• MSME in India

The Indian government’s MSME Budget 2025 has been hailed as a significant step towards strengthening the backbone of the Indian economy. With a focus on credit access, technological upgrades, and simplified regulations, the budget aims to empower MSMEs and propel their growth. Industry associations and MSME owners have welcomed the budget, expressing optimism about its potential to address key challenges. They believe that the measures announced will create a more conducive environment for small businesses to thrive.  

While the budget has been well-received, some challenges remain. Effective implementation of the announced measures is crucial to ensure that the benefits reach the intended beneficiaries. Additionally, continued efforts are needed to address issues such as infrastructure gaps and skill development.

Despite these challenges, the MSME Budget 2025 presents significant opportunities for small businesses in India.

Our newsletter is an attemppt to provide brief about the developments in MSME Sector on weekly basis.

  • Our Special Corner
  • “Budget 2025 reshapes MSME landscape—higher investment and turnover limits unveiled” 

Union Budget 2025: Aimed at enhancing credit availability and supporting the country’s small businesses, Union Finance Minister Nirmala Sitharaman in her Budget speech on Saturday announced an increase in the credit guarantee cover for micro and small enterprises (MSEs) and start-ups.

Additionally, the classification criteria for MSMEs have been revised, raising both investment and turnover thresholds. The modified definition of MSMEs is expected to facilitate the expansion and growth of these enterprises. The resulting economies of scale could enhance productivity without the MSMEs losing out on several government incentives, including market support, export promotion, preferential procurement in the public sector, and incentives through the Micro Small Enterprises-Cluster Development Programme (MSE-CDP), Prime Minister Employment Generation Programme (PMEGP), and Scheme of Fund for Regeneration of Traditional Industries (SFURTI) and enabling of IT ecosystems. This enabling environment will promote competition and avoid dwarfism among MSMEs.

The government said the revised thresholds allow businesses more room to scale without losing the benefits of MSME status.

Enhancement in Credit Guarantee Cover:

  • Micro & Small Enterprises (MSEs): Increased from Rs 5 crore to Rs 10 crore
  • Start-ups: Increased from Rs 10 crore to Rs 20 crore
  • Exporter MSMEs: Now eligible for term loans up to Rs 20 crore

Revised MSME Classification Criteria:

Changes in Investment Limit

  • Micro Enterprises: Increased from Rs 1 crore to Rs 2.5 crore
  • Small Enterprises: Increased from Rs 10 crore to Rs 25 crore
  • Medium Enterprises: Increased from Rs 50 crore to Rs 125 crore

Changes in Turnover Limit

  • Micro Enterprises: Increased from Rs 5 crore to Rs 10 crore
  • Small Enterprises: Increased from Rs 50 crore to Rs 100 crore
  • Medium Enterprises: Increased from Rs 250 crore to Rs 500 crore

Industry observers opined that the MSME reclassification will strengthen the credit access and competitiveness of the MSMEs and will support their business expansion.

  • MSME Schemes:

The government has introduced many schemes to encourage the micro and small industries. Through many schemes, the Central government is boosting the credit availability for the MSMEs. MSME (Micro, Small and Medium Enterprises) schemes are initiatives launched by the Government of India to support and promote the growth and development of small businesses in the country.

  • “Govt approves Mutual Credit Guarantee scheme to strengthen MSME sector”

The Indian government has approved a new Mutual Credit Guarantee Scheme for Micro, Small, and Medium Enterprises (MSMEs), particularly those in the manufacturing sector. This scheme aims to improve access to credit for MSMEs, thereby boosting manufacturing and supporting the “Make in India” initiative.

The Centre on Wednesday approved the Mutual Credit Guarantee Scheme to give a fillip to manufacturing by micro, small & medium enterprises (MSMEs), fulfilling a promise made in the previous budget and just days ahead of Union Budget 2025.  

Key features of the scheme:

  • Guarantee Coverage: The scheme will provide 60% guarantee coverage to Member Lending Institutions (MLIs) for loans up to ₹100 crore sanctioned to eligible MSMEs for the purchase of plant and machinery.  
  • Eligibility: MSMEs with a valid Udyam Registration Number are eligible to apply.  
  • Loan Amount and Usage: A minimum of 75% of the project cost must be utilized for the acquisition of equipment and machinery.  
  • Repayment Terms: For loans up to ₹50 crore, the maximum repayment period is 8 years with a 2-year moratorium on principal installments. For loans above ₹50 crore, longer repayment and moratorium periods may be considered.  
  • Guarantee Fees: No guarantee fee will be charged in the first year. For the subsequent three years, the fee will be 1.5% per annum of the outstanding loan amount. Thereafter, it will be 1% per annum.  
  • Scheme Duration: The scheme will be in effect for four years from the date of the issuance of operational guidelines or until cumulative guarantees of ₹7 lakh crore are issued, whichever is earlier.  

The scheme is anticipated to have a significant impact on the manufacturing sector, which currently contributes 17 per cent to the nation’s GDP and employs over 27.3 million workers. Aligning with the Prime Minister’s vision of ‘Make in India, Make for the World,’ the MCGS-MSME is designed to facilitate access to credit, thereby promoting growth in the manufacturing sector and increasing its share of GDP to 25 per cent,” said a statement issued by the finance ministry.

Overall, the Mutual Credit Guarantee Scheme is a welcome step towards strengthening the MSME sector in India. By improving access to credit, the scheme will help MSMEs overcome financial constraints, expand their operations, and contribute to the growth of the Indian economy.

For eligibility, application process and other process, please get in touch with us.

  • Trade Receivables Discounting System (TReDS) – Part 62

Trade Receivables electronic Discounting System (TReDS) is an online electronic platform and an institutional mechanism for factoring of trade receivables of MSME sellers. It enables discounting of invoices through an auction mechanism to ensure prompt realization of trade receivables.  

The Trade Receivables electronic Discounting System (TReDS) was released by the Reserve Bank of India in 2018 to help small businesses resolve cash flow issues.

FAQS on TReDs

1. Does TReDS guarantee invoice financing?

No, TReDS does not guarantee invoice financing. It depends on the availability of bids from financiers, the seller’s acceptance of those bids, and the successful settlement of obligations between the involved parties.

2. Govt. Approved platforms:

Currently, there are 3 (three) government-approved TReDS platforms operating in India namely, Invoicemart, Receivables Exchange of India, and Mynd Solutions wherein the MSMEs upload their invoices or bills of exchange on the platform within the statutory limit of 45 (forty-five) days from the date of acceptance or deemed acceptance of goods or services, where buyers accepts the transaction.

3. Latest Amendment:

The key change introduced in the notification dated 07 November 2024 is that all companies registered under the Companies Act, 2013, with a turnover exceeding INR 250 crores, (which was previously INR 500 crores) as well as all Central Public Sector Enterprises, must mandatorily onboard on the TReDS platform by 31 March 2025.

  • MSME Corporate News:
  1. Budget 2025: Perfect recipe to boost consumption and empower MSMEs and start-ups

In Budget 2025, the government has prioritised people, innovation and manufacturing. The aim is to elevate India as a global manufacturing hub, boost employment, and empower local businesses. Anticipated tax reforms are set to offer significant relief, enhancing disposable income and invigorating the economy.

The government has attempted to hit the target by providing an impetus to the Indian economy in terms of accelerated growth, securing inclusive development, invigorating private sector investments, uplifting household sentiment, and enhancing spending power of the Indian middle class.

The budget focused on the agriculture sector with announcement of various incentives – PM Dhan-Dhaanya Krisi Yogna, a programme for vegetables and fruits, a makhana board, urea plant, enhanced credit. For the amelioration of MSMEs, the budget laid the roadmap by introducing initiatives including reclassification of MSME criteria, fund of funds of start-ups and initiative for first time entrepreneurs. It also unveiled a range of measures for investing in people — IITs, skills, broadband in schools, AI education and the healthcare sector.

Here are some take-aways from Budget 2025:

Manufacturing

In order to position India as the global hub for manufacturing and producing electronic goods, a comprehensive programme for the development of semiconductors and display manufacturing ecosystem in India was approved. Ministry of Electronics and Information Technology has notified schemes for setting up of such facilities in India.

The benefit of the presumptive taxation has been extended to non-residents providing services or technology in India for setting up of such electronics manufacturing facilities or in relation to the manufacture or production of such articles.

It is, therefore, proposed, to insert a new section 44BBD, which deems 25 per cent of the aggregate amount received/ receivable by the non-resident on account of providing services or technology as profits and gains of such non-residents from business in India. This will result in an effective tax payable of less than 10 per cent on gross receipts by a non-resident company.

Real estate

Finance (No.2) Act, 2014 introduced a special taxation regime for Real Estate Investment Trust (REIT) and Infrastructure Investment Trust (InVIT) [commonly referred to as business trusts]. Special taxation regime under section 115UA of the Act, provided a pass-through status to business trusts in respect of interest income, dividend income received by the business trusts from a special purpose vehicle in case of both REIT and InvIT and rental income in case of REIT. Such income is taxable in the hands of the unit holders unless specifically exempted.

Insurance

The FDI limit for the insurance sector will be raised from 74 to 100 per cent. This enhanced limit will be available for those companies which invest the entire premium in India. The current guardrails and conditionalities associated with foreign investment will be reviewed and simplified.

Start-ups

The existing provisions of Section 80-IAC, inter-alia, providing for deduction of entire profits and gains for three consecutive assessment years out of ten years, derived from an eligible business by a start-up, had a sunset clause, being applicable to startups incorporated on or before April 1, 2025. The sunset clause has now been extended till April 1, 2030.

  • New credit guarantee scheme for MSMEs to boost investment, manufacturing, exports: Exporters

The launch of a new credit guarantee scheme for the MSME sector covering loans up to Rs 100 crore will help attract more investments, promote manufacturing and boost the country’s exports, exporters say. They said that the exporting community’s lack of adequate financing for capital investments has long been a challenge for MSMEs, restricting their ability to scale and compete in global markets.

On January 29, the government launched the Mutual Credit Guarantee Scheme for MSMEs (MCGS- MSME) with an aim to provide 60 per cent guarantee coverage by National Credit Guarantee Trustee Company Ltd (NCGTC) to Member Lending Institutions (MLIs) for credit facility of up to Rs 100 crore sanctioned to eligible MSMEs for purchase of equipment/machinery, the finance ministry said in a statement. Manufacturing sector currently comprises 17 per cent of the nation’s GDP and over 27.3 million workers.

For availing the scheme, the MSMEs should fulfil certain conditions which include that the borrower should be an MSME with valid Udyam Registration Number, loan amount guaranteed shall not exceed Rs 100 crore, project cost could be of higher amounts also and minimum cost of equipment /machinery is 75 per cent of project cost.

“This move aligns perfectly with the ‘Make in India, Make for the World’ vision, enabling our enterprises to boost production, improve quality, and expand their global footprint,” Sahai said, adding that the export credit rate for MSMEs ranges between 10-11.5 per cent, while term loan ranges between 11-13.5 per cent.

The scheme will be applicable to all loans sanctioned under MCGS-MSME during the period of four years from the date of issue of operational guidelines of the scheme or till cumulative guarantee of Rs 7 lakh crore are issued, whichever is earlier, it said.

  • Textiles to toys: MSMEs get a Rs 2,250 crore booster shot with mission exports

The commerce, MSME and finance ministries will work together to identify various sectors that will require maximum capital support for technology upgradation, marketing, brand building, and accessing newer markets, to boost exports, commerce minister Piyush Goyal said Saturday. Govt has announced setting up an Export Promotion Mission with an outlay of Rs 2,250 crore.

Goyal said the mission could address issues including the ways to extend credit to the exporting community at affordable rates. The mission will facilitate easy access to export credit, cross-border factoring support, and support to MSMEs to tackle non-tariff measures (NTMs) in overseas markets. He added the finance minister has given flexibility for export promotion and all the three ministries will work together and design which all sectors really need support.

With regard to the resolving NTMs, the minister said if a country has a very difficult terms of reporting or quality approvals, India should be in a position to support MSMEs in meeting those costs. Most NTMs are domestic rules created by countries with an aim to protect human, animal or plant health and environment.

  • Reinforces govt commitment to start-ups, MSME sector: Investors

Investors have termed the Union Budget as progressive and growth-oriented that reinforces government’s commitment to start-ups and micro small and medium enterprises (MSME) sector.

Steps like doubling credit guarantee cover for the MSME, enhancing their investment and turnover limits by 2.5 times and 2 times, respectively, to boost their growth and operational efficiency and introducing customised credit cards for them will stimulate economic growth, says the industry.

The Budget 2025-26 focuses efforts of the Union Government to secure inclusive development, uplift household sentiment and enhance the power of India’s middle class, stated Rajiv Aggarwal, president, Baddi Barotiwala Nalagarh Industries Association (BBNIA).

Terming the budget as revolutionary, the BBNIA said the Budget focuses efforts of the Union Government to secure inclusive development, uplift household sentiment and enhance the power of India’s middle class. “These announcements are aimed at stimulating economic expansion, give push to small businesses, enhance infrastructure, improve governance and promote sustainable development across multiple sectors,” said YS Guleria, gen secy, BBNIA.