Small and Medium Businesses Get a shot in the arm in #Budget2018 The step comes as a relief post demonetization & GST that broke the back of MSMEs countrywide

The MSME sector forms the backbone of India's economy and in a Budget that would be the last one before Elections 2019, it was paramount the government addressed the issues of the MSME sector.

In a move that is being seen as a shot in the arm for MSMEs, India's Finance Minister Arun Jaitley announced mass formalisation of the sector. The step comes as a relief post demonetization & GST that broke the back of MSMEs countrywide.

Top 5 measures announced by Jaitley to facilitate MSMEs:-

37.94 billion rupees for MSME as credit support

The biggest challenge of the medium & small enterprise is that of credit. At a time when expansion & distribution is the only way to grow, India's MSMEs have time and again found it difficult to sustain businesses owing to steep costs.

For the year, the government has announced INR 3,794 crore of credit support, capital and interest subsidy on innovation. This could bring the much-needed help to MSMEs in surviving their businesses.

3 trillion rupees lending target for MUDRA plan for FY19

Under the government's popular scheme for MSMEs called the Micro Units Development and Refinance Agency scheme or MUDRA, Jaitley announced the allocation of INR 3 lakh crore for lending to MSMEs for 2018-19. This could be a game changer for creation of jobs and improving employment.

"Increased focus on MUDRA means government recognizes MSME's are going to be critical job creators making MSME's a major engine of growth and employment," Rahul Belwalkar, CEO of SecUR Credentials said in a post-Budget press release.

Government will address bad loan problems of MSMEs

While talking about bad loans, it is increasingly becoming important to address the bank loan arising out of sick MSMEs.

MSME sector accounts for 45 per cent of total NPAs or bad loans in the banking system. According to RBI, the number of sick MSMEs rose to 4,86,291 in 2015-16.

In the Budget 2018-19, the government said it will address bad loan problems of MSMEs. This move could spur green shoots of growth considering MSMEs mostly cater to core industries.

Power2SME's CEO R Narayan in a post-Budget release said the government's aim to revamping the system of sanctioning of loans to SMEs by linking it with GSTN will immensely help MSMEs with better management of working capital and faster discounting of the bills.

Online loan facility for MSMEs will be revamped

The one business group that is most averse to using digital banking services is the MSMEs. To push them to adopt going digital and aid them, the government said online loan facility will be revamped.

The FM's agenda to provide viable environment for fintech companies to grow could help bridge MSME lending gap. This could also be a great business opportunity for fintech companies that cater to merchant banking and have come in the limelight soon after the government's demonetization move.

Manav Jeet, the CEO of Rubique believes the initiative will definitely help fintech companies like his expand & help bridge the credit gap for MSMEs. "We are also hopeful to see government coming up with special tech measures to bring out e-signature facilities within banks and enable access credit digitally removing the need for paperwork which usually delays the disbursal," Jeet said.

Reduction in corporate tax to 25 per cent for the companies with annual turnover of INR 250 crore

In last year's budget, the government had reduced the income tax for small companies with an annual turnover up to INR 50 crore to 25 per cent.

This year, the government has given tax boost to MSMEs in the form of corporate tax relief. Jaitley said that the move will result in 7,000 companies coming under the 25 per cent tax slab. The government is expected to receive INR 7,000 crore less as revenues due to this decision.

According to Jaitley, MSMEs account for 99 per cent of the corporate tax filers.

In additional sop, 40 million power connections under Saubhagya Yojana will also help MSMEs and can result in a spurt in job creation.

The founder of India Angel Network & NASSCOM Saurabh Srivastava lauded the Budget and said the slew of measures announced for the MSME sector were excellent as they will give a flip to one of the biggest job creation engines in India.

After demonetization, can all these measures make India's small and medium businesses happy is a question that the government will receive in 2019 Elections.