By Dr. Gyan Pathak
Union Minister of Finance Nirmala Sitharaman labelled MSMEs of India in her budget speech as the second engine in the growth story of India, boasted of significantly helping the sector under PM Narendra Modi led government, and announced several new schemes for them. However, in reality the Centre has been cutting allocations for the Union Ministry of Micro, Medium and Small Enterprises since 2022-23, and the level of allocation for the financial year 2025-26 is still lower than actual expenditure in 2022-23.
Nothing will be more hypocritical for Narendra Modi government, when we consider the declining allocation with the change of definitions for all categories for MSMEs. In 2020, the government had redefined MSMEs to include bigger companies to help them in the name of MSMEs, and now the Union Budget 2025-26 has again redefined to help some more bigger enterprises. We have seen how the schemes implemented for the MSMEs have helped bigger enterprises brought under this category, while smaller ones continued struggling for help.
It is still not clear how the Union Budget 2025-26 will be going to help the present MSMEs, in significant ways, since several schemes were really intended to help the newly brought bigger enterprise by changing the very definition.
Allocations for the Union Ministry of MSMEs in the last few years has been on the decline, which shows the neglect and apathy of the Modi government towards this sector, while it has been keen in helping big corporates to corner more and more profit. The actual expenditure for 2022-23 for MSME was Rs 23,628.73 crore, which declined to Rs 22,138.01 crore in 2023-24. Union Budget 2024-25 kept the budget allocation at Rs 22,137.95 crore, but the revised estimate shows that government is likely to spend only Rs 17,306 crore by March 31, 2025. No one can agree with the government that they have been helping the MSME sector to grow, especially when they are not even spending the allocated amount and saved almost Rs 5000 crore.
Showing higher budget allocation for 2024-25 seems now only an act of playing to the gallery, while the government did not actually intend to spend the entire allocated amount. Nevertheless, for the year 2025-26 the allocation is shows Rs 23,168 crore which was even less than actual expenditure of Rs 23,628.73 crore in 2022-23. Even then, we are uncertain about how much government will not spend in spite of the allocation.
It is an important issue since MSME sector is a vital contributor to India’s industrial landscape in terms of manufacturing, exports, and employment. With 5.93 crore registered MSMEs employing more than 25 crore people, these enterprises generate a significant share of the country’s economic output. In 2023-24, MSME-related products accounted for 45.73% of India’s total exports, reinforcing their role in positioning the country as a global manufacturing hub.
Despite this encouraging background, the allocation for MSME for 2025-26 is disproportionally low. Nevertheless, the Centre has claimed that the new budgetary provisions aim to build on this strong foundation by fostering innovation, enhancing competitiveness, and ensuring better access to resources. Through these steps, the government seeks to equip MSMEs with the tools needed to expand their reach and strengthen their contribution to India’s economic growth.
FM Sitharaman has said that the revised classification criteria will help MSMEs scale operations and access better resources. The investment and turnover limits have been increased by 2.5 times and 2 times respectively, and is expected to improve efficiency, technological adoption, and employment generation.
Now investment and turnover limits for micro enterprises have been raised from current 1 and 5 crore to 2.5 and 10 crore, for small enterprises from current 10 and 50 crore to 25 and 100 crore, and for medium enterprises from current 50 and 250 crore to 125 to 500 crore. The definition will impact the Employment Linked Schemes announced in 2024-25 worth Rs10000 crore but yet to be launched. ELI budget for the year 2025-26 has been doubled to Rs20,000 crore. The scheme is to be launched through EPFO, and subsidy will be given to employers for every new EPFO member. Significant number of decent job creation under this scheme is expected, but we have already lost one year without even the scheme launched.
The other measures announced were enhancement of credit availability cover, credit cards for micro enterprises, support for startups and first-time entrepreneurs, focus on labour-intensive sectors, and manufacturing and clean tech initiatives.
Now let us have a closure look on actual budget to see if the allocation was enough to significantly support MSMEs. Under the Central Sector Schemes and Projects Rs 22,896.51 crore has been allocated for 2025-26 as against Rs 21,868.45 crore allocated for 2024-25. However, we should take note of the fact that the Centre is likely to spend only Rs 17,054.29 as per revised estimate for the current financial year. Hence it is highly uncertain if the Centre will actually spend the allocated money in 2025-26 on its schemes.
Major increase in allocation is in Development of Khadi, Village and Coir Industries which has been increased from Rs 1400.29 crore for 2024-25 to Rs 1532.16 crore in 2025-26. However, the Centre is likely to spend only Rs 1011.21 crore in the current year, a very dismal performance.
There are two schemes under Technology Upgradation and Quality Certification – ASPIRE (Promotion of Innovation, Rural Industry and Entrepreneurship) and MSME Champions Scheme. ASPIRE was allocated Rs 20 crore for 2024-25, but only Rs 8.68 crore is likely to be utilised. Nevertheless, allocation remains at Rs 20 crore for 2025-26 also. MSME Champions Scheme sees cut in allocation to Rs 54.72 crore from actual Rs 88.77 crore in 2023-24.
Similar is the case under Prime Minister Employment Generation Programme (PMEGP) allocation for which has declined to Rs 2954.42 crore for 2025-26 from actual Rs 3106.18 crore in 2023-24. There is no budget allocation for Credit Support Programme. Guarantee Emergency Credit Line (GECL) facility to eligible MSME borrowers also saw a cut from actual Rs 14,000 crore in 2023-24 to Rs 9000 crore for 2025-26. Credit Linked Capital Subsidy (CLCS) has no allocation.
Apart from access to finance has shown decline, another difficult area for MSMEs will be Marketing. Procurement and Marketing Support Scheme has also seen a cut from actual Rs 68.70 crore in 2023-24 to Rs65 crore. Entrepreneurship and Skill Development programme has been allocated Rs 836 crore for 2025-26 as against allocation of Rs 704 crore in 2024-25. Infrastructure development programme has been allocated Rs 3156 crore for 2025-26 as against allocation of Rs 2560 crore for current year but government is likely to utilise only Rs 1687 crore by March 31, 2025.
All these show that the MSME sector has not been given due weightage in the Union Budget 2025-26 allocations, but FM Sitharaman has been talking big about government’s significant measures under PM Narendra Modi. Under these circumstances, MSMEs will have to grow primarily on its own strength, while little help will be coming to them from the Centre. (IPA Service)
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