India’s Micro, Small and Medium Enterprises (MSMEs) remain central to the country’s economic architecture, functioning as engines of growth, employment generators, and catalysts of inclusive development. The Union Budget 2026–27 reinforces this position with a structured and reform-oriented framework aimed at transforming MSMEs into globally competitive “champions.”
With more than 7.47 crore enterprises employing over 32.82 crore people, the MSME sector is the second-largest employer in India after agriculture. It contributes approximately 35.4 percent to manufacturing output, 48.58 percent to exports, and 31.1 percent to the national GDP. These numbers underscore the sector’s structural importance in shaping India’s economic trajectory.
The Budget articulates three overarching “Kartavyas” — accelerating and sustaining economic growth, fulfilling the aspirations of citizens, and building capacities while ensuring equitable access to resources and opportunities. Within this framework, the first Kartavya outlines a focused three-pronged strategy to help MSMEs scale up as national and global champions.
Three-Pronged Strategy: Equity, Liquidity and Professional Capacity
Equity Support: Strengthening Risk Capital Base
A dedicated ₹10,000 crore SME Growth Fund has been announced to nurture high-potential enterprises based on defined eligibility criteria. The objective is to provide growth capital to enterprises that demonstrate scalability, innovation, and export potential.
Additionally, the Self-Reliant India (SRI) Fund, established in 2021 to provide equity infusion into viable MSMEs, will be augmented by ₹2,000 crore. As of November 30, 2025, the SRI Fund has supported 682 MSMEs with investments amounting to ₹15,442 crore. The enhanced allocation is expected to deepen risk capital penetration, particularly for micro and emerging enterprises.
This structured equity push reflects a policy shift from mere survival support to long-term capacity building and competitiveness.
Liquidity Support: Deepening Financial Infrastructure
Liquidity remains a persistent constraint for MSMEs. The Budget addresses this through systemic reforms centered on the Trade Receivables Discounting System (TReDS).
Over ₹7 lakh crore has already been unlocked for MSMEs through TReDS. To institutionalize and scale its impact, four significant measures have been announced:
- Mandating TReDS as the settlement platform for all purchases from MSMEs by Central Public Sector Enterprises (CPSEs).
- Introducing CGTMSE-backed credit guarantee support for invoice discounting on TReDS.
- Integrating Government e-Marketplace (GeM) with TReDS for seamless information sharing between government buyers and financiers.
- Enabling TReDS receivables to be structured as asset-backed securities to deepen the secondary market and enhance liquidity.
TReDS functions as an electronic platform facilitating financing and discounting of MSME trade receivables from corporates, government departments, and public sector undertakings. The proposed reforms aim to accelerate receivable settlement cycles, reduce working capital stress, and institutionalize prompt payment culture.
Professional Support: Creating ‘Corporate Mitras’
Recognizing compliance and managerial capability gaps, the Government will collaborate with professional institutions such as ICAI, ICSI, and ICMAI to design short-term modular courses and practical tools. These initiatives will create a cadre of accredited para-professionals, termed “Corporate Mitras,” particularly in Tier-II and Tier-III towns.
These professionals will assist MSMEs in regulatory compliance, financial management, and governance standards at affordable costs, thereby strengthening institutional capacity at the grassroots level.
Tax Reforms to Boost Global Market Access
To ease cross-border B2C trade, the Budget proposes removing the existing ₹10 lakh per consignment limit on courier exports. This move is expected to reduce transaction friction for small exporters, artisans, and start-ups leveraging e-commerce platforms.
Technology-driven tracking of rejected and returned shipments will further streamline logistics efficiency and compliance management, enhancing India’s competitiveness in global digital trade ecosystems.
Digital Formalization and Registration Milestones
The launch of the Udyam Registration Portal in 2020 marked a major step toward formalization. The registration process remains paperless, digital, and free of cost. In January 2023, the Udyam Assist Platform was introduced to bring Informal Micro Enterprises into the formal credit ecosystem and enable access to Priority Sector Lending.
From July 2020 to December 2025, more than 7.30 crore enterprises have been registered across both platforms, including 4.37 crore registrations under Udyam and 2.92 crore under Udyam Assist. This expansion reflects accelerating formal integration within the MSME sector.
Employment and Entrepreneurship Support
Prime Minister’s Employment Generation Programme (PMEGP)
Since its inception in FY 2008–09 through December 2025, PMEGP has assisted over 10.71 lakh micro enterprises with margin money subsidies amounting to ₹29,249.43 crore. The scheme has generated estimated employment for more than 87 lakh persons.
Recent enhancements include higher project cost ceilings and expanded activity scope, reinforcing entrepreneurship-led employment generation.
MSME Champions Scheme
The MSME Champions Scheme focuses on enhancing competitiveness through three components:
- MSME Sustainable (ZED) – promoting “Zero Defect, Zero Effect” manufacturing standards.
- MSME Competitive (LEAN) – encouraging productivity and process optimization.
- MSME Innovative – supporting incubation, design interventions, and intellectual property protection.
To date, 2,71,373 MSMEs have registered under the ZED certification scheme, with 1,92,689 achieving certification. Under the Lean scheme, 32,077 enterprises have registered, and 31,987 have formally pledged adherence to lean practices.
Strengthening E-Commerce and Supply Chains
The expansion of the Open Network for Digital Commerce (ONDC) and the TEAM (Trade Enablement and Marketing) Initiative, targeting onboarding of five lakh MSMEs, provides structured digital market access. These platforms aim to lower transaction costs and integrate small enterprises into formal digital supply chains.
Additionally, over 30,000 beneficiaries under the PM Vishwakarma Scheme have been onboarded on the Government e-Marketplace (GeM), enhancing access to institutional buyers.
Online Dispute Resolution (ODR)
Launched on MSME Day, June 27, 2025, the MSME ODR Portal establishes a structured pre-adjudication framework for resolving delayed payment disputes. The system promotes dialogue-based settlements before formal proceedings under the MSMED Act, 2006.
This mechanism seeks to preserve business relationships while enabling efficient recovery of dues.
Credit Guarantee Expansion
The Credit Guarantee Scheme for Micro and Small Enterprises (CGSMSE), celebrating 25 years in 2025, has crossed one crore guarantees since inception in August 2000.
Between January and November 2025 alone, 29.03 lakh guarantees worth ₹3.77 lakh crore were approved. The guarantee ceiling has been enhanced from ₹5 crore to ₹10 crore.
A notable inclusion is a special provision for enterprises promoted by transgender entrepreneurs, offering a 10 percent concession in guarantee fees and enhanced coverage of 85 percent, effective March 1, 2025.
PM Vishwakarma: Supporting Artisans and Craftspeople
Launched in September 2023, the PM Vishwakarma Scheme provides end-to-end support to artisans across 18 trades. As of December 1, 2025, 30 lakh beneficiaries have registered, and 23.09 lakh have completed training.
In 2025, ₹2,257 crore was sanctioned to 2.62 lakh beneficiaries as collateral-free loans. Digital enablement has reached 6.7 lakh beneficiaries, strengthening market linkages and financial inclusion.
Labour Reforms and Compliance Rationalisation
The ongoing implementation of Labour Codes seeks to modernize India’s labour framework through digitisation, simplified compliance, and enhanced social security. Rationalized thresholds and streamlined inspection systems aim to reduce regulatory burden on MSMEs while ensuring workplace safety and equitable labour standards.