Budget 2021: Govt Creates Opportunities for MSMEs; Industry Players React

Vaishnavi Gupta
Vaishnavi Gupta Feb 01 2021 - 5 min read
Budget 2021: Govt Creates Opportunities for MSMEs; Industry Players React
Union Finance Minister Nirmala Sitharaman has made a provision of Rs 15,700 crore for the Ministry of Micro, Small and Medium Enterprises (MSME) sector.

In the Union Budget 2021-22, Union Finance Minister Nirmala Sitharaman has made a provision of Rs 15,700 crore for the Ministry of Micro, Small and Medium Enterprises (MSME) sector.

While presenting the Union Budget in the Parliament, Sitharaman said, “We have taken a number of steps to support the MSME sector in this budget. I have provided Rs 15,700 crore more than double the previous year.”

On the Union Budget 2021, Joji George, Co-Founder, Gonuts, stated, “The Budget 2021 announced by Hon’ble Finance Minister today through positive left us wanting some more from a start-up and MSMEs perspective. That said, the budget did reflect the Indian Government’s commitment to boost the Indian start-up ecosystem. Government has doubled its expenditure allocation towards micro small and medium enterprises to Rs 15,700 crore in FY22. This is an excellent move for companies like us that work with a large number of MSMEs.”

Definition of Small Companies to be Revised

Proposing amendments to the Companies Act 2013, the FM said that the definition of small companies will be changed by raising the capital base to Rs 2 crore from the current limit of Rs 50 lakh.

Gurpreet Singh, Managing Director at Arrow PC Network Pvt Ltd (Titanium Partner - Dell Technologies), commented, “Regressive rules had certainly affected the ease of doing business for many organizations and start-ups. However, the government's announcement of establishing a separate administrative structure especially for ease of doing business will help many organizations benefit in the future. Revision of the definition of small companies by raising the capital base to Rs 2 Cr from the current limit of Rs 50 lakh will give a big boost to companies affecting their monetary status.”

Single Person Companies to be Formed

The companies can now be set up with just a single person to incentivize their incorporation in a move to give a boost to ease of doing business.

Alongside, Finance minister Nirmala Sitharaman said, the residency period for setting up companies will be reduced from 182 days to 120 days, allowing non-resident Indians to also incorporate one-person companies in India.

Akshay Hegde, Co-Founder & MD, ShakeDeal, said, “This year’s budget is pragmatic, positive and business-friendly, which is encouraging for young and fast-growing India. Allowing single person companies will also provide an impetuous to entrepreneurship in the country. We welcome this budget as a progressive step in the right direction with an intention to promote ease of doing business in India and further stimulate the economy while creating jobs.”

Joji George, Co-Founder, Gonuts, also added, “FM has announced, registration of one-person firms with no limit to paid-up capital will boost the start-up ecosystem. That helps small entrepreneurs to take the leap. A boost from the budget for startups is important as it carves the next phase for the start-up ecosystem post the pandemic.”

Promoting Digital Transactions to be a Game-changer in the MSME Segment

The government’s decision to promote the digital mode of payment will be a game-changer in the MSME segment.

Sonakshi Nathani, Co-Founder & CEO, Bikayi, said, “As a WhatsApp integrated e-commerce startup catering to MSMEs, we welcome the decision of doubling MSME allocation by the Govt. Post pandemic, there is an urgent need to build a sustainable ecosystem for these micro, small and medium business owners.”

“In the past 6 months with lockdown restrictions, we have seen increased adoption of digital mediums to run businesses. However, lack of understanding, ease of use and incentives, restricts these businesses to explore further. Hence, the decision to promote digital transactions and attach financial incentives to promote a digital mode of payment will be a game-changer in the MSME segment, specifically for local e-commerce players,” she added.

Extension of Tax Holiday for Start-Ups

While presenting the Union Budget 2021-22, Finance Minister Nirmala Sitharaman announced that in order to help India's startups amid the COVID-19 pandemic, tax holidays for these businesses have been extended by one year till March 31, 2022.

Sasidhar Nandigam, Co-Founder & CSO, CredR, stated, “We welcome the steps taken in the scrappage policy & extension of tax holiday for start-ups. For startups, this comes as a breath of fresh air to the struggling startup ecosystem. With the pandemic disrupting business and earning this year, the amount saved from this tax holiday will help startups to reinvest this money into building business.”

Abhinav Girdhar, Founder, Appy Pie, further said, “Additional one year tax holiday for startups, announced by the Finance Minister in the Union Budget, has been one of the foremost demands and we are pleased that the same has been incorporated. Capital gains exemption with regard to investments in startups is also a welcome step. These moves will provide a further boost to Prime Minister Narendra Modi's call for Startup India.”

Centre's ECLGS Programme for MSMEs Valid till March 31, 2021

The government had announced a Rs 3 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for MSMEs under the Aatmanirbhar Bharat Abhiyan package in order to mitigate the stress caused by the lockdown. The scheme was valid till the month of October. Finance Minister Sitharaman had later extended the ECLGS till November 2020 and has further extended it till March 31, 2021.

As part of the Centre's ECLGS programme, the Centre has already sanctioned 71.3% of the Rs 3 lakh crore emergency credit to the badly affected MSMEs and businesses as of January 8, 2021. The scheme was launched in May 2020 after over a month of total lockdown across the country. After reviewing the situation in November, the scheme was extended till March 31, 2021.

The scheme offered MSMEs and small businesses loans up to 20% of their entire credit outstanding as on February 29. Initially, the Centre put a cap that only companies with Rs 100 crore turnover and Rs 25 crore outstanding will be eligible but the turnover cap was removed in November 2020.

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