Impact of Union Budget 2021-22 on SMEs

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Impact of Union Budget 2021-22 on SMEs

SMEs in India are considered the backbone of the socio-economic development of our country. An estimated 45 million SMEs provide a significant number of jobs, services, innovation and similar other inclusive growth for our nation. This is why we should consider understanding the impact of Union Budget on the strongest pillar of growth, i.e., SMEs. Overall, the whole budget benefits the SME sector by either introducing new opportunities or other direct benefits. Here are the top highlights of the Union Budget 2021-22 for SME and MSME sectors-


Double fund allocation for the sector

The sector's allocation has been doubled from the current year, which is Rs.7572 Crore to Rs.15700 Crore. This has been done to revive the Covid-hit sector and encourage these businesses.

Significant ports will be managed in PPP mode

Major ports will be moving from managing their operational services on their own to model wherein private partners will manage it for them. Seven projects valuing more than 2000 Crore will be Public-Private Partnership modes in the financial year 2021-22.

Mega investment textile parks to be launched

In the Union budget, an amount of Rs.3614 Crore has been allocated to the Textiles sector. To make India globally competitive and boost employment, a scheme of mega-investment textile parks has been introduced. 7 Textile parks are set to be launched in the next three years. This will attract investments as well as encourage textile imports which will help the economy further.

Faster resolution of disputes

Faster resolution of cases will be ensured by strengthening the NCLT framework. Ecosystems shall be implemented, and alternate methods of debt resolution and special framework for MSMEs will be ensured. Small businesses with an income of 50 lakhs and dispute amount not extending 10lakh can resolve disputes through a faceless initiative through a special dispute resolution mechanism.

The government will revise 400 old exemptions

More than 400 old exemptions will be reviewed this year. This will be conducted through extensive consultation starting from 1st October 2021. it will put in place a revised customs duty structure. 

Withdraw specific duties on import on some types of leather

The FM also proposes rationalising the exemption on import of duty-free Items as an incentive to exporters of 36 garment, leather and handicraft items. All of these items are made domestically by our MSMEs. It is also now withdrawing the exemption on imports on some kinds of leather as it is domestically produced in good quality and quantity. They are also raising custom duties on finished synthetic gemstones to encourage their domestic processing.

Levy custom duty uniformly

Due to the sharp hike in the price of Iron and steel, MSMEs have been severely hit To help this sector; the government has introduced a uniform customs duty of 7.5% on flat, semis and long products of stainless steel, alloy and non-alloy. This will provide some relief to the re-cyclers, which are mostly MSMEs. Some exemption duty is also announced on steel scrap from a period up to 31st March 2022. This will reduce their variable costs. This is significantly beneficial to the small steel plants and also help in lowering their renewable costs.

1500 Crore fund to support SMEs

There has been an increase in digital payment in the recent past, to encourage it further, the government has now allocated Rs. 1500 Crore funds to provide financial incentives to promote digital modes of payments.

Revised definition of Small companies under the Companies act

The FM proposes to revise the definition under the Companies Act for small companies by increasing their threshold for paid-up capital earlier at 50 Lakh has been now increased to 2 Crore the turnover, Rs. 2 Crore has now been increased to 20 Crore. 


There are many other new proposals like the privatisation of the PSU banks, and IDBI will ensure more money reaches the MSMEs. Similarly, many recent amendments and proposals can help our economy revive and perform better.

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