The Union Budget 2025-26, presented by Finance Minister Smt. Nirmala Sitharaman, introduces significant reforms aimed at bolstering the Micro, Small, and Medium Enterprises (MSME) sector, recognizing it as a pivotal engine for India’s economic development. These measures are designed to enhance the operational capacity, financial accessibility, and global competitiveness of MSMEs, thereby contributing to the overarching goal of a ‘Viksit Bharat’ (Developed India).

Revised Classification Criteria for MSMEs

To facilitate MSMEs in achieving greater economies of scale, technological advancements, and improved access to capital, the government has revised the investment and turnover thresholds for MSME classification. The investment limits have been increased by 2.5 times, and turnover limits have been doubled across all categories:

Enterprise Category	Previous Investment Limit (₹ Crore)	Revised Investment Limit (₹ Crore)	Previous Turnover Limit (₹ Crore)	Revised Turnover Limit (₹ Crore)
Micro	1	2.5	5	10
Small	10	25	50	100
Medium	50	125	250	500

This strategic enhancement is anticipated to instill confidence among MSMEs, encouraging expansion and job creation, particularly benefiting the youth demographic.

Enhanced Credit Guarantee Scheme

Access to credit remains a critical challenge for MSMEs. Addressing this, the budget proposes substantial enhancements in credit guarantee coverage:

• Micro and Small Enterprises: The credit guarantee cover is increased from ₹5 crore to ₹10 crore, which is expected to facilitate an additional credit flow of ₹1.5 lakh crore over the next five years.
• Startups: The guarantee cover is elevated from ₹10 crore to ₹20 crore, with a moderated guarantee fee of 1% for loans in 27 focus sectors pivotal to the ‘Atmanirbhar Bharat’ initiative.
• Exporter MSMEs: Well-performing exporter MSMEs can now avail term loans up to ₹20 crore under the enhanced credit guarantee scheme.

These measures aim to alleviate financial constraints, enabling MSMEs to invest in capacity building and innovation.

Introduction of Customized Credit Cards for Micro Enterprises

In a move to streamline credit access, the government plans to introduce customized credit cards with a ₹5 lakh limit for micro enterprises registered on the Udyam portal. In the inaugural year, 10 lakh such cards are slated for issuance, providing micro enterprises with flexible and timely financial support.

Establishment of a New Fund of Funds for Startups

Building upon the success of existing Alternate Investment Funds (AIFs) for startups, which have garnered commitments exceeding ₹91,000 crore, the government will establish a new Fund of Funds with an additional contribution of ₹10,000 crore. This initiative aims to broaden the funding landscape for startups, fostering innovation and entrepreneurship.

Scheme for First-Time Entrepreneurs

Recognizing the need to support underrepresented groups in entrepreneurship, a new scheme will be launched targeting 5 lakh first-time women, Scheduled Castes (SC), and Scheduled Tribes (ST) entrepreneurs. The scheme will provide term loans up to ₹2 crore over the next five years and will include online capacity-building programs to enhance entrepreneurial and managerial skills. This initiative draws inspiration from the successful Stand-Up India scheme.

Exploration of a Deep Tech Fund of Funds

To catalyze the emergence of next-generation startups, particularly in the deep tech sector, the government will explore the establishment of a Deep Tech Fund of Funds. This fund aims to provide the necessary capital and support for startups engaged in cutting-edge technological innovations.

Launch of the Export Promotion Mission

To bolster the global presence of Indian MSMEs, an Export Promotion Mission will be established, jointly driven by the Ministries of Commerce, MSME, and Finance. The mission will set sectoral and ministerial targets and facilitate:

• Easy access to export credit.
• Cross-border factoring support.
• Assistance to MSMEs in overcoming non-tariff barriers in international markets.

This concerted effort aims to enhance the export capabilities of MSMEs, contributing to increased foreign exchange earnings and global market integration.

Conclusion

The Union Budget 2025-26 delineates a comprehensive strategy to empower the MSME sector through enhanced financial support, redefined classification criteria, and targeted initiatives for startups and first-time entrepreneurs. These measures are poised to stimulate inclusive growth, foster innovation, and solidify India’s position as a global manufacturing and export hub.

Source: https://pib.gov.in/PressReleasePage.aspx?PRID=2098389