Ensure credit flow to MSMEs in interim Budget: Reliance Securities

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New Delhi: The government should encourage credit flow to the micro, small and medium enterprises (MSMEs) by providing incentives to the segment in the upcoming interim Budget, a report by Reliance Securities said on Tuesday.

Among other incentives, the Budget should also provide interest subvention for lower amount MSME loans, it said.

Noting that the likelihood of such an action by the government was “medium”, the report said the impact of such a decision would be “positive”.

In a meeting here on Monday with public sector banks (PSBs), Finance Minister Piyush Goyal had asked them to increase their lending to MSMEs.

The report by the brokerage arm of Reliance Capital also suggested that the Budget should propose measures by way of taxation to improve the inflow of deposits in the banking system.

It said that there is a high likelihood of the government introducing a nationwide scheme for direct support to farmers in the interim Budget, in line with Telangana’s Rythu Bandhu scheme.

The report also said that the government should take forward the incentives for digitisation initiatives across a broader platform.

On the automobile sector, the report suggested bringing down the Goods and Services Tax (GST) on vehicles to 18% from the current 28%.

Urging concessions on hybrid and electric vehicles, Reliance Securities said the upcoming Budget should implement the long-delayed “Scrappage Scheme” which proposes incentivising the replacement of old vehicles.

Noting that the government had budgeted 207 billion ( 20,700 crore) for fuel subsidies in the current fiscal, the report said it expects a shortfall of 148 billion ( 14,800 crore) on this count.

“Shortfall amount will be likely rolled over to FY20 and will be paid in the first quarter FY20 (by June 2019),” it said.

“In FY20, at $65/barrel and the Rupee at 71, we estimate government should budget fuel subsidy of 306 billion ( 30,600 crore) (excluding FY19 shortfall).”

Regarding the power sector, the report said the government should focus on completing the rural electrification projects.

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