Micro, Small, and Medium Enterprises (MSMEs) are the backbone of any nation, fueling economic growth and driving consumer spending. Even massive corporations depend on the output of these enterprises to have a healthy customer base and from which to source intellectual capital.

The Union Budget 2025  presented on Feb 1st, 2025 therefore has focused on MSMEs with increased financial assistance, expanded credit guarantees, and initiatives for deep-tech development, this budget has boosted opportunities for entrepreneurs.

Let’s dive into the key takeaways for MSMEs and startups from the Union Budget 2025:

1. Revised MSME Classification: Expanding Eligibility for Benefits

The government has doubled turnover thresholds and increased investment limits by 2.5 times, allowing more businesses to qualify as MSMEs. This expanded classification ensures that more enterprises can access Micro, Small, and Medium Enterprises schemes, credit, and tax benefits. It also enables smoother transitions for growing businesses, preventing premature loss of MSME benefits as they scale.

Given below is a detailed breakup of the increased classification limits of MSMEs based on the Union Budget 2025:

2. Government Schemes for Startups

The ₹10,000 crore Fund of Funds will provide additional funding opportunities for startups and innovation-driven MSMEs. This initiative aims to enhance the global competitiveness of Indian startups and support their scalability, ensuring they receive adequate financial support at crucial growth stages.

This is in addition to the existing Alternative Investment Funds (AIF) of 91,000 crore that have already been committed to enterprises. 

3. Expanded Credit Guarantee for MSMEs

To improve access to funding, the credit guarantee cover has been raised to ₹10 crore, unlocking ₹1.5 lakh crore in additional funding over the next five years.

The highlights include:

• Customized credit cards for micro-enterprises with a ₹5 lakh limit to improve access to working capital. This is subject to the enterprise being registered with the government through Udyam registration. This is an easy and free process to get your Micro, Small, and Medium Enterprise registered with the Government of India. The first year will see 10 Lakh such credit cards being provided to businesses that qualify so that access to capital is never an issue.  

• Stronger financial backing for MSMEs, reducing collateral requirements, and improving business growth prospects.

4. Deep-Tech Development Fund

Recognizing the importance of cutting-edge technology, the government has announced a Deep-Tech Development Fund to boost startups in AI, robotics, quantum computing, and other emerging sectors. This fund will provide long-term support for research and development, helping India become a leader in deep-tech innovation.

The Indian government has recognized the critical importance of cutting-edge tech innovations in the AI/ML space aided by semiconductor technology that powers such research and growth. Other related tech innovations include advanced biotech, aerospace, and blockchain which need a boost in funding. The DeepTech Fund of Funds addresses this pressing need, adding to the scope of the Small Industries Development Bank of India (SIDBI) Fund of Funds for Startups (FFS) by allocating an additional Rs 10,000 crore to the scheme. With the new allocation, the scheme’s total outlay will touch a total of ₹ 20,000 crore.

5. Ease of Doing Business Initiatives

A dedicated high-level committee will be established to:

• Simplify compliance processes for startups and Micro, Small, and Medium Enterprises.
• Reduce regulatory burdens, making it easier to start and scale businesses.
• Enhance trust-based governance, fostering a more business-friendly environment.

6. Empowering Women Entrepreneurs

The budget introduces special initiatives to support 5 lakh first-time women entrepreneurs from Scheduled Castes and Scheduled Tribes. These women-led businesses will receive:

• Up to ₹2 crore in term loans, improving access to capital.
• Online training programs to build entrepreneurial skills and knowledge.

This initiative aims to promote gender inclusivity in business and create more opportunities for women in the MSME sector.

7. Tax Incentives and Compliance Relief

To ease financial burdens and encourage business growth, the Union Budget 2025 offers:

• Extended tax holiday for startups, increasing the eligibility period from three to five years.
• Reduced corporate tax rates for eligible MSMEs, improving profitability.
• Simplified GST compliance and faster refund processing, ensuring smoother cash flow.

Summing Up

The Union Budget 2025 presents a significant boost for startups and MSMEs, with expanded funding options, streamlined regulations, and targeted support for deep-tech and women entrepreneurs. These measures are designed to create a more dynamic and competitive business ecosystem in India.