MSME Sector Eyes Expansion in 2026, Urges Budget Support for Credit & Compliance

India’s Micro, Small and Medium Enterprises (MSMEs) are entering 2026 with a sense of "constructive optimism", according to the 10th edition of the MSME Business Confidence Study 2026 published by NeoGrowth. Drawing on insights from over 2,000 business owners across over 25 cities, the report indicated that 86% of MSMEs expect significant business growth in the coming year.

This confidence is strengthened by strong performance in late 2025. During an 87-day festive period, organised retail sales increased by 11% compared to the previous year. This marked the first return to double-digit growth in almost three years. This momentum was mainly due to GST 2.0 rate changes, which reduced pricing pressures, and a significant rise in digital payments. In October 2025 alone, UPI handled over ₹27 lakh crore in transactions, with payment-to-merchant (P2M) values going up by 11% month-on-month (MoM).

Easier Credit, Compliance Relief Expected

Commenting on how Indian MSME sector is at a critical transition, Ravi Saxena, Co-Founder and CEO of Wonderchef said, “For this Union Budget, the focus must shift from subsidies to driving a fundamental behavioral change of moving from khata culture to institutional transparency.”

Currently, a prevailing "compliance fear" forces many microenterprises to remain informal. He suggested that the government should adopt a 'trust-but-verify' model, rewarding transparency with instant, collateral-free credit through integrated digital platforms to bridge this gap.

“I expect the Finance Minister to deal with structural problems, like making sure that Section 43B(h) is strictly enforced so that big companies pay their MSME debts within 45 days,” Saxena added.

Furthermore, aligning tax audit exemptions and linking Udyam registration to preferential tariffs will transform formalisation into a ladder for growth rather than a weight of compliance.

Saxena went on to say that concerns about the immediate costs of digital systems and professional talent need to be addressed. In order to transform the traditional hustle of Indian entrepreneurs into structured, scalable businesses that serve as the foundation of a Viksit Bharat, he stated that the Budget should concentrate on compliance enablement, streamlining regulations and decriminalising minor procedural infractions.

Echoing a similar sentiment on transparent digital lending infrastructure, Chirag Shah, Founder & CEO, Pulse, added that simplifying compliance, expanding credit guarantee mechanisms, and introducing incentives for technology adoption in financial services can unlock new growth opportunities for small businesses. Supporting fintech innovation, while ensuring secure and responsible use of data under frameworks like the Digital Personal Data Protection Act (DPDPA), will be key to building a more inclusive, resilient, and data-driven lending ecosystem, one that helps MSMEs access capital exactly when they need it to grow.

“As we look ahead to the upcoming Union Budget, we hope to see a strong focus on empowering MSMEs through easier access to credit and faster, more transparent digital lending infrastructure,” Shah asserted.

MSMEs Bullish on Expansion

The NeoGrowth study further stated that expansion is the primary theme for 2026. Approximately 72% of MSMEs intend to expand their physical footprint by opening new outlets, while 30% plan to diversify their product ranges. To fund these ambitions, one in two MSMEs (54%) plan to seek business loans for inventory and working capital.

Women entrepreneurs are particularly bullish, with 87% anticipating growth. While their goals align with the broader sector, they are placing a unique emphasis on hiring, staff training and improving store aesthetics.

As the 2026 Union Budget approaches, the sector is calling for practical enablers to sustain this momentum. Nearly 48% of owners prioritise timely access to working capital, while 26% seek simpler compliance and faster access to government schemes.