Budget boost for MSMEs with higher credit limits, lower guarantee fees

In her eighth Budget speech, Finance Minister Nirmala Sitharaman unveiled a series of measures to support India’s Micro, Small, and Medium Enterprises (MSMEs), a sector crucial to the country’s economic fabric. These measures include a substantial increase in credit guarantee coverage for micro and small enterprises, with the guarantee cover rising from Rs 5 crore to Rs 10 crore. Additionally, the Budget introduces a new, customised credit card with a Rs 5 lakh limit, targeting 10 lakh MSMEs registered on the Udyam Portal in its first year.

 

To help MSMEs scale up operations, enhance technological capabilities, and access capital, the Union Budget has introduced enhanced investment and turnover limits for MSME classification. This move is expected to enable MSMEs to grow confidently and create more job opportunities for India's youth.

 

“The new thresholds—2.5 times higher for investments and twice the current limits for turnover—will foster a conducive environment for growth and innovation,” Finance Minister Nirmala Sitharaman said.

 

Increase in credit guarantee coverage

A key highlight of the Budget is the substantial increase in credit guarantee coverage. “For micro and small enterprises, the guarantee cover will rise from Rs 5 crore to Rs 10 crore, unlocking an additional Rs 1.5 trillion in credit over the next five years. Startups, which have become a major engine for innovation, will also benefit from enhanced credit facilities, with guarantee limits increased from Rs 10 crore to Rs 20 crore and a reduction in guarantee fees,” she announced in her Budget speech.  ALSO READ: Union Budget 2025: 10,000 new medical seats, boost for IITs, AI push

 

Customised Credit Card with Rs 5 lakh limit

In a bid to further support micro-enterprises, the Budget introduces a new, customised credit card with a Rs 5 lakh limit, targeting 10 lakh MSMEs registered on the Udyam Portal in its first year. This initiative is designed to improve access to credit and help businesses thrive.

 

Allocation of Rs 91,000 crore for the fund of funds

Furthermore, the Budget allocates Rs 91,000 crore for the Fund of Funds to support startups and entrepreneurs, with more than Rs 10,000 crore contributed by the government.

 

“An expanded scope for the new Fund of Funds, with an additional contribution of Rs 10,000 crore, will further enhance support for entrepreneurs, especially women from Scheduled Castes and Scheduled Tribes, with loans of up to Rs 2 crore over the next five years,” the Finance Minister stated.

 

Focus on India’s footwear and leather sectors

Aimed at strengthening India’s footwear and leather sectors, the Budget introduces specific policy measures to improve employment opportunities, quality, and productivity within these labor-intensive industries.

 

With a focus on reducing payment delays, expanding credit facilities, and providing better access to global markets, the Union Budget 2024-25 provides MSMEs with the tools they need to thrive. The increased allocation for infrastructure development, alongside the establishment of e-commerce export hubs, will ensure MSMEs have the support they need to tap into new business opportunities both domestically and internationally.

 

As the second engine of India’s economy, MSMEs contribute significantly to both manufacturing and services, with over 5.7 crore registered units employing 7.5 crore people and accounting for 36 percent of the country’s manufacturing output. Additionally, MSMEs play a pivotal role in driving exports, contributing 45 percent of the nation's total export value.