While many reforms in the Budget focus on financial support to entrepreneurs, unfortunately, they do not address wage security or provide adequate support for women workers
By B Renuka Ramakrishna, Dr Soumen Ghosh
The Union Budget 2025-26 came out with several measures to ensure India’s faster development. The current year’s GDP growth is estimated to be around 6.4 per cent and it is appreciable to note that the government has brought down fiscal deficit from 4.8 per cent to 4.4 per cent, and aims to bring it further down in the following years. The Budget also strongly focuses on providing improved support to the MSMEs through various schemes and financial aids.
Focus on Quality
Micro, Small and Medium Enterprises (MSMEs) contribute a major proportion to the country’s GDP and create substantial employment opportunities. The government has, through the years, focused on improving the quality of services and support that the MSME sector receives. Digital transformation, better credit accessibility and skill development were on the agenda.
While many reforms focus on providing financial support to entrepreneurs, unfortunately, they do not address wage security for labourers or support for women workers. The last year’s budget laid the foundation for improved reforms in 2025. The 2024 Budget established the groundwork for the MSMEs and labour reforms, emphasising financial assistance, export promotion and skill development. The 2025 Budget has built upon these measures with more targeted interventions. While better credit support and tax relief have seen notable improvements, challenges related to labour laws remain largely unchanged from 2024.
What’s New in 2025-26
The government has raised the credit guarantee limit from Rs 5 crore to Rs 10 crore, providing MSMEs with better access to funds without requiring heavy collateral. The 2024 Budget introduced a Rs 9,000-crore credit scheme for the MSME sector. While this is a significant amount, the total credit demand of the MSME sector is much higher. A large portion of small businesses still struggle to access formal financing.
The following are the turnover thresholds introduced for different enterprises:
- Investment limit for micro-enterprises is now allowed up to Rs 2.5 crore, and the turnover limit is Rs 10 crore.
- Investment limit for small enterprises is now allowed up to Rs 25 crore, and the turnover limit is Rs 100 crore.
- The investment limit for medium enterprises is now allowed up to Rs 125 crore, and the turnover limit is Rs 500 crore.
A better functioning scheme of Rs 10,000 crore has been allotted to to a Fund of Funds to support MSME startups. Affordable borrowing is a key focus this year. In addition, the government aims to reduce the tax burden on MSMEs and promote ease of doing business. Furthermore, credit card facilities for micro-enterprises will now be introduced with a limit of up to Rs 5 lakh, with 10 lakh cards set to be issued in the first year of implementation.
MSMEs can now leverage artificial intelligence to expand their businesses. The government is taking steps to enhance digital commerce by integrating technological innovation. It is evident that the reforms aim to promote local production of goods and services while strengthening commerce.
Labour Gets Little
The labour force plays a crucial role in ensuring the successful operation of MSMEs. However, when attention shifts to informal sector labourers, the Budget appears to have fallen short of improving their security and standard of living. Employer-employee relationships within this sector remain weak and unprotected.
While improvements can bee seen across multiple sectors, there is discontent when it comes to workplace and labour laws for women. Safety of the workforce should be the priority of companies but necessary norms and support are often overlooked by the same. A government’s intervention in safeguarding the missed aspects was expected in this year’s Budget.
Better credit support and tax relief have seen notable improvements but challenges related to labour laws remain largely unchanged from 2024
The gig workforce is a vital component of India’s modern economy. As India’s gig and platform economy grows rapidly, the Budget has allocated Rs 32,646 crore to the Ministry of Labour and Employment — an 80% increase from last year. The Ministry is prioritising the newly introduced Employment Generation Scheme, with its funding doubled to Rs 20,000 crore. This represents a 37% increase in fund allocation compared to the PM Shram Yogi Maandhan Yojana.
This year’s Budget is more MSME-friendly compared to 2024. It provides essential support for MSME entrepreneurs while fostering inclusivity among first-time entrepreneurs, female entrepreneurs, and those from the socially backward section.
The relief in both direct and indirect taxes has played a crucial role in promoting domestic production. With the introduction and modification of various reforms, MSMEs are expected to become more competitive both domestically and globally. However, the success of these reforms depends on their effective implementation.
Continuous policy adjustments will be necessary to ensure better development, inclusive rapid growth and long-term sustainability of this sector.
What Can Be Done
On the one hand, the manufacturing sector in India plays a pivotal role in employment generation, and on the other hand, it significantly contributes to the country’s economic growth. With a sizable number of women workers involved in the production process, we can expect a more gender-centric approach from the government in future.
If the government takes the initiative to uphold social sustainability for all types of workers, India will undoubtedly grow more inclusively. Apart from providing health security, the manufacturing sector expects more support from the government to become a global manufacturing powerhouse.
