The Union Budget 2025 introduced key measures to strengthen the Micro, Small, and Medium Enterprises (MSME) sector and promote the Make in India initiative. With 5.93 crore registered MSMEs providing livelihoods to over 25 crore people, the Budget focused on easing credit flow, accelerating digital adoption, and implementing pro-business reforms to enhance competitiveness and drive sustainable growth.
What is the Startup Credit Guarantee Scheme?
The Startup Credit Guarantee scheme is a government initiative aimed at providing collateral-free loans to startups, ensuring they have easier access to institutional credit. Startups often face difficulties in securing funding due to a lack of tangible assets or an established credit history. Recognising this, the government has introduced this initiative to facilitate their financial needs without burdening them with stringent collateral requirements.
Key announcements in Budget 2025-26
Revised MSME classification criteriaInvestment and turnover limits for MSMEs have been increased by 2.5 times and 2 times, respectively, enabling businesses to scale operations and improve efficiency.
Improved credit access
- The credit guarantee cover for micro and small enterprises has been increased from ₹5 crore to ₹10 crore, allowing businesses to access an extra ₹1.5 lakh crore in loans over the next five years.
- Startups will now get a higher guarantee cover of ₹20 crore, up from ₹10 crore, with a lower 1% fee for loans in 27 priority sectors.
- Exporter MSMEs can now avail term loans of up to ₹20 crore with increased guarantee coverage.
- A new credit card scheme for micro enterprises will offer ₹5 lakh in credit to Udyam-registered businesses, with 10 lakh cards to be issued in the first year.
- A ₹10,000 crore fund of funds will support startups and innovation-driven enterprises.
- A new scheme will provide term loans of up to ₹2 crore to 5 lakh first-time women, Scheduled Caste, and Scheduled Tribe entrepreneurs over five years, building on the success of the Stand-Up India scheme.
Under Section 80-IAC, startups incorporated on or after April 1, 2016, but before April 1, 2025, were eligible for a 100% tax deduction on profits. This benefit has now been extended by five years, covering startups incorporated before April 1, 2030.
Revised MSME classification criteria
The government has updated the investment and turnover thresholds for MSMEs, offering broader growth opportunities:
| Category |
Investment (₹ in Cr) (Current - Revised) |
Turnover (₹ in Cr) (Current - Revised) |
| Micro | 1 – 2.5 | 5 – 10 |
| Small | 10 – 25 | 50 – 100 |
| Medium | 50 – 125 | 250 – 500 |
Current MSME landscape in India
- Share in GDP: MSMEs contributed 30.1% to India’s Gross Value Added (GVA) in 2022-23, up from 27.3% in 2020-21.
- Exports: MSME exports rose from ₹3.95 lakh crore in 2020-21 to ₹12.39 lakh crore in 2024-25.
- Exporting MSMEs: The number of MSME exporters increased from 52,849 in 2020-21 to 1,73,350 in 2024-25.
- Total Export Contribution: MSMEs accounted for 45.79% of India's total exports in 2024-25 (till May 2024).
Government Initiatives Supporting MSMEs
PM Vishwakarma Scheme- Launched on September 17, 2023, with an outlay of ₹13,000 crore (2023-24 to 2027-28).
- Aims to integrate artisans into domestic and global value chains.
- Over 2.65 crore applications have been submitted, with 27.13 lakh registrations completed.
- Launched on July 1, 2020, simplifying MSME registration.
- As of February 4, 2025, 5.93 crore MSMEs are registered, employing over 25.18 crore people.
- Udyam Assist Platform (launched in 2023) helps informal micro-enterprises access Priority Sector Lending.
- A credit-linked subsidy scheme to support new micro-enterprises.
- Subsidy rates:
Special Categories (SC, ST, OBC, women, minorities, ex-servicemen, transgenders, ner, aspirational districts, hill & border areas): 25% (urban), 35% (rural).
General Category: 15% (urban), 25% (rural). - In 2023-24, PMEGP supported 89,118 enterprises, disbursed ₹3,093.87 crore, and created 7,12,944 jobs.
- Launched in 2005-06 to support traditional industries through cluster-based development.
- Strengthens artisans and small-scale entrepreneurs by improving productivity and market linkages.
Conclusion
To sum up, the business ventures registered under the Department of Promotion of Industry and Internal Trade (DPIIT) as startups can receive the benefits of the Credit Guarantee Scheme for Startups. The loans can be availed from the participating Member Institutions (MIs). The scheme could be helpful for emerging businesses, especially the micro, small and medium enterprises (MSMEs), for funding. However, the startups should evaluate the loan options and interest rates before availing any financial assistance under the scheme.
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