Union Budget 2025 is a growth catalyst for MSMEs

With over 1 crore registered MSMEs employing 7.5 crore persons and contributing to 36 per cent of manufacturing output and 45 per cent of exports, the Budget Speech rightly recognised the MSME sector as an engine of growth alongside agriculture, investment, and exports.

India’s MSME sector is a behemoth in aggregate, but the market dynamics inherently vest the individual businesses with low bargaining power in the business ecosystem. This necessitates a dedicated framework of policies and measures to protect and encourage them.

The Budget announced a major reform — the investment and turnover limits for defining the MSMEs will be increased by 2.5 times and 2 times, respectively, across categories. This will bring many businesses currently outside the ambit of the MSME into its fold, and many medium enterprises will now enjoy the benefits available to small enterprises. Most importantly, the micro and small enterprises can now scale up without the fear of losing the protection offered to them.

Access to affordable credit has long been a challenge for the MSMEs, especially given their needs to upgrade to stay in tune with the consumer aspirations. Now the MSMEs can look forward to better working capital access and financial support for growth.

This Budget doubles the credit guarantee limit from ₹5 crore to ₹10 crore for micro and small enterprises, and from ₹10 crore to ₹20 crore for startups in key sectors. Export-oriented MSMEs can enjoy term loan guarantees up to ₹20 crore. Additionally, customised Credit Cards will provide ₹5 lakh limit to micro enterprises registered on the Udyam portal. Besides, for startups, a new fund of funds with ₹10,000 crore is announced. A new scheme for first-time entrepreneurs will provide term loans up to ₹2 crore for 5 lakh women, scheduled caste, and scheduled tribe first-time entrepreneurs over the next five years, together with online entrepreneurship training.

Finance Minister Nirmala Sitharaman also announced that the government will undertake policy and facilitation measures to promote employment and entrepreneurship in labour-intensive sectors. The MSMEs on their growth trajectory find access to skilled labour crucial. It remains to be seen whether the measures will address this.

Coming to sectoral focus, a focus product scheme for the footwear and leather sector is announced, targeting generation of 22 lakh jobs, and ₹1.1 lakh-crore in exports. A cluster-based toy manufacturing scheme is announced aiming to position India as a global toy hub for innovative and sustainable toy production. A National Institute of Food Technology, Entrepreneurship and Management will be established to give a strong fillip to the food processing sector. This will be set up in Bihar, reflecting the Budget’s unmistakable fondness for the election-going state.

Setting up of a National Manufacturing Mission to strengthen ‘Make in India’ is also on the cards, replete with policy support, execution roadmaps, and governance frameworks. It will also drive cleantech manufacturing.

The middle class plays a vital role in India’s consumption economy. With the new tax and rebate structure resulting in no tax liability for individuals with income up to ₹12 lakh, the average household will have higher purchasing power. The increased demand for goods will travel up the value chain ultimately benefitting the MSMEs. Further, individual entrepreneurs can reinvest their tax savings in business growth.

The government has also pledged regulatory simplifications in non-finance sectors, enhancing the ease of doing business. Measures for infrastructure and integration of domestic manufacturing capacities with global supply chains will also benefit the MSMEs indirectly.

Usha Ganapathy Subramanian is a practising company secretary, and Ranjith Krishnan is a sustainability consultant.

Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.

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Union Budget 2025 | Nirmala Sitharaman, as Finance Minister, presented her record 8th Union Budget this time. While inflation has burnt a hole in the pockets of 'aam janata', the Modi govt gave income tax relief for those making up to Rs 12 lakh per year in salaried income. Track the latest coverage, live news, in-depth opinions, and analysis only on Deccan Herald. Also follow us on WhatsApp, LinkedIn, X, Facebook, YouTube, and Instagram.