The budget announces improved loan flow and a broader definition for MSMEs.

New Delhi: Amid a budget focus on supporting smaller firms, Finance Minister Nirmala Sitharaman on Saturday recommended a broader definition of micro, small, and medium enterprises (MSMEs) and highlighted several steps to enhance loan flows.

"The investment and turnover limits for the classification of all MSMEs will be enhanced to 2.5 and 2 times, respectively, to help them achieve higher efficiencies of scale, technological upgrades, and better access to capital."

Smaller businesses will be able to get government subsidies for a longer length of time and more enterprises will fall under the purview of MSMEs thanks to the expanded revenue requirements.

Although the budget does not specify the upper limit in terms of precise figures, it aims to solve a well-known issue: according to industry participants, small business input costs have increased dramatically in recent years, which has caused MSMEs to increase their investments. However, many of these companies no longer meet the MSME requirements due to increased investments.

Conflicts and supply chain interruptions have caused fundamental raw material prices to soar, necessitating this upward revision. For MSMEs using the 25% reserve in public procurement, it will be especially beneficial. According to Anil Bhardwaj, secretary general of the Federation of Indian Micro, Small, and Micro Enterprises (FISME), the action will also assist MSMEs in expanding their operations through technological advancement.

Businesses with an annual income of up to ₹5 crore and an expenditure of up to ₹1 crore in plant and machinery are classified as micro firms under the most recent amendment of the criteria, which was implemented during the COVID-19 epidemic in July 2020.

For small businesses, the criterion is an investment of up to 10 crore and revenue of up to 50 crore; for medium-sized businesses, it is up to 50 crore and 250 crore, respectively.

"The government's decision to raise MSMEs' revenue and investment limitations is a good one since it will improve their working capital, which will support growth and expansion. In the end, this will help the nation's economic growth and development by enabling MSMEs to expand, innovate, and provide more job opportunities," stated Aman Moudgil, director at Gilco Global.

The finance minister also increased the credit limits for government-guaranteed loans for startups, microbusinesses, and small businesses in the face of ongoing liquidity issues.


The loan guarantee cover for startups was doubled from ₹10 crore to ₹20 crore, while it was increased from ₹5 crore to ₹10 crore for micro and small businesses.

"We will introduce customized credit cards with a ₹5 lakh limit for micro enterprises registered on the Udyam portal," the minister said in yet another bold move. Ten lakh (1 million) of these cards will be distributed in the first year.

The government will also introduce a new program to assist new business owners, which will include 500,000 women and members of scheduled castes and scheduled tribes. According to Sitharaman, the program would offer loans of up to ₹2 crore each over the next five years.

Additionally, she announced the introduction of a new strategy aimed at fostering employment and entrepreneurship in labor-intensive industries.

Since the past budget, when the government introduced an apprenticeship program after employment emerged as a prominent issue in the 2024 Lok Sabha elections, there has been a significant push for employment.

Utilizing MSMEs' and other larger companies' export potential was another priority of the budget. The ministries of commerce, MSME, and finance would work together to establish an export promotion mission with sectoral and ministerial goals.