In a significant move, the Union Budget for 2025-26 has reinforced the vital role of India’s Micro, Small, and Medium Enterprises (MSMEs) as a cornerstone of economic growth. Recognizing MSMEs as one of the four primary growth engines, the budget has unveiled a comprehensive set of measures aimed at strengthening this sector across various dimensions.

Key measures include revised classification criteria, expanded credit availability with enhanced guarantee cover, credit cards for micro-enterprises, and policy support for export promotion.

In her Budget Speech, Finance Minister Nirmala Sitharaman emphasised that MSMEs, which number approximately 5.7 crore and account for 45 per cent of India’s exports, serve as a powerful engine of development.

“To help them achieve higher efficiencies of scale, technological upgradation and better access to capital, the investment and turnover limits for classification of all MSMEs will be enhanced to 2.5 and 2 times respectively. This will give them the confidence to grow and generate employment for our youth,” she said.

Industry representatives anticipate that the revised classification criteria will expand the number of industries eligible for MSME benefits.

Access to credit

Also, to improve access to credit, the credit guarantee cover will be enhanced. For Micro and Small Enterprises, from ₹5 crore to ₹10 crore, leading to an additional credit of ₹1.5 lakh crore in the next 5 years. “This enhanced credit guarantee cover will help all MSMEs that are looking at expansion, export market and other immediate term loan improvements,” said V K Girish Pandian, President, IEMA (Industrial Estate Manufacturer’s Association), Guindy (Chennai).

For start-ups , from ₹10 crore to 20 crore, with the guarantee fee being moderated to 1 per cent for loans in 27 focus sectors important for Atmanirbhar Bharat and for well-run exporter MSMEs, for term loans up to ₹20 crore. “The increase in the guarantee cover for MSME and startups will foster entrepreneurship, create job opportunities and improve the business environment, said Ajay Kumar Srivastava, Managing Director & CEO, Indian Overseas Bank.

To improve financial accessibility for micro-units, the government will introduce customized Credit Cards with a ₹5 lakh limit for businesses registered on the Udyam portal. In the first year alone, 10 lakh such cards will be issued.

Additionally, a new initiative will support first-time women, Scheduled Caste (SC), and Scheduled Tribe (ST) entrepreneurs with term loans of up to ₹2 crore over the next five years. This initiative will usher in new women and SC and ST entrepreneurs.

“Make in India”

Sitharaman also reiterated the government’s commitment to establishing a National Manufacturing Mission that encompasses MSMEs as part of its “Make in India” initiative.

Currently, over 1 crore registered MSMEs employ approximately 7.5 crore individuals and contribute significantly—36 per cent —to India’s manufacturing output. This budget aims to position India as a global manufacturing hub while addressing challenges such as technology adoption and global competitiveness.

Published on February 1, 2025