By CA Mohan Patel
The Union Budget 2025-26 introduces key initiatives to strengthen the Micro, Small, and Medium Enterprises (MSMEs) sector, recognizing its significant role in driving economic growth, job creation, and exports. The budget focuses on credit support, tax reliefs, infrastructure development, innovation funding, and skill enhancement, making it easier for MSMEs to access capital, expand operations, and compete globally.
- Key Budget Announcements for MSMEs
- Enhanced Credit Support for MSMEs
- Increased Credit Guarantee Cover
- The credit guarantee limit has been raised from ₹5 crore to ₹10 crore, unlocking ₹1.5 lakh crore in additional funding to support MSME expansion.
- This move encourages banks and NBFCs to provide more collateral-free loans, helping new entrepreneurs and struggling MSMEs secure working capital.
- MSME-Specific Credit Cards
- Introduction of customized credit cards for micro-enterprises, allowing flexible financing options tailored to small business needs.
- Tax Reforms & Compliance Relief
- Income Tax Concessions
- The nil tax slab has been raised to ₹12 lakh per annum, while the 30% maximum tax rate now applies only to incomes above ₹24 lakh.
- This provides higher disposable income for MSME owners and employees, leading to higher consumer demand and business reinvestment.
- Faster GST Refunds
- The processing time for GST refunds has been reduced to 15 days, significantly improving cash flow and liquidity for MSMEs.
- This ensures businesses have access to working capital faster, reducing operational delays.
- Financial Support for MSME Start-ups & Innovation
- ₹10,000 Crore Fund of Funds for MSMEs & Start-ups
- This fund provides direct equity support to innovative MSMEs and start-ups, allowing them to scale operations and invest in R&D.
- Inclusive Entrepreneurship Scheme
- A new initiative will support 5 lakh first-time entrepreneurs from women, Scheduled Castes (SC), and Scheduled Tribes (ST) by offering term loans of up to ₹2 crore over the next five years.
- This promotes inclusive economic participation and ensures diverse representation in the MSME sector.
- Infrastructure & Market Expansion
- Expansion of Regional Air Connectivity
- 120 new destinations have been added under the UDAN (Ude Desh Ka Aam Naagrik) scheme, aiming to connect rural businesses with major markets.
- This will lower logistics costs and create new trade opportunities for MSMEs.
- Maritime Development Fund (₹25,000 Crore)
- Investment in port and shipping infrastructure will reduce freight costs and improve exports for MSMEs engaged in international trade.
- Manufacturing & Skill Development
- National Manufacturing Mission for MSMEs
- Provides technology upgradation incentives, capital subsidies, and market linkages to MSMEs involved in manufacturing.
- Five New National Skilling Centers
- These centers focus on automation, AI, and advanced manufacturing skills, ensuring MSMEs have access to a trained workforce.
- Impact of Budget 2025-26 on MSMEs
✅ 1. Easier Access to Credit & Financing
- Higher credit limits allow MSMEs to expand operations without collateral constraints.
- Government-backed equity support helps start-ups grow without excessive debt.
✅ 2. Increased Profit Margins with Tax Benefits
- Lower income tax rates increase disposable income for MSME owners.
- Faster GST refunds mean MSMEs get quicker access to working capital.
✅ 3. Cost Reduction in Operations & Logistics
- Better regional and maritime connectivity lowers transportation costs for MSMEs.
- Access to newer domestic and global markets boosts revenue potential.
✅ 4. Growth in Manufacturing & Employment
- Incentives for technology adoption make MSMEs more competitive.
- New skilling centers ensure a continuous supply of trained workers, reducing hiring and training costs.
- Sector-Specific Benefits for MSMEs
| Sector | Key Budget Announcements & Benefits |
| Manufacturing MSMEs | ✅ National Manufacturing Mission launched with incentives & subsidies for machinery & production units. ✅ Faster GST Refunds improve cash flow, facilitating reinvestment into operations. |
| Textile & Apparel MSMEs | ✅ Production Linked Incentive (PLI) Scheme extended to include fabric and apparel manufacturing. ✅ Support for Sustainable Production: Initiatives to promote organic and sustainable textile manufacturing practices. |
| Technology & IT MSMEs | ✅ Fund of Funds offers equity support to tech start-ups, fostering innovation. ✅ Tax Incentives: Lower corporate tax rates for MSMEs engaged in research and development activities. |
| Export-Oriented MSMEs | ✅ Maritime Development Fund enhances port infrastructure, reducing export logistics costs. ✅ New Trade Agreements facilitate easier access to global markets for MSMEs. |
| Agro-Based MSMEs | ✅ Increased Funding for food processing and rural MSMEs. ✅ Government Schemes for Organic Farming, Dairy & Agri-Tech promote sustainable agriculture and value-added processing. |
| Retail & E-commerce MSMEs | ✅ Reduction in Compliance Requirements simplifies GST norms and regulatory burdens for small retailers selling online. ✅ Tax Relief for Digital Sellers benefits MSMEs in e-commerce and digital services. |
| Healthcare & Pharma MSMEs | ✅ Incentives for Generic Medicine Production strengthen the domestic healthcare sector. ✅ Easier Access to Loans for Medical Equipment & Pharma Businesses promote healthcare startups and small manufacturers. |
| Fintech & Digital MSMEs | ✅ Support for AI, Blockchain & Cybersecurity Start-ups includes funding and tax incentives for fintech innovation. ✅ Government-backed Digital Lending Programs enhance financial inclusion through MSME participation. |
| Logistics & Supply Chain MSMEs | ✅ Investment in Warehouse Infrastructure & Cold Storage supports perishable goods businesses. ✅ Lower Freight Charges reduce transportation costs for MSMEs. |
| Handicrafts & Traditional MSMEs | ✅ Boost to Khadi, Handloom & Cottage Industries includes increased funding for artisan clusters. ✅ Export Promotion for Handmade Products provides incentives for traditional MSMEs to expand into international markets. |
- Conclusion: Why This Budget is a Game-Changer for MSMEs
The Union Budget 2025-26 presents a pro-business approach with a strong focus on MSME growth. These reforms will:
✅ Enhance access to credit & equity funding, reducing capital constraints.
✅ Boost manufacturing & job creation through incentives & technology upgradation.
✅ Expand market access by improving domestic & global trade infrastructure.
✅ Improve cash flow & profitability with lower tax burdens & faster refunds.
✅ Empower start-ups & women entrepreneurs with targeted financial assistance.
These initiatives will position MSMEs as key drivers of India’s economic growth, fostering innovation, sustainability, and global competitiveness.