A number of initiatives to support the MSME sector were revealed by Union Finance Minister Nirmala Sitharaman during the presentation of the Union Budget.
The 5.7 crore MSMEs, which include more than one crore registered enterprises that employ 7.5 crore people and account for 36 per cent of India’s manufacturing, will be the focus of the second development engine, the Minister noted.
These MSMEs, which account for 45 per cent of India’s exports, are essential to the country’s positioning as a global manufacturing hub. The investment limit for MSME classification will be made 2.5 times and turnover limits for MSME classification are to be doubled.
Micro Enterprises will now be classified according to an investment of Rs. 2.5 crore (approx. US $ 300,000), Small enterprises according to an investment of Rs. 25 crore (approx. US $ 3 million) and Medium enterprises according to an investment of Rs. 125 crore (approx. US $ 15 million).
In order to facilitate an additional Rs. 1.5 lakh crore (approx. US $ 18 billion) in credit over the next five years, the Finance Minister announced that the credit guarantee cover for micro companies will be increased from Rs. 5 crore (approx. US $ 600,000) to Rs. 10 crore (approx. US $ 1.2 million).
Additionally, start-ups will get credit guarantee cover of Rs. 20 crore (approx. US $ 2.4 million), up from Rs. 10 crore (approx. US $ 1.2 million) and the guarantee fee down to 1 per cent for loans.
In an effort to increase access to financing and technological advancement, the government has doubled the investment and turnover thresholds for MSME classification.
In order to assist microbusinesses with their financial requirements, bespoke credit cards with a Rs. 5 lakh (approx. US $ 6,000) limit will also be provided.
Additionally, MSMEs will receive assistance in addressing non-tariff export barriers through an export promotion mission that is co-led by MSMEs and the Commerce Ministry.
