Indian Budget measures designed to boost MSME sector
India’s cash-starved micro, small and medium-sized enterprises (MSMEs) were given a boost in the recent Indian Budget, with the government improving access to finance and cutting red tape, a government minister has said.
B.B. Swain, Secretary to the Union Ministry for Micro, Small and Medium Enterprises, said the improved availability, accessibility and affordability of credit/funds will tackle the main challenge for the sector, with the government’s initiatives acknowledging MSMEs’ contribution to the country’s economic growth.
Speaking at a three-day business conference, Swain said: “The government has acknowledged the contribution of MSMEs to the economic growth of the country. Union Budget 2023-24 has given a boost to the fund-starved sector with higher credit flow and by simplifying compliances.”
He said the launch of a revamped credit guarantee scheme worth Rs 9,000 crore (£898,000) for MSMEs would free collateral-free credit worth Rs 2 lakh crore (£25bn) in loans to small businesses.
“Moreover, by reducing the guarantee fee to 1.3%, the government has eased collateral credit/funding for the MSMEs. This will go a long way to support the sector. These measures can be game-changers,” he said.
Indian budget will continue with efforts to curb inflation
With retail prices rising, the Indian government and the Reserve Bank of India (RBI) have pledged to take steps to control inflation, Finance Minister Nirmala Sitharaman has said.
Among other initiatives, the government has increased the import of edible oil to dampen inflation and will continue to provide free grain to the poorest sector of society as it has done since the start of the pandemic. The government would “continuously monitor prices”, Sitharaman said.
Earlier in February, India’s annual retail inflation rate rose above the RBI upper tolerance limit for the first time in three months to 6.52% in January, as prices rose for food products such as cereals and wheat. The central bank’s stated target is to keep inflation between 2%-6%.
A leading economists has said the soaring prices of cereals including wheat and rice were a concern for the Indian economy, although he said the inflation figures might not be wholly accurate.
The country’s Chief Economic Adviser, V Anantha Nageswaran, explained that some Asian and western countries calculate consumer price index-based inflation using a weighted average of a segment of the population that pays market price for such items and those who don’t.
“Since India does not do that, the stated increase in grains price is not exactly what all consumers bear, therefore stated inflation rate overstates the underlying inflation rate,” he said.
In its last monetary policy meeting in early February, the RBI raised key interest rates by 25 basis points.
According to the India Ratings and Research, the Indian economy is expected to grow 5.9% in FY24 as demand that has built up due the pandemic is unleashed. This compares with 6.4% projection by the central bank for the next fiscal year, and 7% estimated growth by the National Statistical Office for the current financial year.
The report said: “Consumer expenditure is estimated to grow 6.7% in FY24 from 7.7% in FY23, but it may not lead to a broad-based consumption demand recovery because the current consumption demand is highly skewed in favour of the goods and services consumed largely by the households belonging to the upper income bracket.
“The goods and services of mass consumption have yet not shown a sustained pick-up,” it added.
India continues to remain a relative “bright spot” in the world economy, and on its own will contribute 15% of the global growth in 2023, International Monetary Fund (IMF) managing director Kristalina Georgieva said.
“India’s performance has been quite impressive. For this year, we expect India to retain a high growth rate, 6.8% for the year that ends in March. For FY 2023/24 (April 2023 to March 2024) we project 6.1%, a bit of slow down like the rest of the world economy, but way above the global average. And in that way, India is providing about 15% of global growth in 2023,” Georgieva said.
That is the fastest growth rate among major economies, she added.
