Union Cabinet may approve financial support package for MSMEs today

The most vulnerable sectors from US tariffs – currently at 50 percent – are textiles, apparel, gems and jewellery, leather and footwear, chemicals etc

The Union Cabinet is expected to approve a financial-support package, later today, for micro, small, and medium enterprises (MSMEs) to help them counter the impact of high US tariffs, according to sources.

The Cabinet may approve credit-facilitation measures as well, which would provide enhanced loan-guarantee by the government for MSME loans, as they seek extra measures to gain protection for labour-intensive sectors.

The most vulnerable sectors from US tariffs – currently at 50 percent – are textiles, apparel, gems and jewellery, leather and footwear, chemicals etc.

On August 28, Moneycontrol had reported that the central government has lined up a support package worth Rs 25,000 crore under the Export Promotion Mission, announced in Union Budget 2025-26, aimed at providing affordable credit, better market access for exports, and to cushion from the adverse impact of high tariffs.

A senior official had also told Moneycontrol that the Centre is mulling 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," the official had told Moneycontrol earlier.

Moneycontrol had also on August 12 reported 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.

The CGS, managed by Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) - 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.

Last week, a delegation of exporters represented by the Federation of Indian Export Organisations (FIEO) met Finance Minister Nirmala Sitharaman to apprise her of 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.