MSMEs’ day out: Budget push aimed as much at jobs as at pushing sector

Over the past decade, demonetisation, the introduction of Goods and Services Tax (GST), and the COVID-19 pandemic have dealt one blow after another to Micro, Small, and Medium Enterprises (MSMEs), a major driver of the Indian economy that is often considered its backbone.

Thousands of MSMEs have shut shop in this time and there have been repeated requests from India Inc. for government relief to these enterprises. As MSMEs — employing an estimated 7.5 crore Indians and generating a chunk of India’s manufacturing — struggled for survival, the effect reflected on the economy too.

On Friday (January 31), the Economic Survey pointed out that while the profits of large corporates (Nifty 500 firms) had gone up significantly in the last fiscal, wage growth had remained pathetic. Nor did employment go up proportionately, going to show that the prosperity of bigger firms does not necessarily help wage earners.

All-round support

Waking up to the imminent need to address the plight of MSMEs, Finance Minister Nirmala Sitharaman on Saturday (February 1) made some major announcements to give them a leg up.

“India’s MSMEs — numbering around 5.7 crore — play a critical role in the economy, with over one crore registered MSMEs employing 7.5 crore people and contributing 36 per cent to our manufacturing output. These enterprises, producing high-quality goods, are responsible for 45 per cent of India’s exports, positioning the nation as a global manufacturing hub,” Sitharaman said in her speech.

The Budget has provided comprehensive support to MSMEs through expanded credit access, payment security, infrastructure development, skill enhancement, and export facilitation. These measures aim to increase MSMEs’ competitiveness, generate employment, and drive economic growth.

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Change in definition

To begin with, the investment limit for the classification of MSMEs will go up by two-and-a-half times, while the turnover limit has been doubled.

Now, any firm with investment up to Rs 2.5 crore and turnover under Rs 10 crore will be classified as “micro”. A company with investment up to Rs 25 crore and turnover up to Rs 100 crore will be classified as “small” and a firm with investment up to Rs 125 crore and turnover under Rs 500 crore will be classified as “medium”.

“The government’s strategic revision of MSME classification limits is a game-changing reform set to unlock immense growth potential for millions of small businesses across India,” said Sameer Gupta, Chairman and CMD of Jakson Group, reviewing the Budget for the Confederation of Indian Industry (CII).

“By expanding investment and turnover thresholds, this move fosters a more adaptive and supportive ecosystem, empowering entrepreneurs to scale, innovate, and strengthen economic resilience. This visionary step will undoubtedly accelerate the MSME sector’s transformative journey,” he added.

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More credit to MSMEs

Among the key pushes, Rs 9,000 crore has been allocated to the Credit Guarantee Scheme for MSMEs (CGTMSE), which offers collateral-free loans. This will enable Rs 2 lakh crore in additional lending, while the credit limit has been increased from Rs 5 crore to Rs 10 crore for MSMEs.

“Bank credit to MSMEs already saw a significant 22% surge on-year last fiscal, outpacing the 17.5% growth in other categories. Additionally, the amount guaranteed under the CGTMSE scheme saw a substantial 51% rise last fiscal. All this will substantially improve the credit access of MSMEs and foster their growth,” it added.

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Borrowing limit of Mudra Loans rises

Not only that, startups can now access credit up to Rs 20 crore. On the other hand, the borrowing limit of Mudra Loans (Tarun Plus Category) has been increased to Rs 20 lakh. Besides, instead of relying on traditional collateral-based lending, public sector banks will develop in-house credit assessment models based on MSMEs’ digital footprints.

While a new loan scheme will provide up to Rs 2 crore for five lakh women, SC, and ST first-time entrepreneurs, a new internship programme has been launched in top companies for MSME workers and entrepreneurs.

“A special focus on providing MSMEs easier access to credit by doubling credit guarantee cover to Rs 10 crore will strengthen India’s industrial ecosystem,” felt Ashok Saigal, MD, Frontier Technologies Pvt Ltd. “Much anticipated customised credit cards to empower micro-enterprises with a Rs 5 lakh limit and term loans for women entrepreneurs will ensure inclusive economic development,” he added.

Also read: Why almost 5,000 Gujarat MSMEs have closed down in less than 5 years

Online export hubs

Not only easy loans, to help traditional artisans and MSMEs sell their products internationally, new e-commerce export hubs will be set up on a PPP (public-private partnership) mode. Another Rs 5,100 crore has been allocated to promote traditional artisans and craftsmen under the PM Vishwakarma Yojana.

“India’s MSMEs are the backbone of our manufacturing sector. They drive innovation and high-quality production, positioning India as a global manufacturing hub… By providing targeted support, access to finance and technology upgrades, we can unlock their full potential and truly transform India into a manufacturing powerhouse and this will help them join our quest to becoming a Global Supply Chain,” said Deepak Shetty, Chairman and MD, JCB India Ltd, reviewing the Budget for the CII.

Boost to North East

The MSME policy revisions will benefit the North East the most, with Rs 1,200 crore being allocated to Assam alone for its tea and silk industries. Emphasis has also been given to the expansion of bamboo processing MSMEs in Manipur and Mizoram.

Manipur Chief Minister N Biren Singh said the enhancement of investment and turnover limits for the classification of MSMEs would be highly beneficial for the state. “The New Classification Criteria for MSMEs will be greatly beneficial to Manipur which has been a major contributor to the MSME business registration among the North East states,” he wrote on X.

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South benefits big

Among the other regions, Rs 500 crore has been allocated for MSME food processing safety labs in Maharashtra and Gujarat, Rs 700 crore to support small enterprises in Bihar, Rs 850 crore for AI-driven MSME automation in Tamil Nadu and Karnataka, and Rs 500 crore for MSME marine and seafood processing units in Kerala.

According to Maharashtra Chief Minister Devendra Fadnavis, the credit enhancement scheme for MSMEs will benefit the sector and generate significant employment. This, he said, will particularly help Maharashtra which is aiming to be the start-up capital of India.