Union Budget 2021-22 and what it means for Indian MSMEs and Exporters

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Finance Minister Nirmala Sitharaman presented the Budget for 2021-2022 earlier this month in Parliament. The country, having faced critical conditions of the pandemic through the year, had a revenue shortage, leading to an increase in the estimated fiscal deficit. The government monitored the pandemic situation and has taken suitable action to prevent the collapse, and in the process helped the economy to revive to some extent. “The Budget for 2021-22 extensively and comprehensively envisages several initiatives and areas of focus, aimed at enhancing India’s overall competitiveness and manufacturing capacities, which would enable growth, diversification and technological enhancement of India’s exports” Commerce Secretary Anup Wadhawan said. 
 
The budget presented several new incentives for MSMEs such as the dispute resolution scheme to settle disputes up to INR 10 lakhs with the new Dispute Resolution Committee, and increased incentives for one person companies. The definition of small companies has also been broadened, intensity of penalties has been reduced through the LLP act decriminalization, , and tax holidays have been extended for start-ups. The Finance Minister has provided a provision of Rs 15,700 crore for the Ministry of Micro, Small and Medium Enterprises sector. There was also a proposal to reduce margin money requirements from 25% to 15% for start-ups as well.
 
Textile industry has especially benefitted from this year’s budget with the announcement to launch seven mega textile parks in three years, to enable textile industry to boost employment opportunities, attract bigger investments and become internationally competitive. This will create world class infrastructure, with plug-and-play facilities to enable and create global champions in exports, Sitharaman said. Global importers are beginning to look to increase their sourcing from India, and this plan should help India get a bigger share of the apparel and textile export trade market.
 
Significant investments are to be made, to develop the modern fishing harbours and fish landing centres in five major fishing harbours at Kochi, Chennai, Vishakhapatnam, Paradip, and Petuaghat, along with a multipurpose Seaweed Park in Tamil Nadu. These measures are further expected to boost exports from the marine sectors as well. Wadhawan said that for the promotion of exports from the agriculture sector, the “Operation Green” scheme of Ministry of Food Processing Industry, which is presently limited to onion, potatoes and tomatoes, has been increased to 22 perishable items. This would promote creation of infrastructure and value addition for horticulture products.
 
The budget allocation for schemes such as Transport and Marketing Assistance (TMA) and  Agriculture Export Policy (AEP) has been increased, to implement AEP in States and boost agriculture exports.  The commerce Secretary said that the Budget has proposed rationalisation of customs duty structure with a thrust on both easy and competitive access to raw material and infant industry protection objectives to encourage exports, particularly of value-added products. This includes reduction in duties on important raw-material such as iron and steel, copper scrap, naphtha, nylon fibre and yarn, etc. To rationalise the duty structure of gold and silver, the rates have been reduced to 7.5% from 12.5% with Agriculture Infrastructure and Development Cess of 2.5 %.
 
India’s goal of getting to a $5 trillion economy is only possible when our country’s MSMEs are enabled to become international players. In this budget, the government has tried to take steps to boost manufacturing of import substitutes under ‘Make in India’ and also several incentives to boost exports as we have discussed. To take advantage of these new measures in the best way, it is important for the exporters to have enough capacity to cater to the increased incoming demand and to have enough capital to scale up their business. This is where a funding partner such as Seawise Capital can help.
 
About us
 
Seawise Capital is a UK based trade finance company, offering factoring facilities to Indian Exporters. We have been operating in India since 2018, and are backed by large institutional US and UK based investors. With our own balance sheet capital, we fund the customers ourselves and have a quick funding process. We have customers all over the world, ranging from small to large scale exporters and we can tailor our solutions based on your requirements. With our fast and fully online process, you can get set up with a facility in less than a week.
 
One of the benefits of working with Seawise Capital over other providers is our flexibility. We understand the delicacy of the supplier/buyer relationship, and structure bespoke and cost-effective solutions that work for all the parties involved. We can cover buyers in over 150 different countries, and work with leading credit insurance providers and banking partners to make sure our clients get the best service.
 
Get in touch with us, to see how Seawise Capital could help you grow your exports.
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