Union Budget 2021: What SMEs and Start-ups can expect?

Last Updated on April 1, 2021

Union budget 2021 nirmala sitharaman

The year 2020 was a global challenge to all due to COVID-19 pandemic. As per the National Statistical Office, India’s GDP contracted by a record 7.7% during FY-2020-21. 

With the Union budget scheduled to be announced on the 1st of February, various sectors and start-ups, and SME’s are eagerly waiting for the annual budget. The budget 2021 is going to be in paperless form for the first time in India. The start-up founders and SME have many expectations and are waiting to hear large measures at the Union budget this year. 

Let us have a look at what the SME’s and other start-ups are expecting from this budget:-

  • MSMEs expect the government to provide support to help get over the recessionary phase. This is the first budget after the COVID, so people expect it to be good enough to revive the Indian economy. The government should come up with ways to infuse more liquidity into the system. It should also ease the process of fund disbursement to MSMEs. Ease of taxation is something that every sector is expecting. A less complicated GST will support the manufacturing industry.
  • To encourage MSMEs to provide professional services for business growth, the government should reduce the GST rate on most professional services from 18% to 5%. These services include legal professionals, chartered accountants, HR, marketing officials, maintenance, repair, and installation service providers. 
  • Among other suggestions made, the government should also increase the collateral-free loan limit to Rs 5 crore for micro-units and Rs 15 crore for small businesses, and finally to Rs 35 crore for medium enterprises. 
  • MSMEs also expect the government to boost the new micro-enterprise in rural India to help create several employment opportunities apart from agriculture. The government should infuse more infrastructure-based activities in rural and urban economics to generate more jobs. 
  • Credit-lending is another common expectation by MSMEs. Many entrepreneurs are hoping for relief measures in the form of credit lending. The need for digital presence is also increasing day by day. So, there is a need to educate the MSMEs and give them easier access to new strategies and be a part of this new world. 
  • One of the primary focal points for startups is the increase in the availability of capital. The investment scenario will be similar to pre-pandemic times, even if it does not improve. However, a mobilized framework for funding would significantly increase the inflow and outflow for foreign investors. 
  • The start-ups and MSMEs are expecting better measures to help improve credit facilities. The availability of funds is also a significant concern as it can help mobilize the growth and help the sector grow after the COVID-19. The production-linked incentive scheme also needs to be more robust to help strengthen the Aatmanirbhar Bharat Initiative. A more significant number of incubation programs would help in the growth of these. 
  • Start-ups expect various FDI policies and their applicability to be relaxed considerably. This would help them compete against global players. Even in the travel sector, the implementation of strict rules affects the industry negatively.
  • Investors and startups are expecting the Government to remove the IMB certification requirement.
  • Start-ups also expect GST exemption under the reverse charge mechanism and up to a certain revenue threshold.

It is clear that after being badly affected because of the pandemic, the start-ups and SMEs are looking for policy changes in the union budget of 2021. In turn, this would help boost capital availability and improve the inflow of money in the sector. 

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About the Author: Om Prakash