With the Union Budget 2024-25 ahead, Finance Minister Nirmala Sitharaman met representatives from Micro, Small and Medium Enterprises (MSME) in the fifth pre-Budget consultation last week. The nearly two-and-a-half-hour meeting saw participation of a number of small business industry association which pitched for a host of measures to address various issues facing the sector, including 45-day payment cycle, NPA classification, credit availability and so on.

One of the major suggestions put forward during the consultation is overhaul of the NPA classification norms. The present norms are widely seen as unfriendly for the sector and a liberal restructuring option for MSMEs was pitched for. Demand for an employment based PLI scheme for MSMEs and a disaster support mechanism for MSMEs engaged in international trade were also raised. Incentives for the MSME sector were also sought by the participating industry bodies.

The 45-day payment rule was another key issue discussed by the stakeholders. Recently the Supreme Court declined a plea challenging the Section 43B(h) of the Income Tax Act under which businesses are prohibited from extending credit to buyers beyond 45 days. Some MSMEs expressed concern over the provision, fearing that it may lead large buyers opt to purchase from unregistered enterprises. Later, media reports also surfaced that the Centre may relax the rule to some extent.

While different industrial sectors have already expressed their expectations during their pre-Budget consultation with the Finance Minister, according to latest reports, the upcoming Budget is likely to extend the PLI schemes from the current 14 sectors to include a number of additional categories such as toys, footwear and textiles. The scheme has already proved beneficial for sectors like telecom and electronics, and now extending it to other sectors will, no doubt, prove more fruitful.

I invite your opinions.