The Union Budget 2020-21 tabled in the Parliament last week allocated an all-time high amount of Rs 7,572.20 crore for the Ministry of Micro, Small and Medium Enterprises. There are a number of initiatives for the sector. Several measures have been announced also for start-ups. All these sound encouraging. The MSME sector, often termed as the backbone of the Indian economy, has long been facing some major challenges and the Budget measures are likely to bring some relief.

One among the welcome steps is allocation of Rs 2,500 crore for the flagship Prime Minister Employment Generation Programme. Similarly, the Budget raised the turnover threshold for audit of MSME accounts to Rs 5 crore. In another positive step, the Finance Minister announced that a scheme will be introduced to provide subordinate debt to MSME entrepreneurs. It is also encouraging that the Centre has asked the RBI to extend the debt restructuring window for MSMEs by a year.

Some other measures proposed in the Budget include introduction of an app-based invoice financing loans product to address the problem of delayed payments, launch of a scheme of Rs 1,000 crore to extend hand holding support to mid-sized companies in selected sectors, allocation of Rs 472 crore to develop a sustainable model of Khadi based business enterprises, allocation of Rs 805 crore under Credit Linked Capital Subsidy and Technology Upgradation Scheme, etc.

The Budget promises several positive steps also for startups, including early life funding, including a seed fund to support ideation and development of early stage startups and increase in the turnover limit for startups for getting deduction of 100% of their the profits. There is also an announcement to introduce a five-year tax holiday on employee stock ownership plans (ESOP) for startups. While all these proposals are welcome, the outcome will depend mainly on how effectively they are implemented in the coming days.

I invite your opinions.