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Union Budget 2025-26: A Boost for MSMEs
Context:
The Union Budget for FY 2025-26 places a strong focus on MSMEs. Key objectives include boosting consumer demand, enhancing digital participation, and easing regulatory frameworks. The budget emphasises inclusive development, particularly for women and marginalised entrepreneurs.
MSMEs: The Backbone of India’s Industrial Growth
- Serve as a critical component of India’s industrial base and supply chain.
- Enable decentralised industrialisation, promoting growth in smaller towns and rural areas.
- Ensure innovation and technology adoption, leading to enhanced productivity and global competitiveness.
State of MSMEs in India
- MSMEs contribute 30% to India’s GDP, employ 62% of the workforce, and account for 45.79% of exports.
- Over 5.19 crore MSMEs are Udyam-registered as of October 2024, with 99% being micro-enterprises.
- Credit penetration remains low at 14%, with an unmet demand of ₹20-25 lakh crore, affecting nearly 47% of enterprises.
Key Budgetary Measures for MSME Growth
- Enhancing Credit Access
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- Doubling of Credit Guarantee Cover: Increased to ₹10 crore for micro and small enterprises.
- Customised Credit Cards for Micro Enterprises: ₹5 lakh limit for Udyam-registered micro enterprises, 10 lakh cards to be issued in the first year.
- Scheme for First-time Entrepreneurs: Term loans of up to ₹2 crore for 5 lakh first-time entrepreneurs, including women and SC/ST entrepreneurs.
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- Promoting Digital and Technological Integration
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- MSMEs to be integrated into the digital economy with enhanced digital credit access and technology adoption.
- Simplification of regulatory frameworks to improve the ease of doing business.
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- Sector-Specific Support for Labour-Intensive Industries
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- Footwear & Leather Sector Focus Product Scheme: Expected to create 22 lakh jobs, generate ₹4 lakh crore turnover, and ₹1.1 lakh crore in exports.
- Toy Industry Development: Focus on cluster-based manufacturing, skill development, and innovation to promote Made in India toys.
- Food Processing Industry Support: Establishment of a National Institute of Food Technology in Bihar to enhance food processing, income for farmers, and employment for youth.
Impact of Union Government’s Measures on MSMEs
- Increased Financial Inclusion: Expansion of credit access will enable MSMEs to scale up operations and invest in technology.
- Boost to Women and SC/ST Entrepreneurs: Special provisions for marginalised groups will promote inclusive industrial growth.
- Strengthening India’s Export Base: MSMEs’ contribution to Make in India will increase with lower customs duties on key manufacturing inputs.
- Expansion of Digital Economy: Encouraging MSMEs to adopt digital solutions and fintech innovations will enhance efficiency and market reach.
Higher Employment Generation: Focus on labour-intensive industries will create new job opportunities, particularly in tier-II and rural regions.
