The government is introducing several initiatives for MSMEs, including higher investment limits, expanded credit guarantees, and new funding opportunities for startups
Bengaluru: The Union Budget 2025 places a strong emphasis on micro, small, and medium enterprises (MSMEs) with several initiatives, including increased investment limits, enhanced credit guarantees, and new funding opportunities for startups.
According to the Finance Minister Nirmala Sitharaman, MSMEs serve as the second engine of economic growth, with 5.7 crore enterprises in manufacturing and services. Over 1 crore registered MSMEs employ 7.5 crore people, contributing 36% to manufacturing output and 45% to exports.
To support their expansion, investment and turnover limits for MSME classification will be increased by 2.5 and 2 times, respectively, fostering business growth and job creation.Â
Additionally, the credit guarantee cover for micro enterprises will be doubled from Rs 5 crore to Rs 10 crore, unlocking Rs 1.5 lakh crore in additional credit over the next five years.
For startups, the loan limit will rise from Rs 10 crore to Rs 20 crore, with the guarantee fee reduced to 1% for loans in 27 key sectors under Atmanirbhar Bharat. Well-performing exporter MSMEs will also be eligible for term loans of up to Rs 20 crore.
The government-backed Fund of Funds, with an initial Rs 10,000 crore contribution, has helped Alternate Investment Funds (AIFs) secure commitments exceeding Rs 91,000 crore. To further support startups, a new Fund of Funds with a broader scope and another Rs 10,000 crore contribution will be launched.
“The Rs 10,000 crore Fund of Funds for startups is a game-changing initiative that will boost domestic venture capital,” says Priyanka Salot, Co-founder of The Sleep Company, in response to the budget. “The Indian startup ecosystem, including the D2C and retail sectors, is at a crucial juncture, requiring continuous investment to drive innovation, R&D, and manufacturing. This initiative will provide much-needed capital to early and growth-stage startups.”
To empower first-time entrepreneurs from women, Scheduled Castes, and Scheduled Tribes, a new scheme will provide term loans of up to Rs 2 crore over five years. Additionally, micro enterprises will gain access to customised credit cards with a Rs 5 lakh limit to meet their financial needs.
The government will also launch an Export Promotion Mission with sector-specific targets, led by the Ministries of Commerce, MSME, and Finance. This initiative aims to improve access to export credit, facilitate cross-border trade financing, and help MSMEs navigate international trade barriers.
Additionally, a National Manufacturing Mission will be introduced to support small, medium, and large industries under “Make in India.” This mission will provide policy guidance, implementation roadmaps, and a structured monitoring framework for central and state governments.
“The Union Budget 2025 lays a strong foundation for MSMEs and retail, driving both consumer demand and business growth,” said Saahil Nayar, Co-founder and MD of Mila Beauté. “Initiatives like the National Manufacturing Mission and Centres of Excellence will help create a skilled workforce, essential for the retail sector and homegrown brands.”
The government has also announced new measures to strengthen the toy, footwear, and leather industries.
A dedicated scheme will be launched to position India as a global hub for toy manufacturing, aligning with the Make in India and Atmanirbhar Bharat initiatives. This aims to boost domestic production, reduce reliance on imports (particularly from China), and create business and employment opportunities for manufacturers, retailers, and exporters.
Similarly, the footwear and leather industries will receive targeted support to enhance manufacturing and exports. These sectors, which play a crucial role in India’s retail market, will benefit from new policy measures designed to improve global competitiveness and generate jobs.
