Introduction Micro, Small, and Medium Enterprises (MSMEs) and startups are more than just business categories — they are the economic backbone of Bharat, contributing nearly 30% to India’s GDP and employing over 11 crore people. The Union Budget 2025–26 has taken decisive steps to strengthen these engines of inclusive growth through enhanced funding support, ease of doing business, and innovation-centric incentives.
In this article, we analyze the key announcements for MSMEs and startups, compare them with past budgets, and highlight opportunities for entrepreneurs, policymakers, and job seekers.
Key Budgetary Highlights for MSMEs & Startups
- Credit Guarantee Scheme Expansion
- The Emergency Credit Line Guarantee Scheme (ECLGS) continues to support MSMEs with a fresh infusion of ₹1.2 lakh crore credit guarantee limit.
- NPAs in MSME lending fell by 1.8% due to improved coverage, according to RBI.
- Fund of Funds for Startups (FFS)
- Budget outlay of ₹7500 crore under SIDBI-managed schemes to catalyze private venture capital.
- More than 1,100 startups have already been funded under FFS till 2024; the aim is to double that number by 2026.
- Startup India Seed Fund Scheme
- Allocation increased to ₹1000 crore, up from ₹800 crore in FY 2024–25.
- Focus on Tier-2 and Tier-3 cities for new incubators and accelerators.
- Customs Duty Relief on Raw Materials
- MSMEs in sectors like toy-making, electronics, and leather benefit from reduced import duties on key inputs.
- Simplified Compliance
- Decriminalization of minor offenses under the Companies Act and Udyam registration simplification continue.
Budget Comparison Over the Past Five Years
| Year | MSME Budget Outlay | Notable Measures |
| 2021–22 | ₹15,700 crore | ECLGS Phase 1 |
| 2022–23 | ₹21,422 crore | Raising and Accelerating MSME Performance (RAMP) program |
| 2023–24 | ₹22,138 crore | Credit Guarantee Trust for Micro and Small Enterprises revamped |
| 2024–25 | ₹22,138 crore (RE) | Priority sector lending inclusion |
| 2025–26 | ₹24,500 crore (BE) | Enhanced FFS and Seed Fund schemes |
Growth Over Five Years: Approximately 56% increase in outlay since FY 2021–22.
Why This Budget Is a Game Changer
- Access to Capital: Enhanced credit and funding mechanisms reduce the financing gap — a key hurdle for MSMEs.
- Boost to Innovation: With focused startup support in AI, agritech, and climate tech, the innovation ecosystem is better funded.
- Tier-2 & Tier-3 Inclusion: Focus on semi-urban India brings startup momentum beyond metros.
Real-World Impact: The Story of Agrowave
Agrowave, a startup from Gurugram supported by the Seed Fund Scheme, has digitized farm-to-market logistics for over 30,000 farmers. With new capital raised under the SIDBI FFS framework, they plan to scale into Rajasthan and Madhya Pradesh — validating how targeted support can translate into rural economic inclusion.
Challenges That Remain
- Delayed Payments: According to a 2024 ASSOCHAM report, 41% of MSMEs cite late payments as a critical issue.
- Formalization Gaps: Despite the push, only 30% of MSMEs are Udyam-registered.
- Digital Literacy: Many rural startups struggle with GST compliance and online platforms.
The Budget 2025–26 attempts to address these via grievance redressal portals and simplified GST filing procedures.
Opportunities Across the Ecosystem
- For Entrepreneurs: Easier access to zero-collateral loans and early-stage funding.
- For Investors: A de-risked environment due to government co-funding and guarantee schemes.
- For Policymakers: Real-time dashboards for performance metrics under RAMP and Gati Shakti integration.
Conclusion: A Budget That Backs Bharat’s Builders
MSMEs and startups are no longer niche players — they are central to India’s vision of a $5 trillion economy. With its 2025–26 Budget, the government has offered not just financial support but a broader ecosystem of trust, innovation, and resilience. For the common man, it translates into more jobs. For the entrepreneur, more capital. For the investor, more confidence.
The message is clear: If you want to build in India, now is the time.
