MSMEs can reap upto 2 trillion business from Budget boost says a report

MSME's are all set to receive incremental business worth around Rs 2 trillion out of the Rs 3 trillion allocated to the sector in the Budget, a report says. The Rs 3,02,885 crore allocated towards the MSME sector can lead to a direct benefit of Rs 2,00,000 crore to the sector, according to domestic rating agency Smera Ratings. These benefits are roughly 10.5 per cent of the total expenditure of the Budget estimate for 2016-17, the agency said in a note.

The Rs 60-trillion MSME sector contributes a whopping 37.5 per cent of GDP and employs the most number of people. This allocation is divided between consumption and investment categories. A sum of Rs 95,638 crore will go into consumption and Rs 2,07,247 crore to investment, it said.

The agency opines that MSME engagement will be crucial in the implementation as both manufacturing and services based MSME units will take advantage of this massive mobilization of public finances. On a standalone basis, the agency estimates that Rs 1,05,647 crore worth of business can be exclusively conducted by MSMEs. The agency feels that implementation of various schemes such as Pradhan Mantri Gram Sadak Yojana, Kaushal Vikas Yojana, Swachh Bharat Abhiyan, MGNREGA and Khelo India may not require the participation of large companies.

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According to the report, the opportunity created by the Budget will create demand for services of the MSME sector, it said,

Out of the total funds, Gram Sadak Yojana will attract Rs 19,000 crore, Swachh Bharat Abiyan will get Rs 11,300 crore, and roads and highways Rs 26,250 crore. Moreover, MGNREGA will get Rs 15,400 crore (by way of materials), Krishi Sinchai Yojana Rs 2,144 crore and the National Rural Drinking Water Mission has been allocated Rs 1,875 crore. Child development schemes will get Rs 16,120 crore, Khelo India Rs 216 crore and Gram Jyoti Yojana Rs 3,188 crore.

The additional infusion of funds into Mudra and the proposed establishment of 1,500 multi-skill training institutes under the Kaushal Vikas Yojana will facilitate this process further, says Karan Mehrishi, lead economist at Smera Ratings.