Budget 2025: MSMEs – key changes and strategic insights
Business04 Feb 2025
Over the years, government budgets have aimed to support MSMEs through credit access, tax relief, and digitalisation initiatives. While these efforts improved formalisation and access to structured funding, significant hurdles remained.
Budget 2025 lays a strong foundation for MSME growth by removing outdated constraints, improving credit accessibility, and fostering industry-specific advancements. As the government refines these policies, MSMEs must proactively engage with these opportunities to drive sustained expansion, innovation, and leadership in a rapidly evolving economy.
Key reforms in budget 2025
1. Higher investment and turnover limits
- Earlier - MSMEs were restricted by outdated classification limits, leading many to forgo expansion opportunities to retain benefits.
- Now - The investment limit has increased 2.5x, allowing businesses to grow, invest in technology, and expand operations without losing MSME status.
- Impact - Mid-sized MSMEs can now scale without hesitation, while micro and small enterprises continue to receive competitive benefits.
2. Improved credit access and funding support
- Earlier - Many MSMEs struggled to secure loans due to stringent collateral requirements and high interest rates.
- Now - The Credit Guarantee Scheme has been expanded, doubling the cover from ₹5 crores to ₹10 crores for micro and small enterprises, while start-ups now receive up to ₹20 crores.
- Impact - This will lower financial risk for lenders and provide easier access to funding for businesses looking to modernise or expand.
3. Targeted support for manufacturing and export growth
- Earlier - Labour-intensive industries, such as textiles, furniture, and automotive components, lacked structured government backing, limiting their global reach.
- Now - The government has allocated funds to generate 22 lakh jobs while promoting ₹1.1 lakh crore in exports across priority sectors.
- Impact - These interventions will enhance production capacity, create employment, and strengthen India’s manufacturing competitiveness on a global scale.
4. Faster payments and digital integration
- Earlier - MSMEs faced long payment delays, leading to cash flow disruptions and higher dependence on short-term credit.
- Now - Mandatory onboarding on the Trade Receivables Discounting System (TReDS) will ensure quicker invoice settlements.
- Impact - Improved liquidity, reduced reliance on expensive credit, and a more stable financial ecosystem for small businesses.
5. Workforce development and future-ready skills
- Earlier - MSMEs struggled with labour shortages in automation and digitalisation.
- Now - Government-backed training and skilling initiatives will equip workers with expertise in digital tools, automation, and AI-driven industries.
- Impact - A stronger workforce will enable MSMEs to embrace Industry 4.0, enhancing productivity and global competitiveness.
Strategy for MSMEs
- Expand by leveraging the increased investment limits to modernise and enter new markets.
- Secure better financing through enhanced credit guarantee schemes, negotiating improved loan terms with financial institutions.
- Adopt digital payment platforms and onboard onto TReDS for faster invoice settlements and smoother cash flow management.
- Take advantage of government incentives designed to boost manufacturing and export potential.
- Invest in workforce training to integrate automation and AI into daily operations.