The recently announced Union Budget 2024-2025 presents a compelling picture for the future of India’s Micro, Small and Medium Enterprises (MSMEs). The government’s clear focus on empowering this critical sector is a welcome development, with the potential to unlock significant economic growth and job creation.

Understanding Key Budgetary Initiatives

Let’s delve a little deeper into some of the key budgetary initiatives aimed at empowering MSMEs:

• MUDRA Loan Limit Increase: The MUDRA (Micro Units Development & Refinance Agency Ltd.) was established by the government to address the financial needs of micro-enterprises specifically. The increased loan threshold from Rs 10 lakh to Rs 20 lakh empowers these MSMEs to make larger investments, propelling significant expansion and growth.
  
• Focus on Technology Adoption: Budget 2024-2025 prioritizes incentivizing MSMEs to integrate advanced technologies into their daily operations. This strategic move aims to enhance efficiency, improve service delivery, and foster a culture of innovation. The government is well-positioned to create a more competitive and future-proof MSME sector by encouraging the adoption of AI, IoT, and digital platforms.
  
• SIDBI Expansion and Inclusive Growth: The budget also proposes expanding SIDBI (Small Industries Development Bank of India) by establishing 24 new branches. This initiative demonstrates a clear commitment to reaching and supporting historically underserved MSMEs and fostering inclusive economic growth across the nation.

Understanding the Impact: Expert Insights

Industry experts Amit Garg, Partner at Protium, and Amit Gupta, CFO and Partner at Protium, highlight the transformative power of these initiatives, exploring how these would not only address the challenges MSMEs face but also make the enterprises as well as the sector more resilient.

 Increased Mudra Loan Limits and Credit Guarantee Schemes to Strengthen the Backbone

Previously capped at Rs 10 lakh, the MUDRA (short for Micro Units Development & Refinance Agency Ltd) loan limit has been doubled to Rs 20 lakh for entrepreneurs who have successfully repaid earlier loans. This is a significant move as the transformative power of access to capital cannot be underestimated. Amit Garg, Partner, Protium, avers, “A centerpiece of the Union Budget 2024-25’s strategy is the extension of the Mudra loan scheme. The Pradhan Mantri MUDRA Yojana (PMMY) has already been a resounding success, disbursing a staggering Rs 27.75 lakh crore in loans and benefitting over 47 crore small and new entrepreneurs. Expanding the program’s reach will further fuel MSME aspirations, allowing them to invest in growth, hire new talent, and scale their operations.”

Furthermore, introducing a comprehensive credit guarantee scheme for manufacturing MSMEs is a strategic move. “This initiative,” Amit Garg emphasizes, “Will provide targeted term loans for machinery, facilitating process modernization, boosting productivity, and enhancing global competitiveness. The proposed Rs 100 crore credit guarantee specifically for manufacturing MSMEs has generated considerable excitement within the small business community.” The targeted support is crucial for India’s 63 million MSMEs, the backbone of our manufacturing sector, contributing approximately 17% to the nation’s GDP. “By strengthening this vital sector, we create a ripple effect that stimulates economic activity across the board, promising a brighter future for the MSME sector,” Garg adds.

Investing in the Future: Technology Adoption and Innovation

Beyond financial resources, Budget 2024-2025 recognizes the importance of technology in empowering MSMEs. As Amit Gupta, Partner & CFO, Protium, states, “The allocation of substantial resources for technology support is a forward-thinking move. This initiative aims to facilitate the adoption of advanced technologies such as Artificial Intelligence (AI), Internet of Things (IoT), and digital platforms. These technologies, when integrated, can significantly improve operational efficiency for the MSMEs, inspiring a new wave of innovation and growth. Imagine streamlined workflows, reduced costs, and enhanced data-driven decision-making—these are just some of the potential benefits. By embracing technology, MSMEs will be better equipped to scale up, compete effectively, and contribute meaningfully to the national economy.”

The combined effect of these measures—increased access to capital, credit guarantees, and technology adoption support—is a potent recipe for fortifying the MSME sector. A financially stable and resilient MSME ecosystem translates directly into increased job creation and economic growth. Amit Garg says, “This aligns perfectly with Protium’s vision as a non-banking financial company (NBFC), and we see a tremendous opportunity to play our part. By providing customized financial solutions tailored to the specific needs of MSMEs, we can contribute to the government’s goals and empower entrepreneurs to achieve their dreams.”

Aligning with National Ambitions: A Stepping Stone to a 45% GDP Contribution

The Reserve Bank of India (RBI) projects that the MSME sector could contribute up to 45% of India’s GDP by 2025. Budget 2024-2025 powerfully endorses this ambitious vision. “The focus on liquidity, solvency, and technological integration paves the way for a more robust and competitive MSME landscape. This translates to a more resilient national economy, fostering sustainable growth and development,” Amit Gupta adds.

As Garg elucidates, “As an NBFC, Protium sees these developments as an exciting opportunity to collaborate and be a catalyst for the unprecedented growth and success of India’s vibrant MSME sector. It’s about contributing to the national goal of building a “New India,” and a robust MSME sector can fuel this economic growth.”

While MSMEs drive innovation, job creation, and a brighter economic future for India, the Union Budget 2024-2025 is paving the way to make the sector more resilient, prosperous, and technologically advanced. NBFCs must also seize the opportunity to contribute to the MSME strength and, thus, the economy.