MSMEs: 2nd Engine of Growth

Recognized as the 2nd engine of growth in the Union Budget 2025-26, the government aims to boost MSMEs through financial support, skill development, and infrastructure upgrades.

MSMEs (Micro, Small, and Medium Enterprises) are a vital part of India’s industrial economy. They contribute 36% to the country’s manufacturing GDP and account for 45% of its exports. These businesses also provide employment to around 7.5 crore people, playing a key role in driving economic growth, promoting entrepreneurship, and boosting both domestic and international trade.

Key Initiatives & Schemes

1. Revision in MSME Classification Criteria

Objective:

📈 Encourage MSMEs to scale up operations & access financial benefits

Key Features:

💰 Investment & turnover limits increased to 2.5 and 2 times

📊 Boosts technology upgradation & job creation

✅MSMEs are responsible for 45% of our exports.

2. Enhanced Credit Availability & Guarantee Cover

Objective:

💳 Strengthen MSMEs' financial support ecosystem

Key Features:

🏦 Credit Guarantee Cover Increased 

✅ Micro & Small Enterprises: ₹10 crore (from ₹5 crore) → Additional ₹1.5 lakh crore in next 5 years 

✅ Startups: ₹20 crore (from ₹10 crore) → 1% guarantee fee for 27 focus sectors

🚀 Exporter MSMEs: Term loans up to ₹20 crore 

💳 Credit Cards for Micro Enterprises: ₹5 lakh limit for Udyam-registered MSMEs 

✅ 10 lakh cards to be issued in the first year

 📊 Impact Analysis:

Factor	Before Initiative	After Initiative (Expected)
MSME Credit Access	Limited 🚫	Expanded ✅
Startup Growth	Slower 🐢	Accelerated 🚀
Export Competitiveness	Moderate 📉	Strengthened 📈

3. Fund of Funds for Startups

Objective:

💰 Support startups with long-term funding

Key Features:

🚀 ₹91,000 crore commitment to Alternate Investment Funds (AIFs) 

💸 Government contribution: ₹10,000 crore 

📈 New Fund of Funds with additional ₹10,000 crore

4. Scheme for First-Time Entrepreneurs

Objective:

🎯 Promote entrepreneurship among women, SCs & STs

Key Features:

👩 5 lakh women, SC/ST first-time entrepreneurs to get loans 

💸 Term loans up to ₹2 crore over 5 years 

🎓 Online skill-building & business management training

5. Focus Product Scheme for Footwear & Leather

Objective:

👞 Enhance productivity, quality & competitiveness in the footwear & leather sector

 Key Features:

✅ Support for design capacity, component manufacturing & machinery for production 

✅ Expected Employment: 22 lakh people 

📊 Turnover: ₹4 lakh crore; Exports: ₹1.1 lakh crore

6. Measures for the Toy Sector

Objective:

🧸 Make India a global hub for toy manufacturing

Key Features:

✅ Development of toy clusters & manufacturing ecosystem 

✅ Skilling initiatives to produce innovative & sustainable toys 

🌍 Strengthening India’s ‘Made in India’ brand in the global market

7. Support for Food Processing

Objective:

🍛 Strengthen food processing & value addition, particularly in Eastern India

Key Features:

🎓 National Institute of Food Technology, Entrepreneurship & Management in Bihar

✅ Increased value addition for farmers’ produce 

✅ Employment & entrepreneurship opportunities for rural youth

8. National Manufacturing Mission

Objective:

🏭 Drive Make in India through MSMEs & large industries

Key Features:

🏗️ Policy Support & Roadmap for Manufacturing 

🔋 Boost for Clean Tech Manufacturing

⚡ Solar PV cells, EV batteries, motors & controllers 

🌬️ Wind turbines, very high-voltage transmission equipment

🔋 Grid-scale battery manufacturing 

Conclusion: The Future of MSMEs in India

MSMEs are crucial to India’s economic growth and its position in the global market. With the government prioritizing easier credit access, skill development, and improved infrastructure, MSMEs are set to experience significant growth. Initiatives like "Make in India" and clean technology will help propel these enterprises to global leadership. As MSMEs grow and thrive, they will play a key role in advancing India’s journey towards becoming a developed nation.