India has raised investment and turnover limits for Micro, Small, and Medium Enterprises (MSMEs) in a bid to enhance their scale, technological capabilities and access to capital, finance minister Nirmala Sitharaman announced in the Union Budget 2025-26.

The revised classification criteria increase the investment limit by 2.5 times and the turnover limit by twice the existing threshold. Under the new framework, enterprises with investments up to ₹2.5 crore and turnover under ₹10 crore will qualify as micro businesses.

Small enterprises can have investments up to ₹25 crore and turnover up to ₹100 crore, while medium-sized firms are capped at ₹125 crore in investment and ₹500 crore in turnover.

The move is expected to encourage MSMEs to expand operations and create employment, Sitharaman said, noting that over one crore MSMEs employ 7.5 crore people and contribute 36 per cent of India’s manufacturing output. The sector also accounts for 45 per cent of the country’s exports.

A key highlight of the budget is the expansion of credit guarantee cover for micro and small enterprises from ₹5 crore to ₹10 crore, which is expected to unlock ₹1.5 trillion in additional credit over the next five years.

Start-ups will also benefit, with their credit guarantee limits increasing from ₹10 crore to ₹20 crore, alongside a reduction in guarantee fees.

In a further effort to improve financial access, the government has introduced a new customised credit card with a ₹5 lakh limit, targeting 10 lakh MSMEs registered on the Udyam Portal in its first year. The initiative aims to streamline credit access, reduce paperwork and improve transparency.

The budget also prioritises labour-intensive industries such as footwear, leather and food processing, offering sector-specific incentives to drive employment and productivity. Additionally, it strengthens measures to address delayed payments, expand credit facilities, and enhance MSMEs’ participation in global markets.

With increased infrastructure spending and the establishment of e-commerce export hubs, the government aims to provide MSMEs with greater access to business opportunities domestically and internationally.

Industry leaders welcomed the announcements, highlighting their potential to strengthen the MSME sector.