Impact of Union Budget 2026 on MSMEs

With over 7.6 crore enterprises, Micro, Small and Medium Enterprises (MSMEs) play a crucial role in India’s economy by supporting jobs, manufacturing and entrepreneurship. The Union Budget 2026 brings significant policy measures aimed at strengthening the MSME sector. Keep reading on to know more about how MSMEs can stand to benefit from Budget 2026.

1. Create Champion MSMEs

The government outlined three Kartavyas: accelerating and sustaining economic growth through higher productivity and competitiveness; building people’s capabilities to fulfil aspirations and ensuring inclusive participation in line with Sabka Saath, Sabka Vikas. 

Under the first Kartavya, which focuses on driving economic growth and resilience, the Finance Minister announced interventions to create ‘Champion MSMEs’ supported by a three-pronged strategy:

a. Equity Support 

As the first prong, the FM proposed to introduce a ₹10,000 crore SME Growth Fund. This is designed to provide equity support to high-potential enterprises based on select performance criteria.

Also, the Self-Reliant India Fund will receive a ₹2,000 crore top-up, ensuring that micro enterprises continue to access risk capital and are not left behind in the scale-up journey.

b. Liquidity Support

With over ₹7 lakh crore already facilitated through Trade Receivables Discounting System (TReDS), the government proposes four major enhancements:

• Mandatory use of TReDS for all Central Public Sector Enterprises (CPSE) purchases from MSMEs

• Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)-backed credit guarantees for invoice discounting on TReDS 

• Linking Government eMarketplace (GeM) with TReDS to allow financiers to see government purchase orders to MSMEs, thereby facilitating faster and cheaper finance

• Securitisation of TReDS receivables, creating a secondary market and improving liquidity 

c. Professional Support

To ease compliance burdens and reduce operating costs for small businesses, the Budget introduces a new professional support framework for MSMEs. The government will work with professional bodies such as Institute of Chartered Accountants of India (ICAI), Institute of Company Secretaries of India (ICSI) and Institute of Cost Accountants of India (ICMAI) to create short-term, modular courses and practical toolkits to develop a network of trained para-professionals, known as Corporate Mitras.

These professionals will support MSMEs, especially in Tier-II and Tier-III towns, with compliance requirements at affordable costs.
 

2. Expanding Opportunities in Rural and Agri-linked Sector

Businesses operating in animal husbandry, fisheries and agri-value chains can stand to benefit significantly. The Budget supports:

• Integrated development of 500 reservoirs and Amrit Sarovars for fisheries

• Strengthening livestock, dairy and poultry value chains

• Credit-linked subsidies and modernisation of livestock enterprises

• Greater role for start-ups, FPOs and women-led groups in market linkages
   

3. Boost for Women-Led Businesses

Building on the success of the Lakhpati Didi Programme, the Budget introduces SHE-Marts. These are community-owned retail outlets at the cluster level to help women move from credit-led livelihoods to enterprise ownership, supported by innovative financing mechanisms. This is expected to strengthen women-led businesses.
 

4. Export Competitiveness for MSMEs

MSME exporters receive targeted support through:

• Higher duty-free input limits for marine exports

• Extension of export timelines from 6 months to 1 year for leather, footwear and textile products

• Removal of the ₹10 lakh cap on courier exports, enabling small businesses, artisans and start-ups to access global markets via e-commerce
   

5. Lower Input Costs and Easier Trade Compliance

Customs duty exemptions on capital goods and inputs for electronics, EV batteries, solar glass, critical minerals, aviation, nuclear power and biogas-blended CNG will reduce production costs and improve competitiveness for MSMEs integrated into these supply chains.

Also, trust-based customs reforms including longer duty deferral for Authorised Economic Operators (AEOs), faster clearances, AI-based risk assessment, warehouse self-declarations and a single digital window will cut delays, compliance costs and working capital lock-ins for MSMEs and other business segments engaged in trade.
 

6. Expanded Market Access

Businesses operating in Special Economic Zones (SEZs) can benefit from one-time flexibility to sell into the Domestic Tariff Area at concessional duties, while simplified logistics and new export opportunities in fisheries further support small exporters. 

The Union Budget 2026 introduces transformative measures that could shape the future of the MSME sector. MSMEs are set to benefit from improved financial inclusion, enhanced productivity, and greater export competitiveness, reinforcing their role as a critical pillar of India’s economic landscape. 
 

*Disclaimer: Terms and conditions apply. The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances.