Introduction: The Union Budget 2025, delivered by Finance Minister Nirmala Sitharaman, introduces game-changing measures to foster growth and stability in India’s Micro, Small, and Medium Enterprises (MSMEs) and startup ecosystem. In a move aimed at improving financial access and promoting entrepreneurship, the government has increased credit guarantee covers for MSMEs and startups, while also introducing a new financial tool to help micro-enterprises. These initiatives are expected to unlock significant credit and encourage more MSMEs and startups to thrive in a competitive business environment.
Let’s delve into the key provisions of the budget and how they impact India’s MSME sector, startups, and micro-units.
Key Announcements for MSMEs and Startups
1. Enhanced Credit Guarantee Cover for MSMEs
One of the most significant changes announced in the Union Budget 2025 is the enhanced credit guarantee cover for MSMEs.
- Micro and Small Enterprises: The credit guarantee cover under the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) scheme has been doubled from Rs 5 crore to Rs 10 crore. This increase will significantly ease the access of MSMEs to formal credit, which is crucial for their growth and expansion.
- Expected Impact: The government aims to inject an additional Rs 1.5 lakh crore into MSMEs over the next five years. This measure will directly benefit millions of MSMEs by enabling them to secure financing for working capital, business expansion, technology upgrades, and more. This is a much-needed boost for MSMEs, who often face challenges in accessing loans due to collateral requirements.
Read More: Union Budget 2024-25: Key Highlights
2. Increased Credit Guarantee for Startups
The Union Budget 2025 also acknowledges the importance of Startups in India’s economic transformation. Startups will now benefit from increased credit guarantee coverage:
- New Credit Guarantee Limit: The credit guarantee cover for startups has been raised from Rs 10 crore to Rs 20 crore. This will provide startups with enhanced financial resources to scale up operations, attract investment, and compete in both domestic and global markets.
- Reduced Guarantee Fees: For startups operating in 27 key focus sectors, the guarantee fee has been reduced to 1%. This will further reduce the cost of borrowing for startups, making it easier for them to access affordable credit.
Impact on Innovation: Startups are often cash-strapped, especially in their early years, and face challenges in securing financing. With these provisions, the government aims to boost innovation, create jobs, and strengthen the startup ecosystem.
3. Support for Exporter MSMEs
Export-oriented MSMEs will also see increased support in the budget:
- Term Loan Coverage for Exporter MSMEs: MSMEs that export goods will now be eligible for credit guarantees on term loans up to Rs 20 crore. This is expected to help exporter MSMEs expand their business operations and enhance their export capabilities.
Boost to Export Potential: India’s export sector is crucial for economic growth. By providing better credit access to MSMEs in this sector, the government is looking to boost India’s global trade presence.
4. Customised Credit Cards for Micro Enterprises
The Union Budget 2025 introduces a major initiative for micro-enterprises: Customised Credit Cards.
- For Udyam-Registered Micro-Units: Micro-enterprises registered on the Udyam portal will be eligible for customised credit cards with a limit of Rs 5 lakh. This move aims to provide these businesses with easier access to credit for working capital, procurement of raw materials, and other operational expenses.
- Issuance of 10 Lakh Cards: The government plans to issue 10 lakh cards in the first year alone, ensuring that a large number of micro-units benefit from this scheme.
Simplified Credit Access: The introduction of credit cards tailored for micro-enterprises is a significant step toward simplifying the financing process and enabling entrepreneurs to manage their finances more effectively. This will enhance the financial inclusion of micro-enterprises, who often have limited access to formal credit channels.
5. Increased CGTMSE Allocation and Success of the Scheme
The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) has seen a remarkable increase in its allocations and impact over recent years:
- CGTMSE Performance in FY24: In FY24, the total credit guarantee sanctioned under the CGTMSE scheme doubled to Rs 2 lakh crore, the highest-ever in a single fiscal year. This is a clear indication of the government’s focus on driving growth for MSMEs and startups.
- Achieving Milestones: The CGTMSE scheme recently crossed the 1 crore guarantee mark, ensuring that MSMEs continue to receive vital financial support. This collateral-free loan scheme has already supported numerous MSMEs by guaranteeing up to 85% of the loan amount for various categories.
6. Women Entrepreneurs to Receive Special Focus
Women-owned MSMEs are set to receive additional support:
- Increased Coverage for Women Entrepreneurs: The CGTMSE scheme has increased the guarantee coverage for women-owned MSMEs to 90%. This change aims to empower women entrepreneurs and provide them with easier access to credit.
- Targeting 27 Lakh Women Beneficiaries: The government aims to support 27 lakh women beneficiaries through this initiative, further promoting gender equality in the MSME sector.
7. Revised Definition of MSMEs
The government has also revised the classification criteria for MSMEs, which is expected to have a far-reaching impact:
- Expansion of Definition: The definition of MSMEs has been revised to include businesses with a turnover of up to Rs 500 crore, an increase from the earlier limit of Rs 250 crore. This will enable a larger number of enterprises to qualify for MSME support schemes.
- Increased Investment Limits: The investment limits for MSME classification have also been increased by 2.5 times, allowing more businesses to benefit from the classification.
Impact of Revision: This revision makes more enterprises eligible for MSME benefits, ensuring that businesses of various sizes can access the resources, schemes, and benefits available to MSMEs.
Conclusion
Union Budget 2025 offers a comprehensive and robust framework for the growth of MSMEs, startups, and micro-enterprises. The significant enhancements to the credit guarantee cover, along with the introduction of customised credit cards, demonstrate the government’s commitment to fostering a conducive environment for entrepreneurship. These initiatives are expected to strengthen India’s entrepreneurial ecosystem, promote innovation, and create millions of new jobs.
With these provisions, the Union Budget 2025 sets the stage for a new era of financial inclusivity and entrepreneurial growth, providing MSMEs and startups with the resources they need to thrive and contribute to India’s economic prosperity.
