23 March 2019

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Budget 2018 - SME Expectations

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The recent Economic survey predicts a robust and broad-based industry revival. The Make in India initiative to emphasize and focus on 10 champion sectors like Auto, capital goods, defense, pharma, and renewable energy to boost industrial growth and generate more job openings. Other sectors the government plans to focus on are textiles, biotechnology, chemicals, food processing, electronic system design and manufacturing, leather, gems and jewelry, construction, shipping and railways.

SME’s in India contribute greatly to the economy, create significant employment opportunities with considerable investment. Though the Government has put forth several policies and schemes that have helped SME’s overcome challenges. However, small businesses expect a lot more from the Union Budget this year.

Better loan options, tax reliefs and easier statutory compliances will help SME’s and MSME’s thrive and flourish. The shift to a cashless economy has brought on uncertainty amongst business owners on what their business model needs to be. The number of cash transactions has decreased and its all about the wait and watch in the industry.

Considering that this will be the last budget before the General elections in 2019, most businesses expect more tax relief and measures taken increase transactions. Moreover, there are many who are looking forward to receiving the benefits derived from the government’s demonetization initiative in 2016.

Most industry’s have certain expectations. Here are 12 SME industry hopes from the Union Budget 2018.


Improved motivations and fiscal provision to boost the flow of credit to MSMEs. Including a wider salary range under cheap housing schemes and providing extra benefits to developers for the same. Banks expect an incentive for long-term project funding especially for railways and roads. They are looking for better clarity over re-capitalization bonds for nationalized banks’ and expect a reduction in the tenure from 5 years to 3 years for deposits with tax-free interest.


The FMCG industry expects the total budgetary allocation towards rural and MNREGA to increase. Clarity on government’s policy and measures undertaken to double the rural income in five years as announced 2 years ago. Any change in personal tax rules could help increase FMCG consumption. They would also like to understand when the reduction in Corporate Income Tax to 25 percent would be implemented as several companies fall under the highest tax bucket.

Real Estate:

The real estate sector has complicated and confusing rules, where several permissions are required before work commences. The sector expects provision for single window clearances for all permissions along with extra tax incentives for first time home buyers. Developers expect a lower GST rate and an increase in the territory of GST.


Airlines hope the government has a plan to privatize Air India and upgrade the existing airports’ infrastructure. More funds to augment aerospace production and the Maintenance, Repair and Operation sector in India. Expects believe the ATF will be included under GST in this budget.


The tech industry hopes the finance minister will offer infrastructure incentives to churn good-quality technology talent in the new digital age. The tech businesses would like the government to create an ecosystem for startups, so that they have better access to capital and investing in the tech sector becomes profitable. They expect the budget to include timelines for Smart cities, so companies involved would know what to focus on.

Oil and Gas:

The Oil and gas companies expect subsidies on LPG or Kerosene up-to INR 90B for H1 2018. Considering that high crude price would mean INR 470B low recoveries in FY 2019, the companies want clarity on the proportion the businesses are expected to provide for. To increase the use of natural gas, customs duty on LNG was reduced to 2.5% in 2017. This duty could be reduced further to increase LNG consumption. The upstream businesses expect lower cess while auto companies expect excise duty hikes to be rolled back.


Expect easier land acquisition norms for affordable housing developers. NBFCs expect an increase in the Pradhan Mantri Awaas Yojna allocation from INR 230B in 2018 and a higher import duty on gold. They also want an increase in the interest deductible for home loans u/s 24 for tax purposes. Re-introduction of

Infrastructure bonds to increase the provision for infrastructure outlay.


The telecom industry expects withdrawal of customs duty and import duty exemption on end-user telecom products. It is also looking for a change in status to essential infrastructure industry. Moreover, they hope the government announces concessional rates or exemptions on raw materials for manufacturing telecom and IT equipment to boost domestic businesses. The telecom players also expect increased allocation for broadband fibre optic connectivity in rural areas through the BharatNet scheme.

Capital good and infrastructure sector:

More allocation of funds for infrastructure sectors like Urban development, housing, railways, roadways. The road ministry expects an increase of 10-12 percent in the budget from the finance minister. More financial allocation to government schemes like Smart cities, Metro, PMAY for rural and urban housing etc.

Metal Sector:

The metal sector would appreciate a boost to domestic products and expect more incentives for Make in India products. The industry expects higher expenditure on infrastructure projects as well as roadways and housing for everyone.

Power Sector:

Considering PM’s promise to make sure rural areas and villages receive power, the sector expects an increased outlay allocation for schemes like Integrated Power Development Scheme, Deen Dayal Upadhyaya Gram Jyoti Yojana and Power for All. Implementation of policies that encourage the use of electric vehicles.


The pharma industry expects a change in status from priority to infrastructure along with hospitals, diagnostic centers, so that their profitability increases while the outlay of funds reduces. The pharma companies want the budget to offer tax benefit for 10 years on the capital expenditure for hospital developments. Rationalize the duties levied through lower duties on application programming interfaces (API) thereby allowing for better credit utilisation.


Expect the budget to include announcement on the introduction of new monetary products, include more participants in the commodity exchange and better rules to augment the growth of new segments such as bond and currency markets. These regulations will be important for CDSL, MCX and BSE. Easing securities transaction tax and commodities transaction tax will help to boost trading volumes.


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