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Post-Budget 2025: Impact on MSMEs and Small Business Growth

Synopsis:

The Union Budget 2025 was announced on Feb 1, 2025 by Nirmala Sitharaman with a focus on four engines of development: agriculture, MSMEs, investment, and exports. Read more... The budget made quite a few announcements related to MSMEs and furthering Make in India. From schemes like manufacturing missions to schemes for better access to capital, the budget aims to make India a manufacturing hub with MSMEs as its key drivers. Presenting #BudgetSimpleHai to make the budget 2025 simpler for you!Read less


From taxpayers to big industries, MSMEs to all other sectors, everyone has been waiting long for the 2025 budget announcements with high hopes. The wait is over! On Feb 1, 2025, Ms. Nirmala Sitharaman started her budget speech at 11:00 a.m. for the 8th time, making history as the only finance minister to do so. 

The budget announcements this year focused on four engines of development: Agriculture, MSMEs, Investment, and Export. Continue reading as we delve deep into budget highlights specifically made in regard to the MSME sector, its impact, future outlook, and much more. 

Union Budget 2025: Key Announcements MSMEs and Small Business Sector

Ms. Nirmala Sitharaman, on February 1, 2025, presented the union budget 2025-26, becoming the only finance minister in the country to have delivered eight consecutive budget speeches. The Union Budget 2025 was announced with a focus on investment in the economy, people, and innovation. Take a look: 

  • MSMEs & Its Current Landscape: 

    • MSMEs were announced as the second engine, with a focus on MSMEs numbering 5.7 crores. The speech mentioned over 1 crore registered MSMEs, employing 7.5 crore people, generating 36% of manufacturing coming together to position India as a manufacturing hub, with quality products.

    • The budget highlighted that MSMEs are already responsible for over 45% of exports. Further, to help them achieve higher efficiency, it announced technological upgradation and better access to capital. 

  • Increase in Investment and Credit Access

    • The investment and turnover limits for the classification of all MSMEs will be enhanced to 2.5 and 2 times, respectively.

    • Additionally, to improve access to credit, Credit Guarantee coverage will be increased. For instance, for micro and small enterprises, it will be increased from ₹5 to ₹10 crore rupees, leading to additional credit of 1.5 lakh crore in the coming 5 years.

    • Credit Guarantee for startups to be increased from ₹10 to ₹20 cr rupees with a guarantee fee being moderated to 1% for loans and 27 focus sectors. 

    • For well-run exporter MSMEs, for term loans up to ₹20 crore rupees. 

    • Furthermore, a customised credit card was also announced with a 5 lakh rupees limit for micro-enterprises registered on the Udyam portal. 

    • New scheme to be introduced benefiting 5 lakh SC and ST women who are first-time entrepreneurs. It will help them with providing term loans up to ₹ 2 crores during the next 5 years. 

  • India- A Toy Hub

    • The budget also highlighted the building of the National Action Plan for Toys- a relevant scheme to make India a Global hub for toys. The scheme is designed to focus on the development of clusters, skills, and manufacturing ecosystems that will help create high-quality, unique, innovative, and sustainable toys. 

  • Support to Other SMEs

    • Support for food processing industries, in line with Purvodaya, along with the establishment of the National Institute of Food Technology, entrepreneurship, and Management in Bihar. 

    • Announcement of Manufacturing mission furthering Make In India: the government will set up a manufacturing mission for small, medium, and large industries by providing policy support, execution roadmaps, and governance. 

Union Budget 2025: Government Initiatives and Reforms

Calling MSMEs the second engine of India’s economic development, the Finance Minister unveiled plans to boost credit support for exporters:

  1. Major increase in credit guarantee

    The credit guarantee cover has been proposed for an increase from ₹5 crore to ₹10 crore. Additionally, well-performing MSME exporters will now have access to term loans of up to ₹20 crore.

  2. Credit Cards

    In a move to empower micro enterprises, the government also announced the launch of customised credit cards. “We will introduce tailored Credit Cards with a ₹5 lakh limit for micro-enterprises registered on the Udyam portal. In the first year, 10 lakh such cards will be issued,” the Finance Minister stated.

Impact Analysis of Budget 2025 on MSMEs and Small Businesses

Before we start exploring the MSME budget highlights for 2025, let's understand what makes the sector important. Well, MSMEs are of crucial importance and contribute significantly to the overall growth and development of an economy and its people. 

Generally referred to as the backbone of India's economy, MSMEs and small businesses help immensely with ideas, innovation, and job creation. Here is how MSMEs help

  • Create Employment 

MSMEs generate employment for both types: skilled and unskilled labour. This, ultimately, helps reduce the rising rates of unemployment in the country.

  • Regional Development 

The government plans to promote the establishment of small businesses and MSMEs in less developed or underdeveloped regions, which ultimately balances economic development. Further, it also helps reduce the problem of concentrating businesses in just big urban centres. 

  • Boost Economic Diversification 

MSMEs help boost Economic diversification by businesses engaging in different sectors like manufacturing, textiles, agri-business, food processing, etc. MSMEs contribute significantly to the country's exports and GDP. The sector saw a remarkable rise from ₹3.95lakh crore in 2020-21 to ₹12.39 lakh crore in 2024-25. And even under the unprecedented COVID-19 conditions, the sector managed to contribute 29.6% to India's GDP.

A Quick Recap: Budget 2024 Provisions Announced for MSMEs and Small Businesses Growth

The significance of MSMEs and small businesses was very well reflected even in the Budget 2024. Here is a quick recap of key announcements made in Budget 2024 with respect to MSMEs.

  • Budget 2024 increased the credit access to MSMEs with the MUDRA limit being doubled. This went to ₹20 lakhs from ₹10 lakhs. 

  • The turnover limit for the TReDS platform was lowered by 50% and went to ₹250 crores from ₹500 crores. The strategic move aimed to make the platform more accessible to new businesses, helping them better manage their working capital and cash flow. 

  • A new assessment model for MSME credit was introduced. This was done to help MSMEs bag essential funds for unhindered operations. 

  • Credit Guarantee Scheme to offer extra security for MSME loans. 

Future Outlook for India's MSMEs Post-Budget 2025

With a direct focus on MSMEs and several big announcements in Budget 2025, with respect to improving investment, credit access, and loan facilities for MSMEs, the sector is likely to thrive further. Initiatives like an increase in the investment and turnover limits for MSMEs by 2 and 2.5, respectively, can be seen as a power move to encourage MSMEs to do better and enhance their job-creating capabilities. 

Government announcements related to technological upgradation and promotion of different industries, including footwear, are being seen as inclusive and in a positive light among entrepreneurs. The growth of small businesses, entrepreneurs, and MSMEs is often hindered due to a variety of challenges. And securing adequate finance is one of them. The sector had high hopes from the budget announcements in terms of credit access, special incentives for women entrepreneurs, and lending facilities. 

All in all, the budget 2025 served as a decent attempt to help MSMEs cope with their financial challenges with an increase in credit guarantee coverage. Further, the announcement of schemes like the new scheme to help SC/ST women with term loans of up to ₹2 crores, the budget aimed to make the entrepreneurship field more inclusive and fair for everyone.

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Frequently Asked Questions

What are the key budget announcements for the MSMEs in 2025?

Answer Field

Nirmala Sitharaman, in Union Budget 2025, made a variety of announcements related to the MSME sector. For instance, the budget called for technological upgradation and credit access to the sector. For instance, the credit guarantee cover for micro and small enterprises will be increased from ₹5 to ₹10 crore rupees. And for startups, it will increase from ₹10 to ₹20 crores. Further, announcements were made to make India emerge as a toy hub.

How will the Budget 2025 affect the MSMEs?

Answer Field

With some positive and benefits announcements in favour of MSMEs, including better access to credit and empowering more women entrepreneurs, budget 2025 is likely to have a positive impact on the sector. Government initiatives and financial support can help MSMEs grow and secure funds easily, reducing their financial struggles.

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