8-February -2025-Special-Article

UNION BUDGET 2025-26: KEY MEASURES FOR MSME SECTOR

The Union Budget 2025-26 has introduced several significant initiatives to strengthen the Micro, Small, and Medium Enterprises (MSME) sector. Recognizing its critical role in India’s economy, the government has enhanced financial support, eased regulations, and introduced new schemes to promote growth and competitiveness.

Key Budgetary Measures for MSMEs

Increased Investment and Turnover Limits

• The investment threshold for MSMEs has been raised by 2.5 times, and turnover limits have been doubled.
• This revision enables more businesses to qualify as MSMEs, allowing them to access government incentives and financial support.

Enhanced Credit Availability

• Credit guarantee cover for micro and small enterprises increased from Rs 5 crore to Rs 10 crore, unlocking Rs 1.5 lakh crore in additional credit over five years.
• Startup guarantee cover increased from Rs 10 crore to Rs 20 crore, with a reduced loan processing fee of 1% in 27 priority sectors.
• Exporter MSMEs can avail Rs 20 crore term loans with enhanced guarantee cover, promoting international trade expansion.

MSME Credit Cards

• Introduction of MSME credit cards to simplify loan access and boost business growth.
• Micro-enterprises registered on the Udyam portal will receive Rs 5 lakh credit facility.
• 10 lakh MSME credit cards to be issued in the first year to facilitate access to working capital.

Support for Startups

• A Fund of Funds worth Rs 10,000 crore is introduced to boost startup funding.
• A new scheme for first-time entrepreneurs from women, Scheduled Castes (SC), and Scheduled Tribes (ST) will provide term loans up to Rs 2 crore over five years.
• Inspired by the Stand-Up India scheme, the initiative includes online capacity-building programs to enhance entrepreneurial and managerial skills.

National Manufacturing Mission (NMM)

• Focus on clean tech manufacturing under the Make in India initiative.
• Emphasis on domestic production of solar photovoltaic (PV) cells, EV batteries, wind turbines, and transmission equipment.
• Aims to reduce import dependence, particularly from China, and strengthen India’s self-reliance in advanced manufacturing.

Support for Labour-Intensive Sectors

Focus Product Scheme

• Encourages design, component manufacturing, and non-leather footwear production.
• Expected to create 22 lakh jobs and generate a Rs 4 lakh crore turnover.

Toy Sector Development

• A new cluster-based scheme to promote toy manufacturing and skill development.
• Aims to position India as a global toy manufacturing hub.

Food Processing Industry

• Establishment of the National Institute of Food Technology in Bihar to support Eastern India’s food industries.

Cross-Border Factoring for MSMEs

• Scaling cross-border factoring services to account for 3% of India’s merchandise exports, aligning with global averages.
• Export factoring allows MSMEs to sell their receivables at a discount for immediate cash flow, reducing reliance on banks.

Current Scenario of MSMEs in India

Employment Generation

• MSMEs provide employment to over 25.18 crore people in India, significantly contributing to job creation.

Economic Contribution

• The MSME sector’s contribution to Gross Value Added (GVA) increased from 27.3% in 2020-21 to 30.1% in 2022-23.

Growth in Exports

• MSME exports rose from Rs 3.95 lakh crore in 2020-21 to Rs 12.39 lakh crore in 2024-25.
• The number of MSMEs engaged in exports surged from 52,849 in 2020-21 to 1,73,350 in 2024-25.
• Their share in India’s total exports increased from 43.59% in 2022-23 to 45.79% in 2024-25 (till May 2024).

Challenges Faced by MSMEs in India

• Labour Issues: Lack of standardized trial periods, unskilled workforce, wage disparities, and inefficient training centres.
• Lack of Awareness: Confusion regarding government schemes and poor coordination between central and state authorities hinder MSMEs from availing benefits.
• Export Barriers: Inadequate export infrastructure and lack of compliance with Environmental, Social, and Governance (ESG) standards affect competitiveness.
• Formalization and Inclusion: Despite the Udyam Registration Portal, many micro-enterprises remain informal due to lack of PAN or GST registration.
• Regulatory Burden: Complex licensing, inspections, and compliance processes create challenges, especially for smaller businesses.

Government Initiatives for MSMEs

• PM Vishwakarma Scheme
• Udyam Assist Platform
• Prime Minister’s Employment Generation Programme (PMEGP)
• Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
• Self-Reliant India (SRI) Fund
• MSME Samadhan
• CHAMPIONS Portal
• MSE-CDP (Cluster Development Programme)
• Pradhan Mantri MUDRA Yojana
• Government e-Marketplace (GeM)
• Trade Receivables Discounting System (TReDS)
• Public Procurement Policy for MSEs:

• 25% of Central Government procurement must be from MSEs.
• 4% reserved for SC/ST entrepreneurs, 3% for women-led enterprises.
• In 2023-24, MSEs supplied Rs 74,717 crore worth of goods/services (43.71% of total procurement).

Way Forward

Simplifying Regulations

• Reducing red tape and easing compliance norms will enhance MSME productivity.

Strengthening Financial Support

• Expanding SRI Fund and improving credit availability for MSMEs.

Technology and Skill Development

• Promoting digitalization, automation, and skill enhancement to improve global competitiveness.

Expanding Market Access

• Increasing standardization and quality control to improve MSME reach in domestic and international markets.
• Reducing tariff and non-tariff barriers through trade agreements.

The 2025-26 Union Budget aims to empower MSMEs through financial incentives, skill development, and ease of doing business measures. By addressing key challenges and promoting domestic manufacturing, India can strengthen its MSME sector and drive long-term economic growth.

Mains Question:

1. Discuss the key budgetary measures introduced for the MSME sector in the Union Budget 2025-26 and analyze their potential impact on economic growth and employment generation in India. (150 WORDS)