MSME Budget 2021 Expectations: 5 Things Small Businesses Want

Budget-2021-expectations copy
(Last Updated On: February 5, 2021)

It’s officially time for the Government to prepare the MSME Budget 2021. This year’s budget is crucial to address the impact that COVID has left on the country’s business sector. 

Expected to be announced on February 1st 2021, here are some of the MSME budget 2021 expectations from small businesses in India. 

4 key issues that will impact MSME budget 2021 expectations – 
  1. Fiscal interventions are necessary
  2. Constraints in the Government’s execution capacity
  3. Increased focus on state government budgets since they spend 70%-90% more than the Central Government 
  4. MSMEs still in deep debt and in need of financial assistance to continue business 

MSME Budget 2021 Priority – Help MSMEs get back on its feet

More campaigns like Atma Nirbhar

The Aatmanirbhar scheme is also expected to help boost MSMEs with increased skill development programs. The handloom industry saw sudden growth through different ‘vocalforlocal’ campaigns. Therefore, small businesses want the Government to continue growing focus in rural areas and expanding infrastructure in rural towns, through NREGA spending and support to agriculture.

“Healthcare focus will revolve around expenditure on vaccination along with the expansion of healthcare infrastructure in semi-urban/rural areas,” Harsha Upadhyay – Kotak Mahindra

Small businesses also expect tax exemption, interest reduction, and power subsidy for rural entrepreneurs.

Skill Development and Digital Literacy

Small businesses in the country are hoping the Government will make digital literacy a focal point in the plan to revive the MSME sector.

In a 2021 forward-looking report, we found that entrepreneurs are looking to actively upskill so they can be better prepared for pandemics. You can find the link to the free report in the description below. MSMEs hope there is access to free online learning resources and more initiatives like “Skill India” 

Also, the government should pay immediate attention to Startups and small business workforce with ease of compliance burden.

The Government could also help fill in gaps in the MSME workforce. How? Formalising employment benefits to workers who migrated back to their hometowns, making it possible and beneficial for them to return to work.

Interest rate cuts on loans and extended moratoriums

The Government should extend moratorium schemes for MSMEs – from the Emergency Credit Line Guarantee Scheme launched during COVID, to the Company Fresh Start Scheme. A statement made by Financial express says – 

“ The crucial challenge in the market that needs to be addressed, is not the availability of credit, but the risk appetite for lenders, who are understandably concerned about being saddled with loan defaults.” 

A poll we ran recently showed that over 50% of our voters agreed that the Government should extend moratorium schemes.

To go forward, the Government should encourage lending initiatives in the budget. The Government can bear the cost of loan premiums in FY21. This modification would push lenders to be more generous with MSMEs and also protect them from potential risks.

Read to know more about the different moratorium schemes Government introduced during COVID 

Tax Relaxations

While there have been indications that there may not be any changes in the income tax slabs, there is a call for a better and more transparent GST structure. Businesses are also hoping for exemptions for certain industries that come under government plans or yojanas. 

The pandemic hurt low-income households and small businesses the most, financially.

“ Implementing recommendations of the Direct Tax Code committee would be a timely reform. As the number of households paying income tax is low, cuts to indirect taxes may also help.” – Neelkant Mishra, Co-Head of Equity Strategy, Asia Pacific, Credit Suisse

Carry-forward of losses

Industries like Travel and Automobile (ones that have been the most hit) expect policies that will allow them to carry forward business losses from the current period of 8 years to 12 years.

These industries also expect stimulus and promotions from the government so they can bounce back from a bad business year. If your business is in one of these industries, stay tuned for some allocations.

The automobile and real estate sector also want the government to provide more tax breaks to citizens and increase their disposable income.

What does your business want from the Government? Let us know in the comments. Follow our Twitter handle for the latest Union Budget 2021 updates.


Leave a Reply

Your email address will not be published.

This site uses Akismet to reduce spam. Learn how your comment data is processed.