“Today’s budget announcement by the FM builds on the interim budget from February 2024, and sets ambitious targets for holistic growth under the guiding principle of ‘Sabka Saath, Sabka Vikaas’, despite global economic challenges. The reduction of the TReDS onboarding turnover threshold from ₹500 crore to ₹250 crore aims to boost MSME liquidity, adding 22 CPSEs and 7,000 companies to the platform, facilitating quicker cash conversion from trade receivables. SIDBI’s new branches in MSME clusters will enhance financial service access. The government’s revised fiscal deficit target to 4.9% of GDP reflects a commitment to fiscal discipline and infrastructure investment. Initiatives to empower women in the workforce, reduce customs duties, and incentivize financial services at GIFT-IFSC align with the government’s vision to attract fresh pools of capital and establish India as a manufacturing leader. These measures are anticipated to positively impact our business ecosystem.”

On TReDS

The proposal to lower the turnover threshold for mandatory onboarding on TReDS from ₹500 crore to ₹250 crore is a significant step towards enhancing liquidity MSMEs in India. This change is expected to bring approximately 22 Central Public Sector Enterprises (CPSEs) and around 7,000 additional companies onto the platform, thereby broadening the scope of suppliers to include medium enterprises. TReDS serves as a vital financial lifeline for MSMEs, enabling them to convert their trade receivables into immediate cash, thus mitigating the persistent cash flow challenges they face. By facilitating quicker access to working capital, this initiative not only supports the growth of MSMEs but also strengthens the overall supply chain ecosystem, allowing larger corporate buyers to negotiate better procurement terms and enhance their supplier relationships. Furthermore, the inclusion of medium enterprises in TReDS signifies a more inclusive approach to financial accessibility, allowing a wider range of businesses to benefit from reduced financing costs and improved cash flow management. This move is poised to foster a healthier financial environment, encouraging more companies to adopt TReDS.

The government has seen the targetted benefit TReDS has been able to extend to the MSME sector during the COVID days, and thus, this expansion of adding medium-sized entities to the seller’s category will further boost the platform’s adoption and usage.

Fiscal Deficit Target Reduced to 4.9%

Finance Minister Nirmala Sitharaman announced a revised fiscal deficit target of 4.9% of GDP for the financial year 2024-25, down from the earlier estimate of 5.1% set in the interim budget. This is expected to create more fiscal space to invest in infrastructure and boost domestic investment. The Economic Survey noted that India’s fiscal deficit has already dropped from 6.4% in 2022-23 to 5.6% in 2023-24, aided by resilient economic activity, increased tax compliance, and higher-than-budgeted non-tax revenue. This move demonstrates the government’s commitment to fiscal prudence and consolidation, which is crucial for India’s long-term economic growth and development.

SIDBI’s Expansion to Serve More MSME Clusters

The Small Industries Development Bank of India will be opening 24 new branches this year, expanding its service coverage to 242 MSME clusters. This initiative aims to provide better access to financial services and support for MSMEs which are the backbone of the Indian economy. This expansion will help bridge the gap between MSMEs and financial institutions, ensuring that entrepreneurs receive the necessary support and guidance to thrive.

Empowering Women in the Workforce: A Priority for Startups

The Finance Minister emphasized the importance of increasing women’s participation in the workforce, stating that it will be a priority for the government. This will be facilitated by setting up hostels and creating partnerships to organize women-specific skilling programs. By providing access to skilling programs and creating a supportive ecosystem, the government is enabling more women to pursue their entrepreneurial dreams and contribute to the startup ecosystem.

Reduction in customs duty to reduce input costs, deepen value addition, promote export competitiveness, correct inverted duty structure, boost domestic manufacturing etc

In a move to promote domestic manufacturing and reduce the cost of production, the FM outlined a strategic approach to customs duties aimed at bolstering domestic manufacturing while ensuring competitiveness in the global market. The reduction in customs duties on essential raw materials and electronic components is a significant move to lower input costs, enhance value addition, and correct the inverted duty structure. This will not only make production more cost-effective but will also foster a competitive manufacturing environment, support our green energy initiatives, and simplify our duty structure for better compliance and ease of doing business. This comprehensive approach to adjusting customs duties aims to balance the need for protecting local industries while encouraging competitiveness and aligning with international trade standards.

Incentives to IFSC

To attract global capital to India, the Finance Minister has introduced multiple incentives for financial service entities and products at GIFT-IFSC, including tax and income exemptions. Additionally, the Finance Minister has suggested that venture capital funds (VCFs) based in IFSC should not be required to disclose the source of funds when extending a loan or other amounts to an assessee.

– Mr. Kalyan Basu, MD & CEO Vayana (IFSC) Pvt. Ltd.