New Delhi: Union Finance Minister Nirmala Sitharaman’s budget proposals focus on boosting MSME growth and job creation. A key initiative is the expansion of credit facilities, doubling the credit guarantee cover for micro and small enterprises from Rs 5 crore to Rs 10 crore. Additionally, the government has pledged Rs 1.5 lakh crore in extra credit support over the next five years.
FM Sitharaman announced another round of the Fund of Funds for Startups scheme with a corpus of Rs 10,000 crore to promote the growth of budding entrepreneurs.
The announcement assumes significance as the government is focusing on promoting innovation through startups.
These measures enhance financial accessibility, enabling MSMEs to expand operations more seamlessly. The increased credit guarantee is expected to ease loan security concerns, empowering businesses to invest in growth and technology upgrades.
Mukul Goyal, Co-Founder of Stratefix Consulting, said that the Union Budget 2025 has rightly emphasised the pivotal role of MSMEs in India's economic landscape. “With over one crore registered MSMEs contributing approximately 36% to our manufacturing output and 45% to exports, their significance cannot be overstated,” he said.
He added, “The government's decision to enhance the investment and turnover thresholds for MSME classification is a commendable move. This adjustment will enable more enterprises to avail MSME benefits, fostering growth and competitiveness.”
Additionally, the increase in credit guarantee cover for microenterprises from Rs 5 crore to Rs 10 crore is a significant step. This initiative is expected to inject an additional Rs 1.5 lakh crore in credit over the next five years, empowering small businesses to invest in innovation and expansion, Goyal commented.
Mayuresh Raut, Managing Partner, Seafund, seconded that this will not only enable startups to have access to debt capital; it will also help them scale faster with less equity dilution. “Hence, it will lead to a virtuous cycle of higher top line, less equity dilution, better valuation, and better fundraising.”
However, while these measures are promising, it is crucial to address the persistent challenges that MSMEs face. “Access to timely and affordable credit remains a hurdle for many small businesses. Streamlining the loan disbursement process and reducing bureaucratic red tape is essential to ensuring that the intended benefits reach the grassroots level,” emphasised Goyal.
The government will launch a Rs 2-crore term loan for 5 lakh first-time women, SC and ST entrepreneurs, Finance Minister Sitharaman said.
Presenting the Union Budget for 2025–26, the finance minister also said a manufacturing mission will be set up for SMEs and large industries.
Besides, the government will undertake facilitation measures to enhance productivity in labor-intensive sectors, Sitharaman said.