The upcoming Union Budget is expected to be critical in restoring India's pandemic-hit MSME segment. It is projected that Budget 2022 would continue to offer stimulus to the market for locally created goods to minimise import reliance and support the 'Make in India' effort. One of the most pertinent demands has been help for MSMEs to build a good credit line and credit history. The MSME segment also expects further tax rebates from the government and more ease of doing business.
Experts feel that helping MSMEs build a good credit line and credit history is the need of the hour. “A good credit line will help them with quick and easy access to secured credit, also assuring the lenders such as banks on the risk they will be underwriting. For this purpose, providing credit bureaus with access to utilities bills data, cash flows and invoices data, income tax data, and GST and expanding the scope of the bureau data to include alternate data will be effective steps to scale up credit access to MSMEs. Mandating Permanent Account Number (PAN) for all commercial reporting to credit bureaus is a necessary step in helping build credit history that the government could consider bringing to effect,” remarked Neeraj Dhawan, managing director of Experian India.
It is a fact that the MSME sector in India is urged to be the second biggest employment provider, next to agriculture. The MSME segment provides 30 per cent of Gross Domestic Product (GDP) and approaches 48 per cent of exports. However, they keep encountering multiple challenges. Many MSME's expect simplicity and ease of performing business.
“MSMEs are looking for measures to improve the credit lending and accessibility of funds that can mobilise growth. MSMEs are also hoping for reforms such as GST rationalisation and a reduction in compliance burden. They are expecting the government to provide tax rebates as they are the ones most impacted by Covid, especially in terms of their cash flow. At the same time, the government should encourage banks to lend more to NBFCs as it could help increase cash flow towards the MSME sector as NBFCs in turn lend to the MSMEs. Also, there should be stronger policies to deal with willful defaulters and steps should be taken to address the rising NPAs in the MSME sector to encourage them further,” said Girish Linganna, director, ADD Engineering Components (India) Limited.
A few players feel that the government’s timely measures have supported the recovery of the MSMEs as they were severely impacted by the Covid-19 pandemic, but this momentum should be continuous to support their recovery. “We should continue the momentum by empowering small businesses with innovative digital financing solutions like supply chain financing, subsidising loan insurance for financial institutions which service MSMEs, and continue to simplify GST slabs to further strengthen the sector. Incentivising asset-light innovations can enable millions of small business owners to adopt and benefit from digital payments,” said Nikhil Sahni, division president, South Asia, Mastercard.
