Sector responsible for 36% of country’s manufacturing output to see enhanced access to capital & skill development. Calling them one of the four “powerful engines” driving the economy, Union Finance Minister, Nirmala Sitharaman announced a series of measures in the Union Budget 2025 aimed at strengthening India’s Micro, Small, and Medium Enterprises (MSME). These included increased investment and turnover limits for MSME classification and a scheme for first-time entrepreneurs from certain groups. At present, over 10 million registered MSMEs employ 75 million people, contribute 36% to the country’s manufacturing output and account for 45% of India’s exports, Sitharaman stated in her Budget speech. While the budget introduces several reforms to boost the sector, a closer examination of the allocations reveals both hits and some misses.
Boosting investment & credit:
One of the key announcements was the increase in investment and turnover limits for MSME classification. The new thresholds set at 2.5 times the current investment and twice the turnover limits, are expected to provide more working capital to MSMEs, encouraging expansion and job creation. Recognizing the financial constraints faced by small businesses, the Budget has also expanded credit guarantee coverage:
- The credit guarantee cover for MSMEs has been increased from Rs 5 crores to Rs 10 crores, unlocking an additional Rs 1.5 lakh crores in credit over the next five years.
- For start-ups, the guarantee cover has doubled from Rs 10 crores to Rs 20 crores, with a moderated guarantee fee of 1% for loans in 27 focus sectors under the Atmanirbhar Bharat initiative.
- Exporter MSMEs will now be eligible for enhanced credit guarantees on term loans up to Rs 20 crores, helping them integrate better into global trade.
Additionally, the Government will introduce customized credit cards with a Rs 5 lakhs limit for micro enterprises registered on the Udyam portal. In the first year, one million such cards are expected to be issued, streamlining access to working capital.
Budget allocations: A mixed bag:
The Union Ministry of Micro, Small, and Medium Enterprises has been allocated Rs 23,168 crores, an increase of 4.6% over the 2024-25 Budget. However, in the revised estimates for 2024-25, the allocation was cut to Rs 17,306 crores, nearly 22% lower than the initial allocation.
Key changes in scheme allocations include:
- Khadi, village and coir industries: Allocation increased by 9% to Rs 1,532 crores.
- Technology upgradation and quality certification: Funding remains unchanged at Rs 74.42 crores.
- Prime Minister Employment Generation Program (PMEGP) and Other Credit Support Schemes: Allocation reduced by 1.5% to Rs 11,954.42 crores.
The Government has also expanded the Fund of Funds for Start-ups with an additional Rs 10,000 crores contribution, though the Budget allocation for the scheme this year stands at Rs 700 crores. Meanwhile, the allocation for entrepreneurship and skill development has been increased by over 19% to Rs 836 crores.
Support for first-time entrepreneurs:
A dedicated scheme for first-time women entrepreneurs as well as those from Scheduled Castes (SC) and Scheduled Tribes (ST) will offer term loans up to Rs 2 crores over the next five years. The scheme will integrate successful aspects of the ‘Stand-Up India’ initiative, while providing online capacity-building programs for entrepreneurship and managerial skills. However, the Budget document does not explicitly list this initiative.
Two focus sectors:
To promote employment and entrepreneurship, the Government will implement targeted policy measures for industries:
- Focus product scheme for footwear & leather sectors: This initiative aims to enhance productivity, quality and competitiveness by supporting design capacity, component manufacturing and production machinery for both leather and non-leather footwear. The Government expects this to generate employment for 2.2 million people, Rs 4 lakh crores in turnover and Rs 1.1 lakh crores in exports.
- Toy sector development: Building on the National Action Plan for Toys, the Government will introduce a dedicated scheme to develop clusters, strengthen skills and foster an ecosystem for sustainable, innovative and high-quality toy manufacturing under the ‘Made in India’ brand.
Source : https://www.downtoearth.org.in/economy/budget-2025-26-big-push-for-micro-small-and-medium-enterprises
