MSMEs are calling for last-mile capability building, digital training, and stronger policy support ahead of Budget FY27.
The report highlights persistent challenges including limited access to formal finance, knowledge gaps, and slow adoption of quality standards.
Policy suggestions include cash-flow-based underwriting using GST/e-invoice data, IBC-aligned resolution frameworks, and district-level MSME cells.
Budget FY27 Expectations: MSMEs Need ‘Strengthening Capacity’ at the Last Mile
So far, government policies have largely centred on boosting competitiveness, expanding formal financing, and promoting technology integration across value chains
Summary
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As India moves toward the Union Budget 2026–27, expectations around allocations and policy reforms are building. A key focus area is the micro, small, and medium enterprises (MSMEs) sector, the backbone of the economy, which contributes around 30% to GDP, accounts for 35% of manufacturing output and 45% of exports, and employs more than 100 million people.
So far, government policies have largely centred on boosting competitiveness, expanding formal financing, and promoting technology integration across value chains, Deloitte said in a report. “Despite these advancements, MSMEs face persistent challenges such as limited access to finance, knowledge gaps, scalability issues, and slow adoption of quality standards,” it noted.
What the Sector Demands
According to the report, the sector calls for strengthening capacity at the last mile through training on accounting methods and digital platforms, export and quality standards, and policies to enhance competitiveness. The report recommends integrating AI in service delivery, and establishing a dedicated MSME liquidity and growth fund channelled via NBFCs.
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“Access to finance remains a challenge for most MSMEs, constrained mainly due to high KYC norms imposed by banks. Hence, a green-channel treatment and dedicated fund via NBFCs will improve accessibility for last-mile enterprises,” it said.
Policy Recommendations
The report suggests adopting cash-flow-based underwriting using GST/e-invoice and utility data, and aligning resolution thresholds with the Insolvency and Bankruptcy Code (IBC) for faster settlements. Greater formalisation could lead to faster credit delivery, lower NPAs, and reduced dependence on informal funding, it added.
Other recommendations include district-level MSME cells, outcome-based grants to states, and independent evaluations every 12 months. “District-level convergence across schemes reduces duplication and improves delivery fidelity,” the report said. Wider and faster adoption of digital platforms and quality standards will strengthen credit access, compliance, and market linkages.
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