India’s small firms pushing for measures to help access to finance
India’s micro, small and medium-sized businesses (MSMEs) expect the government to address issues around access to credit and digital transformation in the imminent Interim Budget statement.
In 2023’s Budget statement, the MSME ministry was allocated a 41.6% increase in funding from the previous fiscal year. The MSME sector contributed almost 30% of the country’s GDP in 2021-22. Finance Minister Nirmala Sitharaman is expected to present the Interim Budget on 1 February.
Consulting firm Deloitte is recommending the government promotes credit guarantee and insurance schemes to minimise risks for MSMEs borrowing funds, especially in sectors like automotive, electronics, industrial and electrical machinery and chemicals.
It said the government needs to enhance the digital commerce ecosystem, and address challenges for stakeholders to aid growth. “With over half of the $5-trillion economic dream of the nation resting on the shoulders of MSMEs, there have been several policy initiatives undertaken over the last couple of years to boost their productivity,” the consultants said.
Vanesh Naidoo, Founder and Director, SafeCams, commented: “We look forward to initiatives that enhance thе ease of doing business, rеducing hurdlеs, and fostering a more responsive regulatory framework. The Budget should also introduce ways to make it easier for new businesses to get credit, including rеducеd intеrеst ratеs, еxtеndеd moratoriums and innovativе financial instrumеnts.
“Allocations for skill dеvеlopmеnt programmes and training initiativеs should be another focus in thе Budget, to еnhancе thе еmployability of individuals and bridgе thе еxisting skill gap. This would not only benefit start-ups but also contribute to overall economic dеvеlopmеnt,” Naidoo said.
In the fiscal year 2023-24, to September 2023, the Ministry of Micro, Small and Medium Enterprises reported that the share of exports from products specified for MSMEs was worth 45.56% of the country’s total exports, showing an increase from 43.59% in 2022-23.
The Federation of Indian Micro and Small & Medium Enterprises (FISME) also wants the Finance Minister to address “the uneven power dynamic between banks and MSMEs, where the balance often favours lenders”.
In a statement FISME Secretary General Anil Bhardwaj said: “Lack of competition in the banking sector (75% of banks being public sector) and weak regulatory institutions… all coalesce into an unhappy experience for an ordinary MSME owner with the banks, whether private or public.”
Puneet Kaura, MD and CEO of Samtel Avionics, said: “We want Finance Minister Nirmala Sitharaman to come up with a special package for MSMEs in the Interim Budget, so that the small and medium units do not suffer for want of credit.
“This sector has the talent and risk-taking appetite and can play a big role in strengthening India’s capabilities even in critical sectors such as semiconductors, space technology, defence, and medical equipment.”
The government oversees various schemes like MSME Champions Scheme, CGTMSE, PMEGP, MSE-CDP, and RAMP, all designed to foster the growth and development of the sector in the country.
“We are optimistic about the Union Budget 2024, which is expected to boost the expansion of fintechs and also support women-led enterprises,” said Mahesh Shukla, CEO and Founder of PayMe.
Affordable finance for fintech firms
Meanwhile, the Digital Lending Association of India (DLAI) is calling for a dedicated India Fintech Credit Fund (IFCF) to provide affordable finance to fintech companies. It said the Budget “is significant not only for its financial provisions but also for its potential to cultivate a knowledgeable and adaptable workforce. A forward-thinking strategy would involve investing in the education and training of our young workforce, coupled with vigorous support for upskilling projects.”
The Budget could also provide assistance for the setting up of the ‘Open Network for Digital Commerce’ (ONDC) initiative. It aims to enable MSMEs to easily access various e-commerce platforms without facing any barriers to entry. Additionally, it aims to facilitate the standardisation of data and processes, benefiting MSMEs in their digital commerce initiatives.
