Union Budget 2025: Transformative measures for MSMEs
The Union Budget 2025 brings significant policy measures aimed at strengthening the Micro, Small, and Medium Enterprises (MSME) sector. With over 5.7 crore MSMEs playing a crucial role in India’s economy—contributing 36% to manufacturing and 45% to exports—these new reforms seek to provide better credit access, technological upgrades, and growth incentives.
Budget Highlights for MSMEs
- Revision in MSME Classification Criteria
The investment and turnover thresholds for MSME classification have been increased by 2.5 and 2 times, respectively. This change facilitates scalability, technological advancement, and improved access to capital, enabling MSMEs to expand operations while still claiming the benefits of MSME government policies.
- Strengthened Credit Guarantee Cover
Access to credit remains a key focus area, with expanded credit guarantee cover across different segments:
- Micro and Small Enterprises: Guaranteed cover increased from ₹5 Crore to ₹10 Crore, unlocking additional credit worth ₹1.5 Lakh Crore over five years.
- Startups: Guaranteed cover increased from ₹10 Crore to ₹20 Crore, with a moderated 1% guarantee fee for loans in 27 focus sectors vital for the Aatmnirbhar Bharat initiative.
- Exporters: Term loans up to ₹20 Crore will receive guarantee support, enabling growth in overseas markets.
- Introduction of Credit Cards for Micro Enterprises
A customized financial product, the Credit Card for Micro Enterprises, will be introduced. Registered enterprises on the Udyam portal will receive a ₹5 Lakh limit, with 10 Lakh such cards issued in the first year to ensure seamless access to working capital.
- Expansion of the Fund of Funds for Start-ups
A new ₹10,000 crore Fund of Funds has been announced to support high-growth start-ups and entrepreneurship. This expands the scope of government-backed Alternative Investment Funds (AIFs) and supplements the existing ₹91,000 crore fund.
Additionally, a Deep Tech Fund of Funds will be explored to support and catalyse next-generation startups.
- Scheme for First-Time Entrepreneurs
A new scheme will support 5 Lakh first-time entrepreneurs from women, Scheduled Castes (SC), and Scheduled Tribes (ST). The scheme will provide term loans of up to ₹2 Crore over five years, along with online capacity-building programs to enhance entrepreneurial and managerial skills.
- Focus on Labour-Intensive Sectors
The budget outlines special measures for labour -intensive industries:
- Footwear and Leather Industry: A dedicated scheme will support design capacity, component manufacturing, and quality enhancement, generating 22 lakh jobs and ₹1.1 Lakh Crore in revenue.
- Toy Industry: A structured plan under ‘Make in India’ will foster high-quality, sustainable, and innovative toy production.
- Food Processing: A National Institute of Food Technology, Entrepreneurship and Management will be established in Bihar to boost food processing, creating value addition opportunities for farmers and employment for youth.
- National Manufacturing Mission & Clean Tech Manufacturing
The National Manufacturing Mission aligns small, medium, and large enterprises with the Make in India initiative. With a special emphasis on Clean Tech manufacturing, the mission aims to:
- Improve domestic value addition.
- Develop an ecosystem for solar PV cells, EV batteries, wind turbines, electrolysis systems, and grid-scale batteries.
- Strengthen clean technology manufacturing, supporting India’s climate-friendly industrial transition.
- Export Promotion Mission
An Export Promotion Mission will be launched to further integrate MSMEs into the global economy. Jointly driven by the Ministries of Commerce, MSME, and Finance, the initiative will focus on:
- Easier access to export credit.
- Cross-border factoring support.
- Addressing non-tariff barriers for MSMEs in international markets.
Actionable Points for MSMEs
- Reassess MSME Classification: Businesses should evaluate their investment and turnover thresholds to leverage new benefits.
- Utilize Enhanced Credit Facilities: MSMEs should explore expanded credit guarantee schemes and credit cards for micro enterprises.
- Leverage Export Incentives: Exporting MSMEs should take advantage of the new Export Promotion Mission for better international trade access.
- Access Startup & Innovation Funds: Eligible startups should apply for the new Fund of Funds and the upcoming Deep Tech Fund.
- Engage in Capacity Building: First-time entrepreneurs should participate in online capacity-building programs for skill enhancement.
- Adopt Clean Tech Manufacturing: MSMEs in manufacturing should explore new incentives under the National Manufacturing Mission.
The Union Budget 2025 introduces transformative measures that could shape the future of the MSME sector. The budget presents a comprehensive roadmap for strengthening MSMEs, with targeted tax reforms, credit access, and sectoral growth initiatives. These announcements aim to bolster India’s position as a global manufacturing hub.
With these measures, MSMEs are set to benefit from improved financial inclusion, enhanced productivity, and greater export competitiveness, reinforcing their role as a critical pillar of India’s economic landscape.
For expert guidance on leveraging these policy changes, MSME Strategy Consultants (msmestrategy.com) are ready to help businesses navigate and maximize these new opportunities.
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