<h4><b>Bottom Line:<\/b><\/h4>\n<p><span style=\"font-weight: 400;\">The pandemic-induced lockdown impacted the MSME sector severely, stumping growth and employment generation. The introduction of ECLGS and Interest Subvention Scheme in the interim budget of 2020 played a key role in its revival, and market players were expecting an extension in the <\/span><b>Budget 2021<\/b><span style=\"font-weight: 400;\">. Although those expectations remained unfulfilled, a sizable allocation to the MSME sector and measures like custom duty reduction, import exemption withdrawal is likely to foster growth in the domestic market.\u00a0<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"<p>In light of the COVID-19 pandemic, the Finance Ministry had launched the Emergency Credit Line Guarantee Scheme (ECLGS) as a part of the Atma Nirbhar package on 12 November 2020 to fillip growth in India\u2019s MSME sector. Under this scheme, the government proposed Rs. 20,000 crore debt provision and equity infusion worth Rs. 50,000 crore. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":6969,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[516,155,127],"tags":[517,58,437,77,518,227,443],"class_list":["post-6968","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-budget","category-msme","category-working-capital-business","tag-budget-2021","tag-loans","tag-msme-sector","tag-msmes","tag-term-loan","tag-working-capital-loan","tag-working-capital-requirements"],"_links":{"self":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/6968","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/comments?post=6968"}],"version-history":[{"count":1,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/6968\/revisions"}],"predecessor-version":[{"id":13653,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/posts\/6968\/revisions\/13653"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media\/6969"}],"wp:attachment":[{"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/media?parent=6968"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/categories?post=6968"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.kredx.com\/blog\/wp-json\/wp\/v2\/tags?post=6968"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}