The Union Budget for 2025-26 has introduced a comprehensive set of measures designed to bolster India’s Micro, Small, and Medium Enterprises (MSMEs). Recognizing their pivotal role in driving economic growth, alongside sectors like agriculture, exports, and investment, the government has made substantial provisions to foster the growth of MSMEs. These initiatives aim to enhance efficiency, promote innovation, and improve competitiveness while ensuring that these enterprises remain at the heart of India’s economic expansion.
Strengthening MSME Foundations
In a significant move, the budget increases the investment and turnover limits for MSMEs by 2.5 and 2 times, respectively. This revision aims to support businesses in scaling their operations, boosting efficiency, and generating employment while also encouraging technological adoption. With enhanced access to resources and tools, MSMEs are expected to become more competitive both domestically and internationally.
Enhanced Access to Credit
One of the most impactful measures in the 2025-26 budget is the substantial increase in the credit guarantee cover for micro and small enterprises. The cover will be raised from ₹5 crore to ₹10 crore, unlocking an additional ₹1.5 lakh crore in credit over the next five years. Furthermore, startups will benefit from a doubling of their credit guarantee from ₹10 crore to ₹20 crore. With reduced loan fees of just 1% in 27 priority sectors, this move is expected to provide a significant boost to startups.
Additionally, micro enterprises registered on the Udyam portal will have access to a customized credit card scheme, offering up to ₹5 lakh in credit. The government plans to issue 10 lakh such cards in the first year alone, enhancing financial access for small businesses.
Fostering Entrepreneurship
The 2025-26 budget also places a strong emphasis on empowering first-time entrepreneurs, particularly women, Scheduled Caste (SC), and Scheduled Tribe (ST) individuals. A new ₹10,000 crore Fund of Funds will provide critical support to startups, while a special scheme offering term loans up to ₹2 crore will cater to 5 lakh entrepreneurs from disadvantaged backgrounds. This initiative builds on the success of the Stand-Up India scheme, reinforcing the government’s commitment to inclusive growth.
Labour-Intensive Sectors in Focus
The budget introduces several initiatives to support labour-intensive industries, which are key to job creation and regional development. For instance, the footwear and leather sector will benefit from a new Focus Product Scheme that will enhance design, component manufacturing, and non-leather footwear production. This initiative is expected to create 22 lakh new jobs and generate a turnover of ₹4 lakh crore.
Additionally, the toy sector will receive a boost through cluster development and skill-building initiatives aimed at positioning India as a global hub for toy manufacturing. A new National Institute of Food Technology, Entrepreneurship, and Management will be set up in Bihar to support the food processing industries in the eastern region of India, fostering regional economic growth.
Promoting Manufacturing and Clean Tech
The 2025-26 Union Budget further emphasizes the government’s vision of making India a global manufacturing hub. A National Manufacturing Mission will provide much-needed policy support and roadmaps for industries of all sizes under the “Make in India” initiative. Special attention will be given to clean tech manufacturing, encouraging domestic production of solar PV cells, electric vehicle (EV) batteries, wind turbines, and high-voltage transmission equipment.
The Current Landscape of MSMEs
India’s MSME sector is a cornerstone of the national economy, contributing significantly to employment, manufacturing, and exports. As of recent estimates, there are 5.93 crore registered MSMEs, providing employment to over 25 crore people. These enterprises play a critical role in India’s export sector, accounting for 45.73% of the country’s total exports in 2023-24.
Over the past few years, the MSME sector has shown remarkable resilience. Its contribution to India’s Gross Value Added (GVA) has been steadily rising, from 27.3% in 2020-21 to 30.1% in 2022-23, highlighting its growing importance in the country’s economic output.
Government Initiatives for MSMEs
The Indian government has rolled out several initiatives to support MSMEs, focusing on financial aid, capacity building, and market integration. The Udyam Registration Portal, PM Vishwakarma Scheme, PMEGP, SFURTI, and Public Procurement Policy for MSEs are some of the key programs designed to promote entrepreneurship, improve employment opportunities, and formalize informal sectors. These initiatives underline the government’s commitment to driving inclusive growth and empowering MSMEs across the country.
Conclusion
The Union Budget 2025-26 marks a significant step towards strengthening India’s MSME sector. By increasing credit access, supporting first-time entrepreneurs, and launching targeted initiatives for labour-intensive sectors, the government is setting the stage for a new wave of growth and innovation.
Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.
