Union Budget 2025-26 Boosts MSMEs with Higher Credit, Revised Classification, and New Funds

New Delhi: The Union Budget 2025-26 has placed Micro, Small, and Medium Enterprises (MSMEs) at the heart of India’s development strategy, recognizing them as a key engine for economic growth and employment generation. Finance Minister Nirmala Sitharaman, while presenting the Budget in Parliament today, announced a series of transformative reforms aimed at strengthening MSMEs, enhancing credit availability, and fostering entrepreneurship.

Revised MSME Classification for Growth

To help MSMEs scale up operations, adopt new technology, and access capital more efficiently, the government has revised investment and turnover limits for their classification. Investment limits will be increased 2.5 times, while turnover limits will be doubled across all categories. This move is expected to provide a boost to businesses, allowing them to expand while still enjoying MSME benefits.

Enhanced Credit Support and MSME Loans

To ensure better access to credit, the government has announced a major expansion of credit guarantee cover, unlocking ₹1.5 lakh crore in additional loans over the next five years. Key measures include:

• Micro and Small Enterprises: Credit guarantee cover increased from ₹5 crore to ₹10 crore.
• Startups: Guarantee cover doubled from ₹10 crore to ₹20 crore, with a moderated fee of 1% for loans in 27 priority sectors under the Atmanirbhar Bharat initiative.
• Exporter MSMEs: Special credit support for term loans up to ₹20 crore.

To further empower micro enterprises, the government will introduce customized Credit Cards with a ₹5 lakh limit for those registered on the Udyam portal. In the first year, 10 lakh such cards will be issued.

Strengthening Startups with New Funds

Recognizing the role of startups in India’s innovation ecosystem, Sitharaman announced the launch of a new ₹10,000 crore Fund of Funds. This will expand the scope of the existing Alternate Investment Funds (AIFs), which have already received commitments of over ₹91,000 crore.

Additionally, the government is exploring a Deep Tech Fund of Funds to support next-generation startups, ensuring that India remains a global hub for high-tech entrepreneurship.

New Scheme for First-Time Entrepreneurs

The budget introduced a special scheme to support first-time entrepreneurs from women, Scheduled Castes, and Scheduled Tribes communities. The initiative will provide term loans of up to ₹2 crore to 5 lakh new entrepreneurs over the next five years. The scheme will draw from the success of Stand-Up India and include online capacity-building programs for business management.

Export Promotion Mission

To boost India’s global trade footprint, the government will launch an Export Promotion Mission, in collaboration with the Ministries of Commerce, MSME, and Finance. The initiative will:

• Provide easier access to export credit
• Offer cross-border factoring support
• Help MSMEs overcome non-tariff barriers in international markets

With these ambitious reforms, the Union Budget 2025-26 aims to position MSMEs as a key driver of India’s economic transformation, fueling job creation, industrial growth, and global competitiveness.