Introduction
Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s economy, contributing nearly 30% to GDP and generating over 110 million jobs. They foster innovation, promote self-employment, and drive industrial growth in rural and urban areas alike. Recognizing their importance, the Union Budget 2025 introduces several reforms aimed at strengthening this sector.
MSMEs greatly contribute to guaranteeing economic inclusions as well, since their activities provide livelihoods to one of the massive sections of a population, thereby including women as well as economically marginalized communities and accounting for roughly 50 percent of exports from India. However, often, MSMEs face restricted access to credits, and regulatory, and competition constraints from larger undertakings, among other key issues. Reforms in the Union Budget 2025 will address these concerns to achieve sustainable growth for this sector and resistance to economic shocks.
A Big Lift For MSME
The Union Budget this time is looking forward to approaching a boost in growth of the MSME sector through financial incentives, technology adoption, and ease of regulatory conditions. Key takeaways include customised credit cards for MSMEs. To make credit more accessible, the government has introduced MSME-specific credit cards with customised limits based on enterprise classification. First, micro and small enterprises will have a credit limit of 5 crore to 10 crore rupees, leading to additional credit of 1.5 lakh crores in the next 5 years. Second, for startups, the credit limit should be from 10 crore to 20 crore rupees. Available credits for term loans up to 20 crore rupees will benefit exporter MSMEs. It will facilitate their cash flows in buying raw materials and increasing operation scale, beyond the conventional hassles of a banking system. The measure would remove the sector’s financial bottlenecks and enhance its liquidity.
Indian government is supporting the startup ecosystem through large monetary investments. The Alternate Investment Funds for start-ups have already attracted commitments that exceed ₹91,000 crore, with backing from the Fund of Funds. The latter, in turn, received ₹10,000 crore in government support. To push funding for start-ups further ahead, a new Fund of Funds will be instituted with an enlarged scope and a fresh government infusion of ₹10,000 crore. The focus is on capital access for emerging businesses and encourages innovation and entrepreneurship in all sectors.
Another scheme is likely to help the first generation of entrepreneurs in the form of women and Scheduled Castes/Scheduled Tribes. In the next five years, the scheme will give term loans of up to ₹2 crore to 5 lakh entrepreneurs, as in the Stand-Up India scheme. This apart, it also offers capacity-building online courses that help entrepreneurs in building and honing entrepreneurial as well as managerial skills for newer businesses and helps build a better support structure for them.
Major Reforms Incorporated Into The MSMEs Sector
Amongst other reforms and modifications introduced under Union Budget 2025 is a revision in MSME Classification thresholds. Previously, micro-enterprises had an investment limit of ₹1 crore, which has now been increased to ₹2.5 crore, while the turnover threshold has been raised to ₹10 crore which was previously ₹5 crore. The investment cap for small enterprises has also been enhanced to ₹25 crore and the turnover threshold is ₹100 crore whereas earlier it was ₹10 crore and ₹50 crore respectively. The investment limit for medium enterprises has been enhanced to ₹125 crore with a threshold of ₹500 crores while its earlier threshold was ₹50 crore and ₹250 crore respectively. This expansion will provide more businesses access to MSME schemes, subsidies, and credit facilities.
A new customised Credit Card scheme ₹5 lakh to micro enterprises who are registered on the Udyam portal and 10 lakh cards will be issued in the first year itself.
Another significant change is the reduction of the corporate tax rate for small businesses to 20%, relieving the burden and making MSMEs more competitive. Another proposal in the budget is further digital transformation, such as an increase in the UPI-linked credit system for MSMEs. This will make digital payments and credit easily accessible, and reliance on traditional banking processes would be reduced.
Infrastructure And Technological Upgradation Of MSMEs
This time the budget is focusing on infrastructure improvement in MSMEs and promoting digitalization. In this respect, the government announced an increased allocation for the MSME sector, leading to better access to modern industrial parks, co-working spaces, and business incubators. This will help new entrepreneurial sentiments and existing businesses enjoy cost-effective operative space along with access to basic utilities.
A big mention is there of the adoption of technology. Artificial intelligence, blockchain, and automation are encouraged in MSMEs. The ‘Digital MSME India’ will train small business owners to handle digital tools in the best possible way so that they can stand up in this changing world of business. Research and development will be done with increased funding, encouraging innovation in the sector and innovativeness of products developed by MSMEs for improving efficiency.
Conclusion
The Union Budget 2025-26 is a landmark step in the way this government looks toward the empowerment of India’s Micro, Small, and Medium Enterprise (MSME) sector. Knowledge of the fact that MSMEs contribute importantly to the economic fabric of India, the present government has put forth measures that seek to address long-known challenges in the sector and help the growth of this sector. Increased focus on financial inclusion, easier access to credits, tax reliefs, and other technological enhancements have enabled the budget to present MSMEs in a path of sustainable development and competitiveness. Revised classification thresholds, increased credit guarantees, and customized MSME credit cards help in improving the access of credit support across businesses, large or small, making the sector boom.
Equally important is the government’s commitment to building up MSME infrastructure. By investing in modern industrial parks, co-working spaces, and business incubators, the budget provides entrepreneurship with much-needed access to scale-up operations. Furthermore, initiatives to drive digitalisation, from the expansion of credit systems linked to UPI to digital tool training, allow MSMEs to keep pace with the rapidly changing technology landscape. However, the true success of these reforms will depend on their effective implementation and uptake by businesses.
Author: Nutan Mishra, HR
Co-Author: Pritish Kumar Panda, Intern
