Budget 2025 to step up financial aid for startups, MSMEs: Report

The Centre intends to address critical challenges such as access to working capital, trade finance, and growth funding at favourable terms

The Union Budget for 2025-26 is expected to provide enhanced financial support for startups and small businesses, which collectively contribute nearly one-third of India’s economic output. The Centre intends to address critical challenges such as access to working capital, trade finance, and growth funding at favourable terms, according to sources cited in a Mint report.

Key measures under consideration include increased support through schemes managed by the Department for Promotion of Industry and Internal Trade (DPIIT) and the Ministry of Micro, Small, and Medium Enterprises (MSME), as per the Mint report.

The report further states that the rising cost of capital, driven by the Reserve Bank of India’s Monetary Policy Committee increasing rates by 250 basis points since May 2022, has been a major concern for MSMEs. Easier access to affordable credit has emerged as a key demand from the sector, which contributes over 29 percent of India’s GDP and employs more than 247 million people.

DPIIT’s Fund of Funds for Startups, launched in 2016, has so far supported 1,120 startups with Rs 19,992 crore in funding, according to data from the Small Industries Development Bank of India (Sidbi), which manages the corpus. This scheme provides capital to Sebi-registered alternative investment funds (AIFs) that subsequently invest in startups through equity and equity-linked instruments.

In the current fiscal, the Fund of Funds scheme has a budget allocation of Rs 1,200 crore. The Centre is also exploring the possibility of allowing startups to use intangible assets such as patents, trademarks, and copyrights as collateral for financing, according to the report.