MSMEs get Budget push: Boosting exports, improving credit access, creating women entrepreneurs

The government in the Union Budget 2026 has enhanced credit guarantee cover for micro and small enterprises to Rs 10 crore from Rs 5 crore and also altered the Micro, small, and medium enterprise (MSME) classification.

The former move is likely to improve credit access in the MSME sector with the government expecting to generate an additional Rs 1.5 lakh crore credit in the next five years.

The MSME sector has a credit gap of Rs 20-25 lakh crore.


The government has also modified how MSMEs are classified, enhancing the investment and turnover limit by 2.5 and 2 times respectively.

The finance minister stated that increasing the investment and turnover limit “will give MSMEs confidence to grow and generate employment for growth.”

“FISME welcomes upwards revision in investment and turnover criteria for classifying MSMEs asa surge in raw material prices due to disruptions in supply chains and conflicts have made it necessary for such an upward revision. It will be particularly helpful for MSMEs taking advantage of 25% reservation in public procurement,” said Anil Bhardwaj, Secretary General, Federation of Indian Micro and Small & Medium Enterprises (FISME).

At present, micro-enterprises are defined as those having investment in plant and machinery of not more than Rs 1 crore and an annual turnover of Rs 5 crore while small enterprises as those having investment in plant and machinery of not more than Rs 10 crore and an annual turnover of Rs 50 crore.

Medium enterprises are classified as those with investments in plant and machinery of not more than Rs 50 crore and an annual turnover of Rs 250 crore.

For micro-enterprises, a customised credit card with a Rs 5 lakh limit will be issued and the government aims to issue 10 lakh such cards in the first five years.

“Providing customized credit cards with a 5 lakh rupee limit will be a huge boost to the MSME sector which is always in need of finance. While providing credit cards with a 5 lakh rupee limit for MSMEs is a good start, perhaps the limit could have been higher,” said Natasha Treasurywala, Partner, Desai & Diwanji.

A fresh Funds of Fund (FoF) for startup will be established with an infusion of Rs 10,000 crore, in addition to the existing government contribution of Rs 10,000 crore.

Further, a new scheme for 5 lakh women from the scheduled castes and scheduled tribes for first-time entrepreneurs will be launched. The scheme will provide term loans up to Rs 2 crore and also bring online capacity building for entrepreneurship and managerial skills.

To boost exports, the government has brought in guarantee cover for well-run MSME exporters who take term loans of up to Rs 20 crore.

The government has also increased guarantee cover for startups from Rs 10 crore to Rs 20 crore with the guarantee fee moderated to 1 per cent for loans in 27 focus sectors.