The government has proposed to increase investment and turnover limits for all MSMEs to 2.5x, and 2x, respectively, to enable higher efficiencies of scale as well as better access to capital for the sector that contributes 36% to country’s manufacturing output. ACMA welcomes the move.
01 Feb 2025 | 3942 Views | By Mayank Dhingra
Micro, Small, and Medium Enterprises (MSMEs) received a strong fillip in the Union Budget 2025, with the government pitching the sector as the second engine of India’s economic growth. In the budget speech on February 1, Finance Minister Nirmala Sitharaman announced fiscal sops in the form of increasing the investment ...
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Micro, Small, and Medium Enterprises (MSMEs) received a strong fillip in the Union Budget 2025, with the government pitching the sector as the second engine of India’s economic growth. In the budget speech on February 1, Finance Minister Nirmala Sitharaman announced fiscal sops in the form of increasing the investment and turnover limits for all MSMEs.
Compared to the current MSME classification guidelines, the investment has been proposed to be increased to 2.5x, whereas annual turnover to 2x, as per the latest Budget. This would imply that instead of a Rs 1 crore annual investment limit for micro enterprises, the new limit will be set at Rs 2.5 crore, annually. Similarly, for medium enterprises, the annual investment limit will be increased from Rs 20 crore to Rs 50 crore.
In terms of turnover, while it is presently capped at Rs 5 crore annually for getting classified as a micro enterprise, it will see revision to up to Rs 10 crore, as per the new proposals by the government in the Union Budget 2025. The move is aimed to make MSMEs get technologically advanced, as well as gain efficiencies of scale.
|
MSME Classification: Existing Investment and Turnover Limits |
||
|
Enterprise Size |
Annual Investment |
Annual Turnover |
|
Micro |
Rs 1 crore |
Less than Rs 5 crore |
|
Small |
Rs 10 crore |
Up to Rs 50 crore |
|
Medium |
Rs 20 crore |
Up to Rs 100 crore |
|
Budget 2025 |
2.5x |
2x |
According to Sitharaman, “Today, over 5.7 crore MSMEs have come together to position India as a global manufacturing hub. To help them achieve higher efficiencies of scale, technological upgradation, as well as better access to capital, the investment, and turnover limits for all MSMEs will be enhanced to 2.5 times, and 2 times, respectively. This will give them confidence to grow and generate employment for the youth.”
With over 36% contribution to the country’s manufacturing output, around 1 crore registered MSMEs presently employ 7.5 crore people. Encompassing manufacturing as well as services, these MSMEs also contribute to over 45% of the total exports from India.
The allied industry in the automotive ecosystem which comprises over 70% MSMEs that supply various automotive components to Tier-1s, OEMs, and in the aftermarket, has welcomed the government’s vision to give a major boost to the sector. According to the Automotive Component Manufacturers Association of India (ACMA), the Budget reflects the government’s strong commitment to strengthening India’s manufacturing sector.
As per Shradha Suri Marwah, President, ACMA, and CMD, Subros, “It is a is forward-looking and growth-centric Budget, reinforcing the government’s commitment to strengthening India’s manufacturing sector and driving the transition to cleaner mobility solutions. The focus on MSMEs, innovation, exports and supply chain resilience will provide a strong impetus to the auto component industry.”
Boost to credit availability
The Budget further stressed upon improving access to credit, with the credit guarantee cover having also been enhanced. For MSMEs, it has been proposed to be increased from Rs 5 crore to Rs 10 crore, thereby, leading to additional credit availability of Rs 1.52 lakh crore, over the next five years.
According to ACMA, the increase in credit guarantee cover for micro and small enterprises from Rs 5 crore to Rs 10 crore will encourage investments in technology and R&D, crucial for the industry's global competitiveness.
For startups, the credit guarantee cover has been proposed to increase from Rs 10 crore to Rs 20 crore, with the guarantee fee being moderated to 1 percent for loans in 27 ‘focus’ sectors, important for creating a self-reliant India. The same fee has also been proposed for well-run exporter MSMEs, for availing term loans up to Rs 20 crore, as per the latest Union Budget.
According to Sitharaman, “For micro enterprises, we will introduce customised credit cards for such enterprises registered on the ‘Udyam’ portal. The government aims to issue 10 lakh such cards in the first year.”
Fund of funds for startups
Giving a strong impetus to startups, the Union Budget 2025 also proposed fresh allocation of Rs 10,000 crore to funds for emerging startups. As per the government, while the Alternate Investment Funds (AIFs) for startups have received commitments of more than Rs 91,000 crore, these are supported by the (FoF) setup of the government, with its contribution of Rs 10,000 crore.
“A new FoF with expanded scope and a fresh contribution of additional Rs 10,000 crore will now be set up,” Sitharaman mentioned.
To further ‘Make-in-India’ programme, the government also outlined setting up a National Manufacturing Mission to cover small, medium, and large industries by providing policy support, execution roadmaps, governance, and monitoring framework for central ministries and states.
To drive entrepreneurship, the government also announced launching a new scheme for 5 lakh women, and SC / ST first-time entrepreneurs, to provide term loans of up to Rs 2 crore, over the next five years. “The scheme will incorporate lessons from the successful ‘Stand-up India’ scheme. Online capacity building for entrepreneurship and managerial skill development will also be organised,” Sitharaman pointed out.
According to Nirmal K Minda, CMD, Uno Minda, “We welcome the Union Budget 2025-26 for its forward-looking initiatives. We particularly appreciate the measures designed to boost job creation and strengthen the manufacturing sector. The introduction of the National Manufacturing Mission, which focuses on enhancing 'Make in India’, will provide support across industries. This initiative will accelerate domestic manufacturing and reinforce India's position as a global manufacturing hub.”
Rohit Saboo, President and CEO, NBC Bearings, "This is a highly growth-oriented Budget with a progressive vision. The enhanced credit guarantee cover and investment in MSME classification will provide essential financial support to the more than 10 million registered MSMEs, which employ 75 million individuals. This strengthens their crucial role in establishing India as a global manufacturing powerhouse."