Detailed Analysis of Union Budget 2025-26 for MSMEs
India’s Micro, Small, and Medium Enterprises (MSMEs) are the economic
backbone, driving employment, innovation, and exports. With over 25
crore jobs generated and a 45.79% contribution to exports in 2024-25, their
role is pivotal. The Union Budget 2025-26, presented on February 1, 2025, by
Finance Minister Nirmala Sitharaman, introduces transformative measures to
empower MSMEs, addressing challenges like credit access, scalability, and
global integration. This survey note provides a comprehensive analysis,
ensuring all details are covered for readers seeking to understand the impact
on small businesses.
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Background and Importance of MSMEs
MSMEs are defined by investment and turnover
thresholds, recently revised in the budget. Previously, micro-enterprises had
investments up to ₹1 crore and turnover up to ₹5 crore, small up to ₹10
crore and ₹50 crore, and medium up to ₹50 crore and ₹250 crore. The
2025 budget raises investment limits by 2.5 times and turnover
thresholds by 2 times, resulting in:
- Micro: Investment up to ₹2.5 crore, turnover up to ₹10 crore.
- Small: Investment up to ₹25 crore, turnover up to ₹100 crore.
- Medium: Investment up to ₹125 crore, turnover up to ₹500 crore.
This revision, effective from the budget
announcement, aims to include more businesses under government schemes,
enhancing their access to credit and technology. MSMEs contribut 30.1% to Gross
Value Added (GVA) in 2022-23, up from previous years, and their export share
grew from 43.59% in 2022-23 to 45.79% in 2024-25, underscoring their
resilience.
Key Highlights of Budget 2025-26 for MSMEs
The budget
introduces several strategic reforms, detailed below:
Revised MSME Classification: Enabling Scalability
The revised
classification is a cornerstone, allowing more MSMEs to access benefits. For
example, a micro-enterprise with an investment of ₹2 crore and turnover of ₹8
crore, previously ineligible, now qualifies. This change is expected to
formalize more businesses, with the Udyam portal facilitating registration. The
impact is significant, as it aligns with the government’s goal to integrate
25.18 crore informal workers into the formal economy via the Udyam Assist
Platform.
Enhanced Credit Access: Fueling Expansion
Credit remains a major hurdle for MSMEs, and
the budget addresses this through:
- Credit Guarantee Expansion: The
coverage for micro and small enterprises is doubled to ₹10 crore,
unlocking ₹1.5 lakh crore in credit over five years. This reduces lender
risk, making banks more willing to lend without collateral, a critical
need for MSMEs lacking assets.
- ME-Card Scheme: A new
initiative offers credit cards with a ₹5 lakh limit to Udyam-registered
micro-enterprises, targeting 10 lakh beneficiaries in the first year. This
provides working capital or short-term credit, addressing cash flow
issues.
- Startups & Exporters: The
guarantee cover for startups is doubled to ₹20 crore, with reduced fees
(1%) in priority sectors like tech and green energy. Export-focused MSMEs
can access term loans up to ₹20 crore, facilitating global market entry.
The application process for these schemes
involves registering on udyamregistration.gov.in, submitting financials, and
applying via participating banks like SBI or SIDBI, with approvals often within
7-10 days.
Empowering First-Time Entrepreneurs
The budget focuses on inclusivity,
particularly for marginalized groups:
- A five-year scheme provides term loans up to ₹2 crore for women,
SC, and ST entrepreneurs, building on Stand-Up India’s success. This
targets 5 lakh first-time entrepreneurs, addressing barriers like lack of
capital.
- A ₹10,000 crore Fund of Funds supports startups, especially in
technology and clean energy, fostering innovation. This aligns with the
Atmanirbhar Bharat vision, promoting self-reliance.
Boosting Labor-Intensive Sectors
Labor-intensive sectors are prioritized for job creation:
- Footwear & Leather: The
Focus Product Scheme aims for ₹4 lakh crore turnover and 22 lakh jobs,
supporting design innovation and non-leather production. This is crucial
for employment in rural areas, where these industries thrive.
- Toy Manufacturing:
Cluster development and skill-building initiatives position India as a
global hub, with funding for modern machinery and training.
- Food Processing: A
National Institute in Bihar will drive entrepreneurship in eastern India’s
agro-industries, leveraging agricultural potential for economic growth.
These sectors are vital for inclusive growth,
providing jobs to lower-skilled workers and boosting rural economies.
Clean Tech and Manufacturing Push
The
National Manufacturing Mission aligns with Make in India, providing
sector-specific roadmaps. Incentives for domestic production of solar PV cells,
EV batteries, and wind turbines promote sustainability and reduce import
dependence. For MSMEs, this opens opportunities in clean tech, with subsidies
for technology upgrades and cluster development.
Also Read: Latest MSMEs Schemes 2025 in India
Ongoing Government Initiatives Strengthening MSMEs
Several existing schemes complement the budget’s reforms:
PM Vishwakarma Scheme
Launched in 2023, this scheme empowers traditional artisans with ₹13,000
crore allocated for skill development and credit linkages. Over 2.65 crore
applications have been received, formalizing the artisan sector and enhancing
their market access.
Udyam Registration Portal
With 5.93 crore MSMEs registered, the portal facilitates access to loans
and subsidies. The Udyam Assist Platform integrates 25.18 crore informal
workers, a significant step toward formalization. Registration is simple,
requiring Aadhaar and PAN, and can be done at udyamregistration.gov.in.
PMEGP and SFURTI
- PMEGP supported 89,118 enterprises in 2023-24, creating 7.12 lakh
jobs, with subsidies up to 40% for special categories. Applications are
processed via pmegp.kviconline.gov.in.
- SFURTI has 376 functional clusters, benefiting 2.2 lakh artisans
through infrastructure and marketing support, preserving traditional
industries.
Public Procurement Policy
In 2023-24, 43.71% of government procurement was from MSMEs, exceeding
the 25% mandate and benefiting 2.58 lakh enterprises. This ensures a stable
market, with procurement details available at msme.gov.in.
Budgetary Commitment: Rising Investments
The Ministry of MSME’s allocation for 2025-26 is ₹23,168 crore, up from
₹17,306 crore in 2024-25, reflecting a 34% increase. This trend, consistent
since 2019-20, underscores the government’s commitment to MSME growth, with
funds directed toward credit guarantees, startup support, and sector-specific
initiatives.
Challenges and Opportunities
Despite
these reforms, MSMEs face challenges like technological obsolescence and market
access. The budget’s focus on clean tech and labor-intensive sectors addresses
these, but implementation will be key. MSMEs can leverage these schemes by
staying updated via msme.gov.in and engaging with District Industries Centres
for guidance.
Conclusion: Paving the Way for a Self-Reliant MSME Sector
The Union Budget 2025-26 marks a paradigm shift, blending financial
inclusivity with sector-specific growth plans. By easing credit bottlenecks,
fostering innovation, and prioritizing labor-intensive industries, the
government aims to elevate MSMEs as global players. Coupled with ongoing
initiatives, these reforms will accelerate formalization, job creation, and
equitable growth. As MSMEs harness these opportunities, their role in achieving
India’s economic visions becomes indispensable.
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