The Micro, Small, and Medium Enterprises (MSME) sector is a key driver of India's economic growth, contributing significantly to employment, manufacturing, and exports. With 5.93 crore registered MSMEs employing over 25 crore people, these enterprises play a crucial role in shaping India’s industrial landscape. In 2023-24, MSMEs accounted for 45.73% of India’s total exports, reinforcing their position as the backbone of India's global trade ambitions.

Recognizing the sector's immense potential, the Union Budget 2025-26 has introduced a series of reforms aimed at enhancing credit access, fostering innovation, and strengthening sector-specific industries. These measures seek to equip MSMEs with better financial tools, promote entrepreneurship, and boost India's manufacturing and export capabilities.

MSMEs and Their Role in India's Economic Growth

MSMEs serve as a foundation for India's industrial and economic expansion, contributing to:

• Employment Generation: As the second-largest employment provider after agriculture, MSMEs support millions of livelihoods across urban and rural areas.
• Manufacturing Output: The sector’s share in India’s Gross Value Added (GVA) has steadily increased from 27.3% in 2020-21 to 30.1% in 2022-23, reflecting its growing influence in economic output.
• Exports: MSME exports have witnessed remarkable growth, increasing from ₹3.95 lakh crore in 2020-21 to ₹12.39 lakh crore in 2024-25. The sector’s contribution to total exports has risen to 45.79% in 2024-25 (as of May 2024), showcasing its deepening integration into global trade.

These trends underscore the resilience of MSMEs and their crucial role in positioning India as a global manufacturing and export hub.

Key Measures for MSMEs in Union Budget 2025-26

The Union Budget 2025-26 presents comprehensive reforms aimed at empowering MSMEs, with a strong focus on financial support, sector-specific initiatives, and policy enhancements.

1. Revised Classification Criteria

·        To enable MSMEs to scale operations and access better financial resources, the investment and turnover limits for MSME classification have been raised by 2.5 times and 2 times, respectively.

·        This adjustment is expected to facilitate greater efficiency, adoption of advanced technology, and increased employment generation.

2. Enhanced Credit Availability

The budget introduces strong financial support measures to improve credit flow:

·        The credit guarantee cover for micro and small enterprises has been increased from ₹5 crore to ₹10 crore, enabling additional credit of ₹1.5 lakh crore over five years.

·        Startups will benefit from an increase in guarantee cover from ₹10 crore to ₹20 crore, with a 1% reduced loan fee for 27 priority sectors.

·        Exporter MSMEs will have access to term loans up to ₹20 crore with enhanced guarantee coverage, ensuring their competitiveness in international markets.

3. Credit Cards for Micro Enterprises

·        A customized Credit Card scheme will provide ₹5 lakh in credit to micro enterprises registered on the Udyam portal.

·        In the first year, 10 lakh credit cards will be issued to facilitate working capital access for small businesses.

4. Support for Startups and First-Time Entrepreneurs

·        A ₹10,000 crore Fund of Funds will be established to support and expand startups.

·        A new scheme will provide term loans up to ₹2 crore for 5 lakh first-time entrepreneurs from Scheduled Castes, Scheduled Tribes, and women entrepreneurs over the next five years.

These initiatives aim to promote inclusive entrepreneurship, ensuring better financial access for disadvantaged groups.

Sector-Specific Support for MSMEs

1. Focus on Labour-Intensive Sectors

Recognizing the potential of labour-intensive industries, the government is implementing:

• A Focus Product Scheme for the footwear and leather sector to enhance design, component manufacturing, and non-leather footwear production. This initiative is expected to:
• Generate ₹4 lakh crore in turnover.
• Create 22 lakh new jobs.
• A new scheme for the toy industry, promoting cluster development and skill-building to establish India as a global leader in toy manufacturing.

2. Strengthening Manufacturing and Clean Tech Initiatives

• A National Manufacturing Mission will provide a comprehensive policy roadmap to support small, medium, and large industries under the Make in India initiative.
• A major focus will be on clean technology manufacturing, with targeted support for:
• Solar PV cells.
• Electric vehicle (EV) batteries.
• Wind turbines.
• High-voltage transmission equipment.

These initiatives align with India’s vision of sustainable industrial growth and energy security, reducing dependence on imports while strengthening domestic manufacturing capabilities.

Government Initiatives for MSMEs

To promote formalization and competitiveness, the government has introduced several initiatives:

1. PM Vishwakarma

·        Focuses on enhancing artisans’ and craftspeople’s productivity and market access.

·        ₹13,000 crore allocated for 2023-24 to 2027-28.

·        Over 2.65 crore applications received, with 27.13 lakh successfully registered.

2. Udyam Registration Portal

·        Launched in 2020, streamlining MSME registration.

·        Over 5.93 crore MSMEs registered, generating employment for over 25.18 crore people.

3. Prime Minister’s Employment Generation Programme (PMEGP)

• Supports credit-linked subsidies for micro-enterprises.
• In 2023-24, PMEGP:
• Facilitated 89,118 enterprises.
• Disbursed ₹3,093.87 crore in subsidies.
• Generated 7,12,944 jobs nationwide.

4. Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

• Strengthens traditional artisan clusters.
• 513 clusters approved, generating 2,20,800 jobs.

5. Public Procurement Policy for MSEs

• Ensures 25% of Central Government procurement is sourced from MSMEs.
• In 2023-24, ₹74,717 crore worth of goods were procured from 2,58,413 MSMEs.

Conclusion

The Union Budget 2025-26 presents a strategic roadmap for MSMEs, prioritizing credit access, entrepreneurship, and sector-specific initiatives. By enhancing financial support, promoting manufacturing, and encouraging global trade participation, the government is ensuring that MSMEs remain key players in India’s economic transformation.

With continued policy support and targeted initiatives, MSMEs will not only strengthen domestic industries but also bolster India’s position as a global manufacturing and export hub, contributing significantly to the vision of Viksit Bharat.