Amid U.S. Tariffs, Union Cabinet Expected to Approve New Financial Support Package for MSMEs

The Union Cabinet on Wednesday may approve a financial-support package for micro, small and medium enterprises (MSMEs) in order to help them counter the impact of high US tariffs.

According to sources, quoted by Moneycontrol, the Cabinet is also expected to approve credit-facilitation measures, which would provide enhanced loan-guarantee by the government for MSME loans, as they seek extra measures to gain protection for labour-intensive sectors.

Currently, the most vulnerable sectors from US tariffs are textiles, apparel, gems and jewellery, leather and footwear, chemicals etc, all facing 50% tariffs.

Earlier, it was reported that the central government is working on a support package worth Rs 25,000 crore under the Export Promotion Mission, announced in Union Budget 2025-26. This project aimed at providing affordable credit, better market access for exports, and help cushion from the adverse impact of high tariffs.

Speaking to Moneycontrol, a senior official said that the Centre is considering a ‘direct-income support’ for the employees of MSMEs impacted by Trump’s tariffs. "The idea is being considered right now, we have to do an assessment of the incentive how it roll-out…what amount would be provided," he told.

It was also noted that the Reserve Bank of India (RBI) may enhance the limit of collateral-free loans for micro & small enterprises (MSEs) to Rs 20 lakh from Rs 10 lakh under the Credit Guarantee Scheme (CGS) by the end of this month or early September.

Managed by Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), CGS was introduced in 2010 - seeks to assure lenders that in the event of an MSE unit that availed collateral-free credit facilities fails to pay back, the trust would pay 75-90 percent of the outstanding amount.

While meeting a delegation of exporters represented by the Federation of Indian Export Organisations (FIEO) last week Finance Minister Nirmala Sitharaman was informed about the challenges following the escalation of tariffs.

FIEO highlighted the immediate concerns of the exporting community, particularly the adverse impact of tariffs on market access, competitiveness and job creation. FIEO’s President SC Ralhan said exporters need a quick and calibrated measure to mitigate the strain of tariffs, as they are key to growth and employment generation.