Union Budget 2020: What’s there in store for MSMEs?

Last Updated at: Mar 11, 2020
MSME: What's there for MSMEs post Budget 2020

With the wheels of the economy of India being solely run on the micro, small and medium enterprises, special attention is being provided to improve its policies, to grow and empower the economy of the nation. More than the large industries, the Indian economy is influenced by the MSMEs. As per the statistics, the MSME contributes to about 45% of the employment in the industrial sector for the nation. They also contribute immensely to the exports with the percentage being about 50, and 95% for the industrial sector. 

The more the progress of the small and medium scale industry, the stronger the economy of the nation becomes. 

Union budget 2020: The changes and impact on MSME 

In 2006, the MSME were introduced as a part of the micro, small and medium enterprises’ development act. Under this, the enterprises were divided based on investment and investment in equipment. All these enterprises are engaged in the production, processing, and preservation of the goods sector.

Recently, the union budget for the year 2020, was announced by Nirmala Sitharaman, the finance minister of India, under which special importance was laid on the MSME and announcements and new changes were made for the same. With the continuous stress being laid on the startups and small industries for widening their scope of growth, the government has also put in efforts to reduce the amount and capital investment required to start a new venture.

Changes and points are taken into consideration for the MSME in Union Budget 2020

The government is trying to bring in more opportunities for the MSME, to help them grow, considering which various points are being considered and statistics have been provided.

  1. There will be a new scheme to provide subordinate debts to MSMEs
  2. Amendments will be in place to enable NBFCs to extend invoice financing to MSMEs
  3. FM asks banks to extend restructuring MSME NPAs for one more year beyond March 2020
  • At the Government e-Marketplace (GeM), the finance minister brought into consideration the creation of a unified procurement system, which holds the benefit of providing a turnover of 3 lakh crores with 3.24 lakh vendors already holding a place on the GeM platform.
    • Although GeM was introduced back in 2016, a series of steps were taken for MSMEs since 2018-19 only.
  • In order to make every place (district) of the nation an export hub, for economic growth, the finance minister announced the Nirvik Scheme, which brought into consideration the topic of tax distributions. This was also introduced to make the process of loans simpler, easier and quicker with an increase in the lending amount.
    • This scheme was created by ECGC (Export Credit Guarantee Corporation of India).
  • Under the new 2020 budget, setting up a new digital platform will be done for a seamless and easy application for the Intellectual Property Rights (IPR).
  • The finance minister also mentioned how GST turned out and its successes. Additionally, she also told me about how GST was beneficial and played an important role in MSME. With over one lakh crore of benefit being extended to the customers, she mentioned that there has been a 10% reduction for the overall taxes.
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  • Over the past 2-3 years since the introduction of GST, various issues were faced by the nation as well as the financial, by they overcame it with the right solutions. According to the figures, there has an addition of over 60 lakh new taxpayers, with the number of returns that were filed amounting to a total of 40 crores. An even simplified system for return filing will be implied from April 1, 2020.
  • To grow a healthy competition between the MSMEs, a new logistics policy is expected to launch soon clarifying the roles of the government at the union and state levels along with that of the key regulators.
  • The factor regulation act 2011, will also incur some changes. This will be done to improve financial stability and sustainability enabling the NBFCs (Non-Banking Financial Company) to extend the invoicing of their finances.
  • Under the union budget 2020, a proposal has been made by Sitharaman, to provide subordinated debt to MSME, helping them with the issue of capital requirements. The amount so lent will be guaranteed by the CGTMSE (Credit Guarantee Trust for Medium and Small Entrepreneurs).
  • With the debt allowance that has been permitted by the RBI, over 5 lakh MSME were able to take the benefits of these.
  • Under the budget 2020, to avoid delay in payments and the cash flows, a new app-based invoice that will finance loan products will be launched.
  • Earlier, all the people having a turnover of more than 1 crore, had to get the books audited by the accountant. But, as per the new changes, this amount has been increased from 1 crore to 5 crore thresholds for the audit procedure. 


As such, with the introduction of the changes in the union budget, it mainly focuses on the improvement of the MSMEs, due to the potential they hold for economic growth.

Senior Executive - Content in Vakilsearch