FM Arun Jaitley announced Rs 3794 crore for MSMEs in Budget 2018

by February 1, 2018 0 comments

After compliance of GST and Demonetization has created a large database of Micro, Small and Medium Enterprise in country. Finance Minister Arun Jaitley while presenting the budget declared the MSMEs as engine of growth and employment. Jaitley announced Rs 3794 crore to MSMEs for credit support, innovation, and capital interest subsidy.

“There has been mass formalization among MSMEs post demonetization and the introduction of the Goods and Services Tax, which is generating a large financial information database. This will be used for financing MSMEs. Online loan sanctioning is to be revamped, and the government will soon announce measures for NPA resolution for MSMEs,” he said.

Further he said that FinTech firms and NBFCs could drive the growth of MSMEs in India, therefore government will undertake steps to increase activity.

Here take a look at what industry experts think on how this announcement will fare with MSME segment:

Rakesh Dubey, President, Microfinance Institutions network.

“By introducing incentives for MSMEs in the form of capital support and corporate tax reduction to 25% for companies with turn over under INR250 crore, government will encourage small entrepreneurs in both urban and rural areas. Clubbed with increased target for MUDRA Yojana for this year, it will encourage small and medium entrepreneurs to expand their businesses. Government’s decision to review refinancing policy of MUDRA for better financing of NBFCs is a good news for NBFC-MFIs. MUDRA has been an important source of financing for microfinance companies and after this announcement they can expect easier access of finance at lower rates in the future through MUDRA. Lastly, government’s focus on improving digital infrastructure in rural areas will help increase the reach of financial inclusion and with the strengthened internet and telecom infrastructure microfinance companies will be able to accelerate cashless adoption in rural areas.”

Shanti Ekambaram, President – Consumer Banking, Kotak Mahindra Bank 

A budget focused on priority segments

The Finance Minister focused the FY18/19 budget on spends in Agriculture, rural upliftment, the poor, health, education, Infrastructure and Digital India.

The fiscal deficit projected, thus, saw a marginal slippage to 3.3% in FY19, with the current year’s deficit estimated at 3.5%. Given the criticality of areas that spends have been allocated to, the money would be well spent and good for India and the Indian economy in the long run.

The National Health Protection Scheme to cover 10 crore families at Rs 5 lakh per family is commendable, as are measures to provide for basics to the poor, increase spends in rural India, and steps to ensure farmers get fair compensation and direct linkages to consumers and markets.

The continued spends on infrastructure – particularly roads, railways, ports, smart cities, are all steps which will give a boost to India’s economic growth and development in the medium to long term.

The steps to ensure increased credit flow to the MSME segment and a reduction in the corporate tax to 25% for companies with a turnover of up to Rs 250 crore will again go a long way in giving a significant boost to this segment, and will create more employment.

The salaried segment did not receive any added benefits other than a higher standard deduction. Benefits to senior citizens, including an increase in the tax exemption limit for interest income on fixed deposit returns, is welcome.

The much discussed and awaited Long Term Capital Gains tax (LTCG) was also announced. In what is a fair move, the 10% LTCG tax is applicable on an incremental basis and all holdings as on Jan 31st 2018 would be grandfathered and valued at prices on that day. However, Securities Transaction Tax (STT) was not reduced.

The introduction of dividend distribution tax on equity mutual funds was a surprise.

Overall, it was a balanced budget with focused allocation given to priority segments that are needed to lay the foundation for India’s long term sustainable growth, with only a marginal slippage on the fiscal deficit.

Rajesh Gupta, Founder, Cash Suvidha

“Certainly this budget will reassure and bring back the lost confidence amongst NBFCs. We appreciate the government’s move for reducing the tax burden on MSMEs. The measures for addressing the Non Performing Assets will ignite a ray of hope across the industry”

“We are glad about the government’s decision to double the Allocation to Digital India scheme to Rs 3073 cr which will accelerate the transformation of India into a digital economy and will help our Fintech platform by extending our services to SMEs & MSMEs in the nooks and corners of the country”

Archit Gupta, Founder and CEO, ClearTax

“Corporate tax reduction to 25% for MSMEs those with turnover under Rs 250cr will give the much needed impetus to this sector.The idea of collating their data to help improve funds availability and give credit support is very encouraging.”

Rohit Lohia, CO-Founder and COO, CoinTribe Technologies 

“Allocation of 373 cr in digital India initiative is a welcome step in the direction of reducing cost of operations for all businesses sytemically while greatly aiding the ecosystem for FinTech enterprises. Further, MSME corporate tax for 2018-19 has been cut to 25% up to revenue of Rs 250 cr. This is likely to encourage larger tax compliance from MSME sector,”  

Satyam Kumar- CEO and CO-Founder, Loantap

“We are happy that Finance Minister has acknowledged voice from Fintech Industry seeking soft touch approach to regulation and making a strong case for fintech participation in supporting SME/ MSME growth. Fintech as a segment has been signaled out in this budget with a very clear objective of credit push to the last mile. We see it as strong government backing for the way fintech industry is shaping in India,” 

Rohit Kulkarni, Country Manager at Payoneer India

“It was heartening to see our Finance Minister recognizing India’s MSME enterprises as a major element for growth and the fastest growing sector post demonetization and GST. The FM in the 2018 budget has reduced the tax for MSME’s by 5%. The deduction of tax has come down to 25% from 30%. This gives MSME’s and other traders an opportunity to expand their services globally and venture their businesses into various global marketplaces.

Another major highlight of the budget is, government encouraging fintech companies on the usage of blockchain technology in India which has the potential to positively impact the payment sector, leading towards a more digital India. Adoption of these newer technologies can help to improve real-time data analytics, and have a positive impact on risk identification and fraud analysis, which can be an important tool in securing   India’s dream of becoming a digital economy ”



Niranj Sangal, Group CEO, OMA Emirates Group 

“We welcome the budget that has been presented. The government’s push for internet penetration by creating access for a rural population of 5 crores is a positive step towards development and a more digital economy. Doing so will give an impetus for acceptance of digital banking infrastructure in Tier2 and Tier3 cities.

Developing a robust network infrastructure is the primary need for digitization which is currently lacking in rural areas. Making internet accessible increasingly  and with the use of Blockchain technology, digital payments will certainly see a upward growth”

Ranjit Punja- CEO & Co-Founder,

“Digitisation and formalisation seems to be the mantra, with the Finance Minister stressing on the growing digital economy and increased allocation to aid digital transformation. The government initiating a new plan on NPAs also shows the importance of rising bad loans with India currently ranking 5th in the world. We hope that this plan would help shift focus on the importance of good credit as a countermeasure. By setting the target of disbursing Rs.3 lakh crore through the MUDRA Yojana for the next fiscal is a commendable step towards inclusive funding.”

Dinesh Agarwal, Founder and CEO,

“The reduction of corporate tax by 25% for companies with a turnover of 250Crore is a positive step. Moreover, the interest shown by the Government to promote online lending is also encouraging for Fintech. Although the Finance Minister touched upon the Angel Tax but it is yet to be seen that what is there to boost the business eco-system. The move to assign uniques IDs for Companies is also a welcome step. Personally, I am very happy to witness the measures taken in education and health sectors”.

Harshvardhan Lunia, CEO & Co-Founder, Lendingkart Group

“The Union Budget for the year 2018 is in line with our expectations and requirements of the economy. The country is still reaping the benefits from forward-looking initiatives proposed over the previous financial year such as demonetization, the GST rollout and the increased focus towards digitization. The programs that have been announced for the rural, agriculture, healthcare and manufacturing sectors will drive essential growth. The continued focus on MSME’s with the allocation of over 3000 crores for credit support along with backing the efforts of FinTech companies’ will help in creating more avenues of financial inclusion for the undeserved segment. Bank recapitalization will also sustain these efforts by adding much-needed credit in the market. The emphasis on complementing existing digitization efforts by connecting villages through high speed optic fibre networks and building Wi-Fi spots will give an impetus to upcoming digital sectors that rely heavily on connectivity like FinTech and Edtech. We are happy with the current focus of the Government, as the country continues on the path of ‘ease of doing business’ it is great to see strong emphasis being out on ‘ease of living’ for the masses.”

Madhusudanan, Founder, M2P Solutions Pvt ltd.

We have had some terrific fine print for Fintech’s in this budget. To quote FM from his speech “Government setting up a group in the Finance Ministry to help devise institutional Development measures to help fintech companies to grow in India” This singularly has the potential to become an important pillar of support to the nascent alternate lending platforms. The combination of Aadhaar e-Sign, GST, Digital Payments and now with the Government’s nudge to easier access to credit for MSME’s will augur well in the medium term. This will also open up opportunities for companies with strong technology and analytical prowess to partner with Banks that are sitting on these relationship. Truly, the financing part of “Fin” comes from Bank and the Technology part of “Tech” from the startups.

Desi Valli, founder and CEO of Netree

“The Union Budget 2018-19, is focused, forward looking and growth oriented. Focus on rural infrastructure, agriculture, education and healthcare, will usher a new era of development in India. Government’s sustained focus on the digital payments and ease of doing business, will boost retail growth in India”.

Pravin Patil, MD & CEO-Starkenn Sports Pvt. Ltd

“This Union budget for FY 2018-19 is a very balanced budget. The extension of 25% corporate tax benefit to organizations with turnover up to 250Cr is a mega boost to all MSMEs who have high  valuation and sales. This will leave companies with higher investible surplus which in turn will create more jobs. The budget also earmarked Rs3 trillion for 2018-19 under the Pradhan Mantri Mudra Yojana or Mudra scheme. In addition to it, allocation of Rs3,794 crore for credit support to MSMEs is also a welcome move. In a nutshell this budget has paved ways for the growth of MSME sector and we at Starkenn Sports are looking forward to FY 18-19.”

Rohit Manglik, CEO, EduGorilla
“The Budget 2018 has shown a positive way forward for MSME sector. Measures such as lower corporate rate for small enterprises, the increased turnover limit under Presumptive taxation scheme under section 44AD of the Income Tax Act for assessees in MSME category are few positives of the budget. The focus on the Make in India Campaign, Swacch Bharat Abhiyaan and Skill India Campaign will also indirectly impact MSME sector in a positive way.”
Anant Goel, CEO and Co-founder, Milkbasket
“We welcome the government’s decision to reduce corporate tax to 25%, from a flat 35% earlier. This is a boon for the startup ecosystem and will help many MSMEs in doing business more efficiently. Budget’s focus on farmers’ welfare is appreciated and the end delivery segment will also benefit from this,”

Sumit Kumar, Vice President, NETAP, TeamLease Services

SME’s are a crucial driver of economic growth and the stimulus given to them in the union budget is highly appreciable. However, for SMEs to leverage the opportunity they would need access to productive talent. The best way to generate productive talent is by adopting apprenticeship. Apart from tax incentives, incentives on apprenticeship would have really helped not only the sector but also the skill India initiative as well.  In fact, there are around 55 million SME units, even if 50% of them appoint 1 apprentice could scale up number of apprentices to 27 million. Supported by MSDE under NAPS, this could be the most conducive method for skilling the youth and influx of talent for the industry.

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