Finance minister Pranab Mukherjee's proposal in the Union budget 2011-12 on Monday, to provide Rs 5000 crore to SIDBI, will give a shot in the arm to the Micro, Small and Medium Enterprises (MSME) sector in India.
In the last budget, Rs 4000 crore was provided to SIDBI for refinancing incremental lending by banks to these enterprises. "For the year 2011-12, I propose to provide Rs 5000 crore to SIDBI for the same purpose out of the shortfall of banks on priority sector lending targets," the FM announced in his budget speech.
Presently, credit is the main challenge that the Indian MSMEs have been facing. With the increase in priority sector lending targets for the banks, it can serve some of the funding requirements of MSMEs and help them scale up.
The MSME sector plays a crucial role in furthering the objectives of equitable and inclusive growth.
The sector contributes 45% of the manufacturing output, 40% of the country's total exports and employment to about 60 million persons through 26 million enterprises.
"We are delighted that the FM has taken into consideration the need to simplify the tax procedures for small businesses. While we appreciate the allocation of Rs 5,000 cr to SIDBI for refinancing incremental lending by banks to micro, small and medium enterprises, we expected better increase in the outlay to cover as many of these firms possible," said IndiaMART, CEO Dinesh Agarwal.
The ministry of MSME has ambitious plans and schemes, which could be in place, with this increase in allocation.