This Weekly E- Newsletter (The Friday Journal) aims to increase awareness regarding various news / updated and activities that have been taken place for the MSMEs and to provide information about the various schemes and programmes along with latest updations from time to time. It is a digital tool used to share relevant and valuable information with the Readers.
MSMEs are an important sector for the Indian economy and have contributed immensely to the country’s socio-economic development. MSMEs produce and manufacture a variety of products for both domestic as well as international markets. MSMEs have played an essential role in providing employment opportunities. MSMEs have driven India to new heights through requirements of low investment, flexible operations, and the capacity to develop appropriate native technology.
This newsletter has been released with an aim to educate MSMEs on various facets of business development.
- MSME in India
Micro, Small, and Medium Enterprises (MSMEs) play a crucial role in the economic growth of India. MSMEs (Micro, Small, and Medium Enterprises) play a significant role in the Indian economy, contributing significantly to GDP, employment generation, and exports. MSMEs are the largest providers of employment in India, creating job opportunities at a low capital cost.
MSMEs encourage entrepreneurship and innovation, fostering a culture of self-reliance and economic development. They provide a platform for individuals to turn their ideas into viable businesses.
Our newsletter is an attemppt to provide brief about the developments in MSME Sector on weekly basis.
Our Special Corner
- “’If MSMEs don’t want…’: FM Nirmala Sitharaman hints at reconsidering 45-day payment rule in July Budget”
Finance Minister Nirmala Sitharaman has said the Centre is willing to reconsider the 45-day payment rule for micro, small, and medium enterprises if the industry wants it. Sitharaman said if MSMEs require an extended payment period, they can submit representations for “consideration in the upcoming July Budget”.
In an interaction with MSMEs in Ludhiana, the minister assured that tax relief for these enterprises remains accessible. However, she emphasized that this relief is contingent upon timely payments, ensuring that businesses benefit while adhering to current payment schedules.
According to Section 43B(h) of the Income Tax Act, introduced through Finance Act 2023, if a larger company does not pay an MSME on time — within 45 days in case of written agreements — it cannot deduct that expense from its taxable income, leading to potentially higher taxes.
MSMEs fear that due to this provision, large buyers could cold-shoulder MSME suppliers and start buying either from those MSMEs that are not registered with Udyam or from non-MSMEs.
Acknowledging that Section 43B(h) has caused some apprehensions among both MSMEs and larger businesses, FISME said, “such fears are unfounded”.
- (Source: Click Here)
- MSME Schemes:
The government has introduced many schemes to encourage the micro and small industries. Through many schemes, the Central government is boosting the credit availability for the MSMEs. MSME (Micro, Small and Medium Enterprises) schemes are initiatives launched by the Government of India to support and promote the growth and development of small businesses in the country.
- “The Ministry of MSME has taken a number of steps to support women-owned MSMEs :
- Special drives for registration of women owned MSMEs under Udyam Registration Portal.
- To benefit women entrepreneurs, the Public Procurement Policy was amended in 2018 mandating Central Ministries/Departments/ Undertakings to procure at least 3% of their annual procurement from women-owned micro and small enterprises.
- To support women entrepreneurs under Credit Guarantee Scheme for Micro & Small Enterprises, two provisions have been introduced for women entrepreneurs w.e.f. 01.12.2022. These are:
- 10% concession in annual Guarantee fees; and
- 10 % additional Guarantee coverage of up to 85%, as against the 75% for other entrepreneurs.
- To encourage entrepreneurship among women, Ministry of MSME implements ‘Skill Upgradation & Mahila Coir Yojana’ under Coir Vikas Yojana, which is an exclusive training program aimed at skill development of women artisans engaged in the Coir sector.
- The Ministry also implements Prime Minister’s Employment Generation Programme (PMEGP), which is a major credit-linked subsidy programme aimed at generating self-employment opportunities through establishment of micro enterprises in the non-farm sector. For beneficiaries belonging to special categories such as Scheduled Caste/Scheduled Tribe/OBC /minorities/women/ ex-serviceman/ physically handicapped/ NER/ Hill and Border areas, etc., higher subsidy is given.
- To encourage participation of women entrepreneurs in trade fairs under Procurement & Marketing Support Scheme, higher subsidy is provided for women owned MSMEs.
- “SAMARTH” initiative was launched to support women-owned MSMEs with the objective of providing Skill Development and Market Development Assistance to women and to train more than 7,500 women candidates from rural and sub-urban areas. Aspiring and existing women entrepreneurs have been provisioned with 20% Seats in free Skill Development Programs organized under Skill Development Schemes of the Ministry; 20% of MSME Business Delegations for domestic & international exhibitions under the schemes for Marketing Assistance implemented by Ministry; and 20% discount on annual processing fee on National Small Industries Corporation’s Scheme.
- MSME Sustainable Zero Defect Zero Effect (ZED) Certification Scheme is an initiative to provide a roadmap to global competitiveness for Indian MSMEs having economic and social impacts in terms of capacity building of MSMEs. The aim of the scheme is that the goods being manufactured by the MSME sector have zero recall from market at the same time has zero effect on environment. Under this scheme to support and empower women entrepreneurs, there is a provision of 100% subsidy on cost of ZED Certification for Women owned MSMEs.
- Under incubation component of MSME Innovative Scheme, a special MSME Idea Hackathon 3.0 was organised for Women entrepreneurs wherein 18,888 ideas have been received.
Source: Click Here
For eligibility, application process and other process, please get in touch with us.
- Trade Receivables Discounting System (TReDS) – Part 36
Trade Receivables electronic Discounting System (TReDS) is an online electronic platform and an institutional mechanism for factoring of trade receivables of MSME sellers. It enables discounting of invoices through an auction mechanism to ensure prompt realization of trade receivables.
The Trade Receivables electronic Discounting System (TReDS) was released by the Reserve Bank of India in 2018 to help small businesses resolve cash flow issues.
“BENEFITS OF USING TREDS”
TReDS offers a number of advantages for MSMEs among which the most important are:
- improved cash flow,
- reduced waiting times for the payment realization,
- decreased dependency on traditional methods of financing, and
- easy access to the competitive terms of financing.
Basically, it provides a stable income stream by allowing enterprises to receive payments for their receivables immediately. This improves liquidity issues often faced by MSMEs because of dropped down payments from their buyers. Furthermore, TReDS features the most transparent and efficient mechanism for invoice discounting which ensures a reasonable and competitive amount of money for MSMEs.
Not only has the TReDS platform eliminated reliance on banks or other monetary institutions to access credit, but it also serves to promote financial inclusion, especially for smaller businesses that might continue to be excluded from conventional credit schemes. Basically, TREEs give MSMEs the opportunity to prosper in today’s fast-paced business world.
- MSME Corporate News:
- FM Sitharaman: Will go back to original rule if MSMEs okay with delay in payments beyond 45 days
Finance Minister Nirmala Sitharaman said on Tuesday that the government will repeal the changes made to Section 43B of the Income Tax Act if MSMEs want to continue operating with uncertainty on payment timelines from their buyers.
Interacting with MSMEs and local industries in Ludhiana, Sitharaman said the government added the 45-day payment rule effective since 2008 to the Income Tax Act on the request of MSMEs facing delays in payment from their buyers beyond 45 days.
“If MSMEs want relaxation in payment made by their buyers without the 45-day limit, whether over 45 days, 150 days or a year and further, then it is easy to make the changes. We will change it and go back to the original rule,” Sitharaman said.
The clause (h), which came into effect on April 1, 2024, with 2024-25 as the assessment year (that is financial year 2023-24), allows expenses to buyers on invoices from micro and small enterprises only if paid within 45 days (where agreement exists) and within 15 days if there is no agreement in the year of actual payment instead of the year when it was incurred as an expense. (To read more – Click Here)
- SBI-led six-member committee on co-lending to focus on boosting MSME credit
The Department of Financial Services (DFS) is in the process of setting up a committee on co-lending with State Bank of India at the helm. The objective of the committee is to address issues related to co-lending, boosting MSME credit and curbing some of the accelerated growth in consumer loans.
SBI, the country’s largest lender and one of the biggest players in the co-lending space, will decide who will be a part of the committee, announced around a fortnight ago. SBI has started reaching out to potential members, the source said. MSME-focused NBFC UGro Capital is expected to be one of the members of the committee. The company did not comment on the same.
Boosting MSME credit
In addition to boosting MSME credit, increased co-lending is expected to help reduce NBFCs’ liquidity requirements as they pursue a more asset-light model, given that the RBI has traditionally been uncomfortable with NBFCs having large balance sheets.
It is also expected to curb some of the accelerated growth seen in co-lending for consumer loans. The regulator recently reached out to certain banks warning them to be cautious about their co-lending partnerships and the stress in portfolio quality arising due to such lending channels.
A recent report by CRISIL said that co-lending AUM is expected to have touched close to ₹1-lakh crore in over five years since the model came into being. Of the co-lending book, personal loans account for 34 per cent of the AUM, followed by housing loans at 20 per cent. Unsecured MSME and gold loans comprised 13 per cent each, whereas secured MSME (including loan against property) and vehicle loans constituted the remaining 20 per cent. The agency expects co-lending to grow at 35-40 per cent in the medium term.
- (Read more – Click Here)
- Need to invest in women-owned MSMEs to further women-led development in India
National surveys peg women’s entrepreneurship at just 20 percent of the MSME sector, while McKinsey Global Institute estimates that India could boost its GDP by $0.7 trillion by bringing 68 million more women into the workforce by 2025. Here’s why we need to bridge this gap
During its G20 Presidency, India made women-led development a key priority. This focus received strong support from member nations and was hailed by global leaders and development partners as a step towards accelerating women’s economic empowerment.
India is putting itself at the forefront of this movement. The force behind this important agenda comes from the stated commitment of the Indian government to undertake policy reforms that will support women at all stages of life. The reforms will include:
- Programs focused on improving the health and nutrition of adolescent girls and young women.
- Initiatives to improve girl’s enrollment in primary, secondary and higher education.
- Policies that enable growth in job opportunities for women.
- Improvements to workplace safety.
- Encouraging women’s entrepreneurship in the country through investment in capacity building for working-age women.
RECOGNISING THE IMPORTANCE OF WOMEN’S WORKFORCE PARTICIPATION
Greater participation of women in the formal economy is key to sustaining higher economic growth. According to a case study by the Women Entrepreneurs Finance Initiative, providing equitable economic opportunity can potentially add $6 trillion to global GDP. McKinsey Global Institute estimates that India could boost its GDP by $0.7 trillion by bringing 68 million more women into the workforce by 2025.
The World Bank reports that India could increase annual GDP growth by 1.5 percentage points by getting 50 percent of women into the workforce.
DRIVING MONEY INTO THE HANDS OF WOMEN BUSINESS OWNERS
Women-owned businesses are pivotal in nurturing gender parity in the entrepreneurial landscape. An important study by Kinara Capital’s MSME Insights Report 2024 analysed 44,821 micro, small and medium enterprises (MSMEs) across six industrial states of India. It revealed that women-owned MSMEs hired 11 percent more women employees compared to those owned by men.
The study highlighted that women-owned MSMEs were better at cost optimisation, income growth, and repayment of business loans than those owned by men. This data-driven evidence strongly supports the fact that the social benefits of economic growth can only be maximised if women business owners are given equal opportunities to compete and succeed.
- (To read more – Click Here)
