Union Budget 2022: Government Should Prioritize Reforms Towards MSME and SME

While each wave of the pandemic has brought forth its own set of challenges, we are hopeful and optimistic that the measures taken by the Government in the upcoming budget will help boost the economic recovery in 2022. Considering the slowdown caused by COVID outbreak in India in the past two years, it becomes crucial for the government to prioritize its reforms towards MSMEs and SMEs which have been one of the most impacted sectors and thus enable them to stay afloat in 2022-23. The MSMEs are responsible for the creation of more than half of the employment opportunities in the country. We believe that facilitating concession in GST rates from 18% to 12%, tax free export income and subsidized interest rates will aid the sector and also empower them to compete in international markets. Regarding RBI's recent clarification on stamping NPA (non-performing assets) on their due date, we think that the government should take a more relaxed approach to enable SMEs to get back to business rather than tightening norms now.

Over the next couple of quarters, we envisage that as the economy starts to recover we will see demand revival. We expect the Government to continue to spend on Infra and as the Government spending on developing infrastructure picks up, we expect this will lead to pick up in CV demand in the upcoming quarters. We also seek maximum allocation of infrastructure funds assigned in the 'Gati Shakti Initiative' launched by the honorable Prime Minister which will enable NBFCs to achieve our 'Make in India' plans. This increase in government expenditure on infrastructure will lead to a surge in credit demand that will further enable NBFCs to flourish and impact the overall economy.

One of the other areas we are expecting in the FY23 Budget is initiatives around expansion in availability of CNG and CNG stations across the country. Although the government has envisioned a noble cause by introducing clean fuel norms that has seen interest from people shifting to Compressed Natural Gas (CNG), however the inability to establish the required number of stations are leaving the vehicle owners in the lurch. Increased investments towards easy accessibility of CNG and CNG stations will positively impact the demand for new vehicles.

The above article is authored by Umesh Revankar, Vice Chairman & MD, Shriram Transport Finance