Budget 2025-26: MSMEs Get ₹1.5 Lakh Crore in Additional Credit & Startup Support

News Synopsis
The Union Budget 2025-26 has introduced a series of robust measures aimed at strengthening India’s Micro, Small, and Medium Enterprises (MSME) sector. The government recognizes the sector’s crucial role in the country’s economic development, employment generation, and global trade competitiveness.
According to a press release from the Ministry of Micro, Small & Medium Enterprises, India currently has 5.93 crore registered MSMEs that collectively employ over 25 crore people.
These businesses play a pivotal role in boosting India's economy, accounting for 45.73% of the country’s total exports in 2023-24. The new budget aims to enhance credit accessibility, support entrepreneurs from marginalized backgrounds, and promote key manufacturing sectors to further accelerate MSME growth.
Increased Credit Guarantee: Major Relief for MSMEs and Startups
One of the key announcements in Budget 2025-26 is the enhancement of the credit guarantee cover for micro and small enterprises. The government has increased the cover from ₹5 crore to ₹10 crore, facilitating an additional ₹1.5 lakh crore in credit over the next five years.
This move will:
✅ Improve financial access for MSMEs, enabling their expansion.
✅ Encourage adoption of new technology and modernization.
✅ Reduce dependency on traditional financing by offering alternative credit sources.
Similarly, to foster startup growth, the credit guarantee for startups has been doubled from ₹10 crore to ₹20 crore, along with a 1% reduction in loan fees for businesses operating in 27 priority sectors.
For export-oriented MSMEs, the government has also introduced term loans of up to ₹20 crore to enhance their global trade presence.
New Fund of Funds and Loan Schemes for First-Time Entrepreneurs
The Union Budget 2025-26 also prioritizes support for first-time entrepreneurs from marginalized communities, including women, Scheduled Castes (SCs), and Scheduled Tribes (STs).
To achieve this, the government has set up a ₹10,000 crore Fund of Funds aimed at boosting startups and small businesses. Additionally, a special loan scheme has been introduced, which will provide ₹2 crore loans to 5 lakh new entrepreneurs over the next five years.
This initiative is expected to:
✅ Empower underrepresented groups in business.
✅ Promote self-employment and job creation.
✅ Reduce financial barriers for aspiring entrepreneurs.
Sector-Specific Initiatives to Boost Job Creation
The government is also focusing on labour-intensive industries, introducing specialized schemes for footwear, leather, and toy manufacturing.
Footwear & Leather Industry Growth Plan
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The Focus Product Scheme aims to boost production and exports in this sector.
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The initiative is projected to create 22 lakh new jobs.
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The sector is expected to achieve a turnover of ₹4 lakh crore in the coming years.
Boost for Toy Manufacturing Sector
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The government has rolled out a new support program for the toy industry.
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India aims to position itself as a global leader in toy manufacturing, reducing dependency on imports.
These sector-specific incentives will drive employment, industrial growth, and make India a major player in global supply chains.
Conclusion
The Budget 2025-26 underscores the government’s commitment to strengthening India’s MSME sector through increased credit access, funding support, and sector-specific incentives.
By facilitating ₹1.5 lakh crore in additional credit, introducing a ₹10,000 crore Fund of Funds, and supporting 5 lakh first-time entrepreneurs, the budget is set to drive business expansion, job creation, and technological innovation.
Additionally, the boost to labour-intensive industries like footwear, leather, and toys will create employment opportunities and help India establish itself as a manufacturing powerhouse. With these measures in place, MSMEs are expected to play an even bigger role in shaping India’s economic future.
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