Budget 2025 Expectations: MSMEs And Manufacturing Players Hope For Easier Taxes, Job Generation, And More

Recently, the industrial sector has experienced a rollercoaster of challenges. The pandemic disrupted supply networks, and increased input costs and geopolitical tensions added to the complexity.

Offering lower tax rates to MSMEs engaged in manufacturing will boost their cash flow and reinvestment capability.

Source : PTI

By Prerna Singla

India's manufacturing sector has traditionally been seen as a key driver of economic growth, contributing significantly to GDP, job creation, and exports. With the Union Budget 2025 approaching, stakeholders across the spectrum are expecting for measures that would not only maintain momentum but also address the sector's evolving requirements. Micro, Small, and Medium Enterprises (MSMEs) are an important emphasis area because they form the backbone of India's manufacturing scene.

In recent years, the industrial sector has experienced a rollercoaster of challenges. The pandemic disrupted supply networks, and increased input costs and geopolitical tensions added to the complexity. Despite these challenges, efforts such as 'Make in India' and the Production Linked Incentive (PLI) schemes have provided much-needed impetus. However, the MSME sector, which accounts for approximately 45 per cent of India's manufacturing production and 40 per cent of exports, continues to face challenges such as restricted access to capital, outdated technology, and infrastructure impediments. As the government develops its fiscal blueprint for 2025, a robust strategy to strengthen the manufacturing sector, with a focus on MSMEs, is critical to achieving the goal of making India a $5 trillion economy.

Access To Finance

Access to affordable finance continues to be a major challenge for MSMEs. The Budget 2025 must address this by extending credit guarantee programs such as the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) with increased budgetary support. This will encourage banking institutions to lend to MSMEs without worrying about defaults. A specialised interest subvention scheme for MSMEs in manufacturing can lower financing costs, allowing them to engage in capacity expansion and technology upgrades. Encouraging innovations like peer-to-peer lending platforms and invoice discounting marketplaces can give MSMEs faster access to working cash.

Focus On Technology

Technology adoption is crucial for MSMEs to remain competitive in a globalised marketplace. Budget 2025 might include a Technology Adoption Fund to help MSMEs invest in Industry 4.0 technologies like IoT, AI, and robotics. Government-backed digital literacy initiatives designed specifically for MSME owners and employees can boost production and efficiency. Increasing the weighted deduction for R&D investment will encourage MSMEs to innovate and develop their own solutions. 

Boost Infrastructure

To grow, the manufacturing sector needs solid infrastructure. To decrease operational expenses, the budget should prioritise the strengthening of MSME clusters with cutting-edge facilities, logistics assistance, and plug-and-play infrastructure. Expediting projects under the National Infrastructure Pipeline (NIP) to increase road, rail, and port connectivity will allow for more efficient flow of products.

Simplify Tax Structures

Tax compliance is a substantial burden on small enterprises. Simplifying tax structures and providing relief can promote growth. Raising the GST exemption ceiling for MSMEs will reduce their compliance burden. Offering lower tax rates to MSMEs engaged in manufacturing will boost their cash flow and reinvestment capability. Introducing a single-window clearance for all tax-related problems can improve the ease of doing business. With global supply chains looking to diversify, India has an excellent potential to establish itself as a manufacturing hub. The Budget can assist by raising export incentives, reviving schemes such as the Merchandise Exports from India Scheme (MEIS), and enhancing advantages under the Remission of Duties and Taxes on Exported Products. Simplifying export documentation and expediting customs clearance will assist MSME exporters. 

Skill Development

The industrial sector has the capacity to accommodate India's rapidly expanding workforce. The budget should strengthen efforts under the Skill India Mission that are customised to the unique needs of the manufacturing industry. Tax breaks for employers that offer apprenticeships can stimulate on-the-job training and skill development. Special initiatives to encourage female entrepreneurs in manufacturing will make the sector more inclusive.

The Union Budget 2025 provides an opportunity to accelerate the expansion of India's industrial sector. By addressing the unique issues that MSMEs face, the government can create the groundwork for a robust and globally competitive manufacturing sector. Measures such as increasing loan access, encouraging technology adoption, and strengthening infrastructure would not only improve the sector's performance but also create millions of jobs and boost economic growth. A focused, inclusive, and forward-looking budget will help India realise its industrial objectives. As stakeholders await the announcements, they hope for a budget that strikes a mix between fiscal discipline and smart investments to strengthen the Indian economy's backbone—the manufacturing sector. 

(The author is the Managing Director at Mefoh Healthcare)

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