What do MSMEs and Startups expect from the Union Budget 2021?

Finance Minister Nirmala Sitharaman will present Union Budget on February 1 for FY 2021-22. The Budget 2021-22 hold more significance owing to the Covid-19 pandemic. Thus, it might shed some light on how the government will allocate funds to revive the economy. Further, the government's Atmanirbhar Bharat Abhiyan may get more incentives as it aims to upscale the manufacturing sector.

The upcoming budget will also boost infrastructure spending, providing a way-in to FDIS. Aimed at reviving demand in the economy the Budget 2021 may focus to make investments effective. Many industry leaders also expect the budget to improve the MSME and Startup economy. With liberal tax reforms, dedicated grants and simpler GST norms, many startups and SMEs have been eyeing updates on Budget 2021.

The budget, for Nirmala Sitharaman, is a test of resilience. To take the country out of one the worst crisis since independence, she has the responsibility of putting the country back on a track.

A Background

The Ministry of Finance and the Ministry of Commerce and Industry have come up with many reforms even before the Budget 2021. Through various budgets, schemes and notifications they have boosted the local industry, MSMEs and startups. Some noteworthy schemes include Interest Subvention and Credit Support Program, Solar Charkha Mission, MSME Sampark and Sambandh, Khadi, Village and Coir Industry development.

The schemes and programmes also include Prime Minister’s Employment Generation Programme, PMEGP; Scheme of Fund for Regeneration of Traditional Industries, SFURTI; A Scheme for Promoting Innovation, Rural Industry and Entrepreneurship, ASPIRE; Entrepreneurship and Skill Development Programme; Credit Guarantee Fund Scheme for SMEs; Credit Linked Capital Subsidy; Technology Up-gradation Scheme, Micro and Small Enterprises - Cluster Development Programme, National Scheduled Caste and Scheduled Tribe Hub.

What are we looking at?

With her statement that this budget shall be ‘unlike anything in the past 100 years’, Sitharaman has raised our expectations. Many leaders in the industry have considered it as a good sign. Yet, the minister will have to remedy some pain points. Here's what industry leaders have pointed out.

Mr Vikram Wadhawan, Founder & CEO, Vasitum states:

“With the upcoming union budget, we are looking forward to the government’s decision to elevate the startup ecosystem including the MSMEs, which are one of the biggest growth drivers of the economy. One of the major problematic areas for them is the availability of working capital. Thus, a framework which can mobilize funding for Startups and MSME will be a great initiative. It will drive serious growth for both sectors. Besides, we are anticipating the government to focus on extending credit facilities to MSMEs by re-levelling the banking and NBFCs to the same ground to ensure consumers get benefited.

We are also confident that an easy to maintain compliance agenda will provide the required impetus to various startups to stick to their homeland. We are also expecting the government to introduce new policy incentives that will accelerate the business growth of startups & MSMEs; thereby helping them to expand, hire resources, generate employment opportunities and contribute to the GDP. In short, we feel a stronger and simpler framework for the Startups; credit/grants to the MSMEs should form a part of the Union Budget along with other usual announcements.”

Mr Sheshgiri Kamath, Co-founder & CEO Kapture CRM states:

“Startups have long been wishing for the relaxation of the FEMA laws. The ease of inbound/outbound financial transactions internationally has been a much-debated subject due to the number of startups that are raising capital from foreign funds. Currently, there are talks around simplifying the compliance procedure with reduced paperwork - especially the ones about filings. Startups will definitely benefit immensely if filings, returns, and submissions are made online.

The technology sector has faced tailwinds in recent times, especially during the pandemic. Making the process of raising capital a little easier by simplifying foreign outward and inward transactions will go a long way. Additionally, making changes to capital gains tax and the tax structure on ESOPs. This will help the sector tremendously as well.

‘Make in India’ is another initiative where technology companies have been leading from the front, especially considering the size of the Indian software exports. And as reportedly, the government is planning to make this the best budget in the past century, I believe that the tech space is eagerly awaiting big changes.”