Budget 2024-25: FM Bolsters MSMEs In Manufacturing With Credit Guarantee Scheme

While making a flurry of announcement during her Union Budget 2024-25 speech, finance minister Nirmala Sitharaman on July 23 (Tuesday) announced a credit guarantee scheme for the micro, small and medium enterprises (MSMEs) in the manufacturing sector.

The scheme is anticipated to help in facilitating term loans to MSMEs for the purchase of machinery and equipment without collateral or third-party guarantees.

“For facilitating term loans to MSMEs for purchase of machinery and equipment without collateral or third-party guarantee, a credit guarantee scheme will be introduced. The scheme will operate on pooling of credit risks of such MSMEs. A separately constituted self-financing guarantee fund will provide, to each applicant, guarantee cover up to ` INR 100 Cr, while the loan amount may be larger,” Sitharaman said.

Besides the MSMEs in manufacturing, the overall electronics manufacturing ecosystem has also received several policy boosts from the Centre in this year’s budget.

For instance, the finance minister proposed to remove the Basic Customs Duty (BCD) on oxygen-free copper used to make resistors, with certain conditions, to boost value addition in the domestic electronics industry. Sitharaman also proposed to exempt certain parts used to manufacture connectors.

Speaking on the boost for the MSME sector, Dinesh Gulati, chief operating officer at IndiaMART Intermesh, said, “The new scheme will not only help provide the much-needed financial assistance but also act as a catalyst for the manufacturing sector… Increase of limit for MUDRA and slash of turnover threshold TReDS registration will further provide necessary breathing room to the MSMEs.”

However, the manufacturing industry had more demands from the government, which were left unattended. One of them was a PLI policy, which could help smaller and medium companies across the electronics manufacturing value chain.

Meanwhile, MSMEs received multiple other benefits. Sitharaman announced that the Small Industries Development Bank of India (SIDBI) would open new branches to expand services to all major MSME clusters within three years and provide them with direct credits.

Besides, the limit of loans provided under the Pradhan Mantri MUDRA Yojana (PMMY) was also proposed to be increased to INR 20 Lakh from the existing INR 10 Lakh.