The Union Budget 2025-26 presents a range of initiatives designed to bolster the Micro, Small, and Medium Enterprises (MSME) sector, acknowledging its significance as a vital driver in India’s development path, together with agriculture, investment, and exports. To support business growth and enhance efficiency, the thresholds for investment and turnover in MSME classification have been increased.
Access to credit is expected to enhance due to a rise in the credit guarantee coverage for micro and small businesses, startups, and export-oriented MSMEs. A fresh program will offer financial aid to novice entrepreneurs from underprivileged backgrounds, while industry-specific projects will boost productivity in sectors like footwear, leather, and toy production.
Key Features for MSMEs in Union Budget 2025-26
The Union Budget 2025-26 presents a variety of initiatives designed to bolster the MSME sector through improved credit availability, assistance for novice entrepreneurs, and encouragement of labour-intensive industries.
Also Read: MSME Advantages and Disadvantages
Revised Classification Criteria
To assist MSMEs in expanding operations and obtaining improved resources, the investment and turnover thresholds for classification have been raised by 2.5 times and 2 times, respectively. This is anticipated to enhance efficiency, technology uptake, and job creation.
| Rs in Crore | Investment | Turnover | ||
| Current | Revised | Current | Revised | |
| Micro Enterprise | 1 | 2.5 | 5 | 10 |
| Small Enterprise | 10 | 25 | 50 | 100 |
| Medium Enterprise | 50 | 125 | 250 | 500 |
Enhanced Credit Availability
- The credit guarantee coverage for micro and small enterprises has risen from ₹5 crore to ₹10 crore, allowing for an extra ₹1.5 lakh crore in credit over a span of five years.
- Startups will experience their guarantee coverage increase from ₹10 crore to ₹20 crore, along with a lowered fee of 1% for loans in 27 prioritized sectors.
- Exporter MSMEs will gain from term loans of up to ₹20 crore with increased guarantee coverage.
Credit Cards for Micro Enterprises
A new customised Credit Card scheme will provide ₹5 lakh in credit to micro enterprises registered on the Udyam portal with 10 lakh cards set to be issued in the first year.
Also Read: MSME New Classification
Support for Startups and First-Time Entrepreneurs
- A new Fund of Funds totaling ₹10,000 crore will be created to enhance assistance for startups.
- A program for 5 lakh first-time women, Scheduled Caste, and Scheduled Tribe entrepreneurs will offer term loans of up to ₹2 crore over five years, integrating insights from the Stand-Up India initiative.
Focus on Labour-Intensive Sectors
- A Focus Product Scheme targeting the footwear and leather industry will promote design, component production, and non-leather shoe manufacturing, anticipated to generate 22 lakh jobs and lead to a revenue of ₹4 lakh crore.
- A fresh initiative for the toy industry will encourage cluster growth and skill enhancement, establishing India as a worldwide center for toy manufacturing.
- In Bihar, a National Institute of Food Technology, Entrepreneurship and Management will be created to enhance food processing sectors in the eastern area.
Manufacturing and CleanTech Initiatives
- A National Manufacturing Mission will provide policy support and guidelines for small, medium, and large enterprises through the Make in India initiative.
- Clean tech production will focus on local manufacture of solar PV panels, electric vehicle batteries, wind energy turbines, and high-voltage power transmission gear.
Budgetary Outlay of Ministry of MSME
| Financial Year | Budget Estimates (in crores) | Revised Estimates(in crores) |
| 2019-20 | 7,011.29 | 7,011.29 |
| 2020-21 | 7,572.20 | 5,664.22 |
| 2021-22 | 15,699.65 | 15,699.65 |
| 2022-23 | 21,422.00 | 23,628.73 |
| 2023-24 | 22,137.95 | 22,138.01 |
| 2024-25 | 22,137.95 | 17,306.70 |
| 2025-26 | 23,168.15 | – |
Current Landscape of MSMEs in India
- The MSME sector remains a fundamental element of India’s economic expansion, playing a crucial role in employment, manufacturing, and exports. In the past few years, the sector has shown notable resilience, with its contribution to the nation’s Gross Value Added (GVA) rising from 27.3% in 2020-21 to 29.6% in 2021-22 and 30.1% in 2022-23, underscoring its expanding importance in the country’s economic output.
- Exports from MSMEs have experienced significant growth, increasing from ₹3.95 lakh crore in 2020-21 to ₹12.39 lakh crore in 2024-25. The count of MSMEs engaged in exports has risen markedly, jumping from 52,849 in 2020-21 to 1,73,350 in 2024-25.
- Their share of India’s overall exports has consistently increased, hitting 43.59% in 2022-23, 45.73% in 2023-24, and 45.79% in 2024-25 (as of May 2024). These trends highlight the sector’s growing incorporation into global trade and its ability to enhance India’s role as a manufacturing and export center.
Government Initiatives for MSMEs
The Government of India has launched a comprehensive set of measures designed to enhance the Micro, Small, and Medium Enterprises (MSME) sector, acknowledging its crucial significance in the economy. These initiatives include funding assistance, purchasing strategies, skill development, and market incorporation. Main initiatives consist of the Udyam Registration Portal, PM Vishwakarma scheme, PMEGP, SFURTI, and the Public Procurement Policy for MSEs, all focused on promoting entrepreneurship, boosting employment, and bringing informal sectors into the formal economy. These efforts demonstrate the government’s dedication to aiding MSMEs and fostering inclusive economic development across the country.
Conclusion
To summarize, the Union Budget 2025-26 presents a strategic plan to strengthen the MSME sector in India, highlighting enhanced credit availability, support for entrepreneurs, and initiatives tailored to the sector. The major updates in classification standards, along with improved credit guarantees and tailored financial products such as credit cards for micro-enterprises, are set to stimulate growth and innovation. The emphasis on industries such as footwear, leather, and toys seeks to enhance job opportunities while also establishing India as a strong competitor in international markets.
