Budget 2026 lays three-part roadmap to help MSMEs scale: Details here

Compared with last year's Budget, the Union Budget 2026-27 builds on the credit framework while moving decisively towards equity funding, market-linked liquidity, and structured compliance support

With micro, small and medium enterprises (MSMEs) positioned as a core driver of economic expansion, the Union Budget 2026–27 outlines a structured three-part framework to help small businesses scale operations and formalise growth.

 

Presenting the Union Budget 2026-27 in Parliament, Finance Minister Nirmala Sitharaman described MSMEs as a “vital engine of growth” and said the government aims to help them evolve into “champions”.

 

The framework rests on three pillars: equity support, liquidity access and professional compliance assistance.

Equity support: Shift beyond debt

“I propose to introduce a dedicated ₹10,000 crore SME Growth Fund to create future Champions, incentivising enterprises based on select criteria,” Sitharaman said.

 

 

She added that the Self-Reliant India Fund will be topped up by ₹2,000 crore to support micro enterprises and maintain access to risk capital.

 

The move signals a clear policy shift from debt-heavy support towards equity and quasi-equity funding, aimed at helping scalable MSMEs expand without balance-sheet stress.

Liquidity access: Strengthening TReDS

On liquidity, Sitharaman said the Trade Receivables Discounting System (TReDS) has already enabled financing of over ₹7 trillion for MSMEs.

 

To leverage its "full potential", the finance minister proposed a series of measures:

 

- Mandating TReDS for Central Public Sector Enterprise (CPSE) purchases from MSMEs

 

- Extending credit guarantee support for invoice discounting

 

- Linking the Government e-Marketplace (GeM) with TReDS

 

- Permitting securitisation of TReDS receivables to create a secondary market

 

“Together, these measures will improve liquidity and accelerate settlement cycles for MSMEs,” she said.

Compliance support: ‘Corporate Mitras’

On compliance, Sitharaman announced that professional institutions such as the Institute of Chartered Accountants of India (ICAI), Institute of Company Secretaries of India (ICSI) and Institute of Cost Accountants of India (ICMAI) will design short-term modular courses.

 

These courses will develop accredited ‘Corporate Mitras’ in Tier-II and Tier-III towns. “These para-professionals will help MSMEs meet compliance requirements at affordable costs,” she said. 

The move is aimed at reducing the cost and complexity of regulatory compliance for smaller enterprises as they scale up.

MSME allocations in Budget 2026–27

Scheme	Allocation (₹ crore)
Guarantee Emergency Credit Line (GECL)	9,000
Fund of Funds for MSMEs	1,900
Raising and Accelerating MSME Performance (RAMP)	1,500
PM Vishwakarma	3,861

 

In Union Budget 2025–26, the policy emphasis was largely on easing scale barriers and improving access to credit.

 

Investment and turnover thresholds for MSME classification were raised by 2.5 times and 2 times respectively, allowing firms to grow without losing eligibility for benefits. Credit guarantee coverage for micro and small enterprises was increased to ₹10 crore, while exporters were permitted term loans of up to ₹20 crore.

 

Start-ups received higher guarantee limits, micro enterprises were offered customised credit cards of ₹5 lakh, and targeted support was extended to first-time women, SC and ST entrepreneurs through term loans of up to ₹2 crore.

 

Compared with that approach, Budget 2026–27 builds on the credit framework while moving decisively towards equity funding, market-linked liquidity and structured compliance support.

Industry response

Industry stakeholders see the revised framework as a step towards widening capital participation in the MSME segment, including foreign investment.

 

“The proposed impetus for MSMEs in Budget 2026 across multiple fronts will attract foreign capital. Investors are likely to view MSMEs as an additional investment avenue, making MSME IPOs more attractive. The ₹10,000 crore allocation to the SME Growth Fund will support small and medium enterprises and position them as a viable alternative to offshore institutions. This could also strengthen the AIF ecosystem in this segment,” said Manoj Purohit, Partner, Financial Services Tax, Tax and Regulatory Services, BDO India.

 

“The Union Budget 2026–27 underscores a push towards the next phase of growth by scaling manufacturing, strengthening infrastructure investment and reinforcing MSMEs,” said Mehul Pandya, MD and Group CEO, CareEdge Ratings.

 

“In line with the Economic Survey, mandating CPSEs to use TReDS for MSME purchases is a pivotal step in unlocking working capital by addressing systemic payment delays. The introduction of CGTMSE-backed credit guarantees and the commoditisation of trade receivables will help create a horizontal credit flow across value chains, ensuring liquidity reaches even the smallest nodes of the supply chain,” said Ram Iyer, Founder and CEO, Vayana.