Financials to catapult MSME and machine tools industry

By OEM Update Editorial April 6, 2022 7:01 pm

Benefits to MSMEs offered in budget will increase demand for machine tools in the short to medium term.

MSMEs have been a substantial part of the manufacturing ecosystem which implies parts and components manufacturing will grow significantly. Raising and Accelerating MSME Performance (RAMP) programme with outlay of Rs. 6,000 crore over 5 years will be rolled out. This will help the MSME sector become more resilient, competitive and efficient. 

Just the increase in capital expenditure for FY 22-23 should create sufficient demand to regain any lost momentum. Nearly 35 percent YoY increase is significant in the sense that it will drive manufacturing across many segments, with the automotive segment seemingly being the one that gets to access a bigger chunk. 

Financial incentives to help boost businesses 

The benefits towards MSMEs will increase demand for Machine tools in the short to medium term, thereby resulting in a fantastic combination of domestic demand being met by domestic supply situation, magnified by initiatives such as PLI, and the extension of ECIGS scheme for another year. 

The credit guarantee trust announced in this budget is likely to help many deserving MSMEs to grow further. Benefits towards MSMEs will also increase demand for Machine tools in the short to medium term. Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE) scheme will be revamped with required infusion of funds. This will facilitate additional credit of Rs. 2 lakh crore for Micro and Small Enterprises and expand employment opportunities. The PLI scheme would be a key factor in the growth. Since the Government of India introduced the PLI Scheme for various sectors and industries in the country, it has become one major source of appreciation for various industries to grow and help the economic boost. According to Mr. Aveen Padmaprabha, Divisional Manager, Industrial Quality Solution, Carl Zeiss India (Bangalore) Pvt. Ltd for the coming era, India is going to be a big market for key sectors like electric vehicles, aerospace, electronics, medical implants which will fall in line with the government PLI schemes, where the government is incentivising industry players in these sectors. The government PLI schemes are only helping in focusing more on our expansion plans. 

Budget impact on machine tool segment technologies 

The machine tool segment stands to benefit much from the current union budget. Just the increase in capital expenditure should create sufficient demand to regain any lost momentum. The increase is significant in the sense that it will drive manufacturing across many segments, with the automotive segment seemingly being the one that gets to access a bigger chunk. In addition to the above, the benefits towards MSMEs will also increase demand for machine tools in the short to medium term, thereby resulting in a fantastic combination of domestic demand being met by domestic supply situation, magnified by initiatives such as PLI, and the extension of ECIGS scheme for another year Feels Vineet. 

Specifically with respect to machine tools, the impact is going to be nothing specifically direct, but there are definitely indirect benefits in the opinion of T.K. Ramesh. There’s a lot of focus on manufacturing. So obviously, there’s a spillover effect upon Machine Tools. So, while capacities get increased with extended special schemes for automotive manufacturing, we believe it will directly impact consumption of machinery and benefit the machine tool industry as a whole. 

Ministry of MSME implements Credit Guarantee Scheme for Micro and Small Enterprises under which new and existing Micro and Small Enterprises engaged in manufacturing or service activity can avail collateral free loans upto an amount of Rs. 200 lakh from Banks and Member Lending Institutions. The Government of India has launched Self Reliant India (SRI) Fund, a fund of funds which aims to extend growth funding to MSMEs. 

SRI Fund for MSME 

Ramesh believes, making MSMEs attractive is the most important immediate need. There is an opportunity. There is an opportunity for cost-effectiveness. But MSMEs can be made a little more competitive by better infrastructure, lesser red tape, faster mechanisms and funding of course. Daughter Funds which are interested in investing in MSMEs shall be empanelled and 20 percent of the funds invested in MSMEs shall be provided by SRI Fund. Non Profit institutions, NBFCs, financial inclusion sector, micro credit sector and other financial intermediaries shall not be eligible for consideration. 

The fund is to support faster growth of MSMEs and thereby ignite the economy and create employment opportunities and help make India self-reliant by producing relevant technologies, goods and services. Assuming an average investment of Rs. 10.00 Crore per MSMEs, approximately 5000 MSME are likely to be benefited. The financial support under this scheme intends to increase the financial capacity of viable MSMEs for growth to expand their business and become National/International Champions. The scheme is being implemented by a special purpose vehicle named “NSIC Venture Capital Fund Limited” and a commitment of Rs.1,080 crore has been approved so far. 

Opportunities in Indian market 

The CAD/CAM/CNC market is innovating at a rapid rate and therefore, implementation of these modern systems in an age, where the nation is focusing on increasing manufacturing contribution to the GDP in double digits, which will add more growth to the complete ecosystem, including the derivative of all the above – consumer experience. The advanced CAM today helps in feature based machining, intelligently establishing dynamic and adaptive tool-paths to achieve best tool-paths. Mr. Vivek Tomar, Vice PresidentTechnical Management & Product Management, CERATIZIT India Pvt. Ltd., is of opinion, it also adds to the competitive advantage to SMEs to go ahead of their competitors in getting more done in less time. And, thus these technologies will stimulate horizons of possibility in manufacturing even further in future. 

Industrial CT is fast growing, and they are used in multiple applications be it Quality Assurance, R&D or even in Production control. Hemanth Kumar, Head of Sales, Industrial Quality Solution, Carl Zeiss India (Bangalore) Pvt. Ltd., remarks, Industrial CT as an alternate option when it comes to quality and production control. Carl Zeiss conducts many certified courses at our QEC to hone a worker’s technical skills. It also collaborates closely with MSME Tool room and AIPMA especially in topics like reverse engineering and Mould development. 

Indian manufacturing industries suffered not only from lack of capital but also from the inability to manage this ‘ecosystem’. Government policies to encourage manufacturing in India viz. PLI scheme, rapid improvements in ease of doing business in India, improved tax compliance will encourage companies to accelerate their expansion plans and create capacities in-line with global scale. 

Digital protection shield for MSMEs financing 

Digitisation on the governance front will help MSMEs receive payments and funding with much more ease than before. Vineet says, this means that the increased capital expenditure will also play a major part in creating elastic demand in the market, alongside balancing the pent up demand in the market. Digital Insurer, Edelweiss General Insurance has joined hands with Ashv Finance, a tech-led NBFC present in over 100 locations in India. While Ashv is offering timely credit to fund the growth aspirations of small businesses and MSMEs, EGI will ensure to safeguard the financial interest of this very important segment. EGI will offer health insurance cover to all the customers of Ashv Finance. The policy will provide security against the business loan taken in case the borrower has an unfortunate incident of an accident or critical illness. The business loan and the insurance policy will be processed together, digitally and with zero paperwork, offering complete ease and convenience to customers. 

Conclusively, the initiative of rating MSMEs will also be undertaken in the coming years and this should allow timely help to the MSMEs without delays and extensive paperwork. The announcement of the initiatives, such as Raising and Accelerating MSME Performance, goes to show that the Government is focusing on the need of the hour and beyond, with the goal of helping MSMEs remarks Vineet Seth, Managing Director – South Asia & Middle East, Mastercam APAC. 

In machine tool industry, skill & labour management is a significant part of any large or small business practice and as such will continue to influence business strategy, delivery and quality components of their businesses. Skilling programmes and partnership with the industry will be reoriented to promote continuous skilling avenues, sustainability, and employability. The National Skill Qualification Framework will be aligned with what dynamic industry needs. While the infrastructure has been put in place and the methodology has also been put in place for skill training. Ramesh is of view, moving of people and then participation are the two areas that need to be strengthened this year and next year. Perhaps in the next two years will see more output of training and development and skill. 

Overall, Budget 2022 promises to provide the much-needed impetus to sustain India’s economic and digital growth benefitting MSMEs and machine tools in an implicit way.