Union Budget 2021 – MSMEs,Startups, E-Commerce Budget Highlights

Union budget 2021
Image credit – NDTV
(Last Updated On: February 5, 2021)

The Union Budget 2021 was presented in the parliament by Finance Minister Nirmala Sitharaman on February 01, 2021, at 11 AM IST.

For the first time, our budget is digitised. The Finance Minister ditched the traditional ‘bahi khata’ to replace it with a ‘Made in India’ tab.

In a 1 hour 50 minutes speech, Sitharaman covered different schemes and pointers for COVID affected MSME and startup sector. Here are all the highlights of the Union budget 2021.

In case you missed it, we LIVE tweeted the entire budget session – take a look here. 

The 6 Pillars of the Union budget 2021

  • Health and Well-Being
  • Physical and Financial capital and infrastructure
  • Inclusive Development for Aspirational India
  • Reinvigorating Human Capital
  • Innovation and R&D
  • Minimum Government and Maximum Governance

Promotion of Aatmanirbhar Bharat 

Finance Minister Nirmala Sitharaman stated in the union budget that the Government is introducing ‘Aatmanirbhar Swastha Bharat Yojana’ with an outlay of ₹ 64,180 crores to support and facilitate economic growth. She also proposed strengthening of ‘Sankalp of Aatmanirbhar Bharat’.

In addition to the Aatmanirbhar Bharat schemes, the Government proposed to launch 7 textile parks over 3 years,  to boost production and investment. This scheme aims to generate employment and encourage domestic production and become global champions in exports.

#2 – Financial boost to MSMEs and startups


The Government will allocate over ₹ 15,700 crores for the MSME sector – more than double from last year! Nirmala Sitharaman also announced that Data analytics and AI framework will be launched for MSMEs under the NCLT framework.

There are also proposed changes to help MSMEs with regard to customs – Khadi, leather, gemstones etc; to encourage domestic processing. The Government will also raise customs duties on cotton, silk to benefit farmers.

For Startups

In a big boost for startups, The Government incentivised incorporation of one-person companies. Such companies will be allowed to grow without any restriction on paid-up capital or turnover and can convert into any other type of company at any time, according to details provided by the Government of India.

#3 – Debt recovery schemes for NBFCs to improve credit discipline 

To improve credit discipline and protect the interest of small borrowers, NBFCs can recover loans that are over ₹ 100 crores only. Also, the budget announced several alternate methods of debt resolution for MSMEs.

#4 – Change in definition of small companies 

The Union Budget 2021 will amend the definition of Small companies under section 2(85) of the Companies.

The Government proposes to do this by increasing the thresholds of paid-up capital from ₹ 50 lakhs to ₹ 2 crores, and turnover from ₹ 2 crore to ₹ 20 Crore.

Through this, many companies are covered under the definition of “Small Companies” – which ensures ease of compliances under Companies Act 2013.

Small businesses will see lesser compliance on matters including the conduct of board meeting, exemption from auditor rotation, relaxations on internal financial control reporting, relaxed provisions on annual return and financial statements and lesser penalties, etc. This will reduce the compliance burden on additional smaller companies,” Madhu Sudan Kankani, Partner, Deloitte India.

#5 – Portal to collect information on gig workers

The Government proposes to allow contractual workers and gig workers to social security benefits. Minimum wages will apply to all category of workers. This will strengthen the unorganised labour workforce and help formulate health, housing, skill, food, credit and insurance schemes for all migrant workers.

Other highlights of the budget for MSMEs

  • Agricultural Infrastructure Fund will be available to APMCs for augmenting their infrastructure facilities
  • Asset monetisation of public infrastructure
  • ₹ 1,500 crores allocated for a proposed scheme for financial incentives to boost digital payments in India

What do we think about the union budget 2021?

The union budget 2021 focused mainly on revival strategies for COVID-hit economy. The Government is going to allocate most of the budget to bring back healthcare and public infrastructure.

Pros: The budget does not impose increased taxes on businesses or startups. There is an increased focus on ease of doing business for MSMEs with lesser compliance burdens.

Cons: The Government focuses on a broader, all-round union budget. There is little focus on MSMEs that are financially crippled and need immediate financial relief. Hopefully, the Aatmanirbhar Bharat scheme will benefit MSMEs that need to grow or expand this year.

Overall, the budget is transparent, focuses on overall industry growth, and promoting digital literacy in the country.

Do you think the Union Budget benefits MSMEs? Let us know in comments


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