Budget Day is considered as an opportunity to assess the journey so far and to relook goals and desires for a financially healthy future. A budget is released to safeguard national finances, rebalance the economy, promote fairness and opportunities, and make long-term investments.
Having said that, every year the budget is expected to include welcome measures focusing on the growth strategies of SME India.
Let us find out what Budget 2018 has in store for this sector.
#1 Tax relief
Aimed at easing cash flow challenges, the government budget decided to reduce the income tax to 25% for small businesses with an annual turnover of up to Rs 250 crore.
Considering that SME India has become an engine of growth, the budget has earmarked Rs. 3 trillion for 2018-19 under the Pradhan Mantri Mudra Yojana or Mudra scheme.
In addition, the government allocated Rs. 3,794 crore for credit support, capital and interest subsidy to SMEs.
#3 Additional funding sources
As per the new norms, graded margin caps on SME loans will facilitate greater flow of credit to SME India. This would, in turn, allow loans up to Rs. 5 lakh to have relaxed margin caps of 10-12%, and those up to Rs .25 lakh, at 8-10%.
#4 Economic ties with markets
Public sector banks are now encouraged to connect SMEs, which approach them for SME loans, with digital lending platforms in case they are unable to help with the same. Such linkages will allow SME India to immediately get access to alternative credit availing options, thereby promoting business.
#5 Paperless and presence-less credit
Budget 2018 has proposed that online loan sanctioning facilities for an SME loan will be revamped for prompt decision-making by banks. The compulsory usage of JAM (Jandhan-Aadhaar-Mobile) Infrastructure will remove obstacles in the remote delivery of credit.
Loans will be offered based on mobile based eKYC, express notifications clarifying the validity of electronic signatures and a time-bound rollout of electronic payment directives set by all involved banks.
#6 Unveilingbuyer information
A digital lending movement will now provide SME loans with the much-needed boost they deserve. Enabling API-based access to data such as utility and telecom data, banking transaction data, and direct and indirect tax data, through a system that works on the suitable use and customer consent, will allow SMEs to use the same to gain access to services.
The growth of SME India is recognized as a vital catalyst for India’s continued growth and development. Budget 2018 is a great opportunity to unshackle SMEs and some of the initiatives announced are going to be a growth driver for space.