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The budget is only a few days away, and every sector is expecting something from the budget. Over the next few days, we will cover different sectors and their expectation from the Union Budget 2025. Today, we start with MSMEs and startups and their expectation from the budget.
How big are MSMEs and startups in India?
According to a 2022 report titled ‘MSMEs Back to the Grind’ by Assocham and CRISIL, MSMEs play a pivotal role in the Indian economy. These enterprises employ approximately 111 million people. It shows their importance as a significant source of livelihood. They also contribute nearly 50% of India's total exports, underscoring their role in strengthening the country’s trade position globally.
Additionally, MSMEs account for about 27% of India’s Gross Domestic Product (GDP), positioning themselves as the backbone of economic activity and growth.
As of June 2023, the Udyam portal, India’s dedicated platform for MSME registration, recorded 20.09 million registered MSMEs. Among these, micro-enterprises dominated with 19.4 million registrations, reflecting their widespread presence across rural and urban areas. It was followed by small enterprises, which numbered approximately 554,000, and medium-sized enterprises, totaling around 52,000. These statistics highlight the vast diversity within the MSME sector, ranging from small-scale artisans and local service providers to growing businesses that significantly contribute to industrial output and innovation in India.
The robust presence of micro-enterprises demonstrates their grassroots-level impact, while the smaller yet substantial numbers of small and medium enterprises signify their role in scaling operations, creating value-added products, and promoting employment opportunities. Together, these enterprises are crucial in driving inclusive growth, encouraging entrepreneurship, and contributing to the socio-economic development of the nation.
As of January 2025, India has over 159,000 recognized startups, securing its place as the world's third-largest startup ecosystem. India is only behind the United States and China. This substantial number underscores the significant scale and continued growth of India's startup scene.
Challenges in front of MSMEs and startups
Persistent issues such as limited access to affordable credit, inadequate infrastructure, and a complex regulatory environment continue to hinder the growth of MSMEs in India. While MSMEs have shown remarkable resilience in the face of these challenges, their ability to compete and innovate is hindered by factors like high borrowing costs, limited access to markets, and a lack of information and resources. These constraints limit their ability to invest in technology, expand operations, and remain competitive in the global market.
Expectations of MSMEs and Startups from the Union Budget 2025
We have seen that MSMEs and startups play a crucial role in the Indian economy and at the same time there are significant challenges for them. They are likely to receive special attention in the budget. Let us look at what the MSMEs and startup owners are looking at from the budget.
MSMEs and startups are looking for simplified regulations, particularly in the area of cross-border payments, to enable seamless global trade. Simplifying these processes would allow Indian businesses to sell their products in foreign markets without being bogged down by complex compliance and red tape, boosting their global competitiveness.
There is also a call to revise income tax rates for proprietorships, partnership firms, and LLPs, which constitute the majority of MSMEs. Many believe aligning their tax rates with the lower corporate tax rates of 25% for existing enterprises and 15% for new ones would promote fairness and incentivize growth in this critical segment of the economy.
Additionally, given the ambitious targets set for service exports in the coming years, including service exports under the eligibility for interest equalization schemes could provide a much-needed boost to this sector. It would help service-based MSMEs and startups remain competitive on the global stage by reducing their cost of capital.
Experts further emphasize the importance of ensuring timely credit access, offering fiscal incentives for digital transformation, and implementing targeted skill development programs. Simplified taxation frameworks will be essential for reducing operational hurdles and encouraging entrepreneurial growth.
Together, these measures could significantly enhance the growth trajectory of MSMEs and startups, solidifying their role as key drivers of the Indian economy. Only time will tell how many of these find a place in the budget.
