In India, the micro, small, and medium enterprise (MSME) segment is not only a powerful engine of economic growth but also an employment generator. It contributes nearly 30 per cent to the country’s GDP, and provides livelihoods to approximately 240 million people. The Prime Minister’s vision of a Viksit Bharat by 2047 will need MSMEs to play a vital role. Hence, there is a need to nurture them more.
During the last decade, the government introduced several initiatives aimed at strengthening the MSME ecosystem. The initiatives have focused on providing access to credit, digitalisation, technology upgradation, skill development, and improving overall market access.
Potential for growth
Budget 2025-26 holds immense potential to further advance the growth of MSMEs.
First, many informal micro enterprises rely on frequent, often daily or weekly, access to credit but don’t have the time to visit banks for transactions. To address this, mobile banking or street-corner banks could be introduced, bringing banking services directly to market centres, making it easier for MSMEs to manage their finances.
Second, while MSMEs can access collateral-free loans, the process of getting approval is often unclear and complicated. To make the process more transparent and accessible, banks should be advised by the RBI to regularly report the number and value of collateral-free loans they’ve approved. This would go a long way in supporting the growth of MSMEs. The Budget could convey an overall intent in this direction.
Third, many MSMEs struggle with the complexities of GST. Reducing the GST slabs or a single GST registration that covers all States would reduce compliance challenges. Simplifying the process for inter-State transactions within the same business group would also cut down on paperwork and improve efficiency. Additionally, MSMEs are often heavily fined for delays in GST payments or filings, even when the reasons for the delay are valid. Introducing a tiered penalty system that takes into account the severity and justification of delays would help lessen the financial burden on these small businesses. Though the decision lies with the GST Council, the Budget could give comfort to MSMEs in this direction.
Fourth, lowering corporate taxes from 25 per cent to 15 per cent would free up resources for MSMEs to invest in R&D, innovation, meet ESG standards, and fuel overall growth. Alternatively, offering accelerated depreciation in the first five years could ease the financial strain.
Fifth, setting up integrated infrastructure townships specifically for MSMEs could be a booster.
Sixth, skill development is critical for the growth of the MSME sector. One practical idea is to create dedicated MSME ‘universities’ offering specialised training, internships and final placements. Budgetary allocations for such ‘universities’ would help the cause of MSME’s in a big way.
These steps would ensure MSME workers are able to thrive in a rapidly changing market scenario.
The writer is Secretary General, ASSOCHAM