FM Enhances MSME Classification, Provides Fresh Rs 10,000 Crore for Startups

Finance Minister Nirmala Sitharaman, in her Budget speech, announced several measures to boost MSMEs, including doubling the turnover limit for these enterprises from the current level. She also said that the investment limit for MSME classification would be increased by 2.5 times. Additionally, she announced an enhancement of the credit guarantee cover for MSMEs from Rs 5 crore to Rs 10 crore.

The Finance Minister also said that the government plans to introduce new customised credit cards for micro-enterprises with a limit of Rs 5 lakh.

The MSME sector plays a vital role in India's economy, contributing 30% to the country's gross domestic product (GDP) and 37% to its manufacturing output. With over 4.8 crore MSMEs operating in India, the sector is dominated by micro-enterprises, which account for over 95% of the total.

However, the sector is facing revenue pressure, as the share of exports of MSME-specified products in total exports declined from 49.4% in 2020-21 to 45.7% in 2023-24, according to data from the Directorate General of Commercial Intelligence and Statistics (DGCIS).

Also Read: FM Nirmala Sitharaman Announces Special Scheme for Farmers to Improve Productivity in Agriculture

New Startup Fund Of Funds

For startups, Sitharaman promised to set up a new fund of funds with an additional Rs 10,000 crore, in addition to the existing government contribution of Rs 10,000 crore.

“The Alternative Investment Funds (AIFs) for startups have received commitments of more than Rs 91,000 crore” the Finance Minister said in her speech.

The Sidbi Fund of Funds is a flagship scheme under the government's Startup India initiative. Launched on January 16, 2016, the fund, invests in Alternative Investment Funds (AIFs), rather than directly funding startups. To date, Sidbi has facilitated capital commitments for 144 AIFs, according to its data.

FM Sitharaman also announced a new scheme for 5 lakh women, Scheduled Castes, and Scheduled Tribes first-time entrepreneurs, providing them with term loans of up to Rs 2 crore over the next five years.