Inclusive growth theories increasingly recognise MSMEs as central to development due to their employment intensity, spatial dispersion, and accessibility to marginalised groups. Drawing on Lewisian labour absorption, Kaldorian linkages, and capability-based and inclusive industrial policy frameworks, MSMEs act as a bridge between informality and high-productivity growth. Globally, MSMEs account for around 90% of businesses, generate 60–70% of employment, and contribute about 50% of GDP, underpinning livelihoods for the working poor, women, and youth.

In India, MSMEs are a key pillar of economic development, generating low-cost employment second only to agriculture, contributing 30.1% of GDP (2022–23), and accounting for nearly 46% of exports in 2024. The Budget has therefore rightly recognised MSMEs as an engine of growth.

The recent Budget (2026) is anchored around three kartavyas of driving resilient growth, empowering people as development partners, and ensuring inclusive access to opportunities for all. MSMEs as a sector are capable of fulfilling all three Kartavyas—while also enhancing India’s international trade profile. Achieving the vision of Viksit Bharat @2047 will depend significantly on empowering MSMEs, as they play a critical role in driving inclusive growth, innovation, and global competitiveness.

The Budget has adopted this three-pronged approach to help MSMEs grow as ‘Champions’ by improving access to liquidity, equity, compliance support, and global markets.

Unlocking MSME Liquidity for Scale and International Trade Integration

Enhanced availability of working capital to MSMEs is being ensured through liquidity support via the Trade Receivables Discounting System (TReDS). It is an online platform that enables MSMEs to unlock working capital by converting receivables into cash, thereby improving credit access for small businesses in India. The Budget has mandated the recognition of TReDS as the transaction settlement platform for all purchases from MSMEs by CPSEs. This will eradicate the issue of uneven participation of public sector undertakings in procurement from MSMEs. It will also act as a benchmark for other corporates, ensuring that purchasing and settlement of MSME invoices becomes easier, thereby enhancing the market reach of MSMEs.

Further, the Government e-Marketplace (GeM) will be linked with TReDS, integrating purchasing, invoicing, and financing on a single platform and providing ease of buying MSME products. This integration will significantly improve cash flows to MSMEs.

Recognition of TReDS instruments as asset-backed securities and the development of a secondary market will enhance demand and supply for trade receivables and improve efficiency through better price discovery, thereby ensuring stability of cash flows.

In addition, credit guarantee support through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) will reduce the perceived default risk for banks and NBFCs, encouraging greater lender participation and competitive bidding. This will lower discount rates and enable smaller, less-rated MSMEs to access working capital even with genuine receivables. The result is a win–win outcome, where MSMEs receive cash closer to the invoice face value, while financiers gain greater certainty of timely repayment.

Improved access to working capital will ultimately enable MSMEs to scale up operations, ensure continuity of business activities, enhance productivity, and translate higher production into increased export capacity.

Stronger and Enhanced Equity

Equity support through a dedicated ₹10,000 crore SME Growth Fund and enhancement of budgetary support to the Self-Reliant (SRI) India Fund by ₹2,000 crore strengthens MSME financing architecture. The SRI initiative provides growth capital to eligible MSMEs to support micro-enterprises and ensure access to risk capital. The Fund of Funds under the Self-Reliant India (SRI) Fund infuses ₹50,000 crore as equity into MSMEs with potential to grow into large-scale units. Disbursement across the country supports faster business growth, job creation, and economic development.

By nurturing enterprises that produce critical technologies and goods, the initiative promotes self-reliance and strengthens India’s export base, enabling MSMEs to compete globally, diversify exports, and integrate into international value chains.

Promoting Affordable Compliance through Corporate Mitras

The Government will facilitate professional institutions such as the Institute of Chartered Accountants of India, Institute of Company Secretaries of India, and Institute of Cost Accountants of India to design short-term, modular courses and practical tools to develop a cadre of “Corporate Mitras,” particularly in Tier-II and Tier-III towns. These accredited para-professionals will support MSMEs in meeting compliance requirements at affordable costs.

By reducing dependence on high-cost professional services, this initiative will lower expenses related to statutory and regulatory filings. Improved and timely compliance will enhance the credibility of MSMEs, thereby facilitating better access to formal credit and wider market opportunities, alongside creating employment opportunities.

Ensuring compliance at both domestic and international levels is essential for smooth business operations, reduced litigation costs, uninterrupted production, increased exports, and greater integration into international trade.

Greater Access to Global Markets for Courier Exports

The Budget proposes removing the ₹10 lakh per consignment value cap on courier exports, enabling exporters to scale shipments, access new markets, and build brand value across both high- and low-value segments. By easing this restriction, the measure is expected to encourage greater participation of small businesses in international trade and support an overall increase in exports.

These initiatives build on existing MSME schemes such as SFURTI and the Procurement and Marketing Support Scheme, among others. The Budget marks a clear shift from fragmented MSME support to ecosystem-based competitiveness. The real challenge will lie in execution and implementation. Given MSMEs’ strong linkages with upstream and downstream industries, if implemented effectively, these measures can reposition MSMEs not merely as beneficiaries of growth, but as drivers of India’s export competitiveness and inclusive development on the path to Viksit Bharat @2047.

Author

Prachi Malik

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