U GRO Capital's Shachindra Nath outlines Budget 2024 wishlist for MSMEs: A focus on credit and digital empowerment

Ahead of the Union Budget 2024-25, Shachindra Nath, Vice Chairman and Managing Director of U GRO Capital, shared his insights and expectations for the MSME sector in a conversation with Business Today TV. With a focus on addressing the credit gap, fostering digitisation, and creating a more supportive ecosystem, Nath highlighted key areas where the upcoming budget could empower India's economic backbone.

Credit Access: A Top Priority

Nath emphasised the critical role of timely credit access for MSMEs, stating, "One of the things where MSMEs have the biggest difficulty is getting timely credit." He believes that while Non-Banking Financial Companies (NBFCs) have played a significant role in reaching underserved segments, the budget should focus on creating an enabling environment for these institutions to thrive.

Key Recommendations for Enhancing Credit Access

Establish a Refinancing Institution: Nath proposed establishing a dedicated refinancing institution, similar to NHB for the housing finance sector, to provide NBFCs with reliable access to funds, especially during liquidity crises. He argued, "As NBFCs would continue to grow larger and larger, if you don't provide that safety net, the whole system is at risk."

Recognise MSME-Focused NBFCs: Nath urged the government to create a specific category for NBFCs specializing in MSME lending, ensuring they receive priority lending rates and aren't treated on par with consumer loan providers.

Reintroduce Credit Guarantee Schemes: Highlighting the success of such schemes during the COVID-19 pandemic, Nath suggested budgetary allocations for partial credit guarantee schemes to encourage lending institutions to extend credit to MSMEs.

Expand the Corporate Debt Market: Nath acknowledged the potential of the corporate debt market but highlighted the need for government support, such as sovereign guarantees for bonds issued by MSMEs, to instill confidence among investors.

Digital Empowerment and Skilling: Unlocking New Opportunities

Nath dispelled the myth that digitisation is prohibitively expensive for MSMEs, arguing that simple measures, like adopting GST compliance and utilizing social media platforms, can significantly benefit businesses. He said, "Social commerce is a huge opportunity. Today's MSMEs are very confident. They think of one world, one digitized world."

To further bolster digital adoption, Nath stressed the importance of government-led skilling programs to help MSMEs professionalise their operations and equip employees with digital literacy.

Addressing the Equity Gap

Nath acknowledged the limited access to equity financing for smaller MSMEs and proposed creating listed investment funds for MSMEs. These funds would allow retail investors to participate in the growth of MSMEs while ensuring proper governance and investor protection.

Rethinking Generative AI for India

Nath expressed reservations about blindly adopting generative AI solutions developed in other countries, emphasising the need for a public utility approach. "If we have to succeed and make open generative AI successful for India, we have to have a public utility, a UPI or an NPCI equivalent," he said.

A Budget for National Growth

Nath concluded by urging the government to view budgetary support for MSMEs not just as an expenditure but as a strategic investment in national growth. "Government has to genuinely believe that their off-balance sheet support would increase the liquidity…and finally, money would get dispersed to people, to MSMEs, in all of the deserving sectors, and finally, people generate employment," he emphasised.