MSME Budget 2026: How the ₹10,000 Crore Fund Will Help SMEs

In the Union Budget 2026, Finance Minister Nirmala Sitharaman unveiled a comprehensive, three-pronged strategy to bolster India's Micro, Small, and Medium Enterprises (MSMEs), reinforcing their role as a critical engine of economic growth. The centerpiece of this initiative is a new ₹10,000 crore SME Growth Fund, designed to provide crucial equity support to high-potential businesses. This, combined with significant liquidity enhancements and professional support systems, marks a strategic shift towards creating globally competitive 'champion' MSMEs.

A Three-Pronged Strategy for MSME Growth

The government's approach, as outlined by the Finance Minister, focuses on three core pillars: Equity Support, Liquidity Support, and Professional Support. This multi-faceted plan addresses the sector's most pressing challenges, from access to growth capital to navigating complex compliance requirements. The budget aims to move beyond traditional credit-linked support and build a more resilient and dynamic MSME ecosystem.

Equity Support: Fueling Future Champions

The headline announcement is the introduction of a dedicated ₹10,000 crore SME Growth Fund. This fund is specifically aimed at providing equity to help promising small and medium enterprises scale their operations, adopt new technologies, and expand into new markets. The government will incentivize enterprises based on select criteria such as productivity, formalisation, and export readiness, effectively creating a pathway for them to become 'future champions'.

To support the smallest players in the ecosystem, the budget also includes a ₹2,000 crore top-up to the Self-Reliant India (SRI) Fund. This infusion will ensure that micro-enterprises, which form the vast majority of the MSME sector, continue to have access to essential risk capital, helping them survive and grow in a competitive environment.

Liquidity Support: Unlocking Cash Flow with TReDS Reforms

Delayed payments remain a significant hurdle for MSMEs, severely impacting their working capital and operational stability. The Union Budget 2026 addresses this head-on with four major reforms centered on the Trade Receivables Discounting System (TReDS) platform:

1. Mandatory TReDS for CPSEs: All Central Public Sector Enterprises (CPSEs) will now be required to use TReDS for settling payments on purchases from MSMEs. This move is expected to serve as a benchmark for the private sector, promoting faster and more transparent payment cycles.
2. Credit Guarantee for Invoice Discounting: A credit guarantee support mechanism will be introduced through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) for invoices discounted on the TReDS platform, reducing the risk for financiers.
3. Integration with GeM: The Government e-Marketplace (GeM) will be linked with TReDS to share information about government purchases with financiers. This integration will encourage cheaper and quicker financing for MSME suppliers.
4. Securitisation of Receivables: In a significant market-deepening move, TReDS receivables will be allowed to be issued as asset-backed securities. This will help create a secondary market, enhancing liquidity and improving the efficiency of transaction settlements.

Professional Support: The Rise of 'Corporate Mitras'

Recognizing that compliance can be a costly and complex burden for small businesses, the budget proposes the creation of a new cadre of professionals. The government will facilitate professional bodies like the Institute of Chartered Accountants of India (ICAI) and the Institute of Company Secretaries of India (ICSI) to design short-term, modular courses. These courses will develop accredited 'Corporate Mitras', especially in Tier-2 and Tier-3 towns, who can help MSMEs meet their compliance requirements at affordable costs.

Reviving Legacy Clusters and Building on Past Reforms

In addition to the three-pronged strategy, the government announced a scheme to revive 200 legacy industrial clusters through infrastructure and technology upgrades. This initiative aims to restore traditional manufacturing hubs, rebuild local economies, and generate employment.

These measures build upon the foundation laid in previous budgets. The Union Budget 2025 had already increased the credit guarantee cover for micro and small enterprises and raised the investment and turnover limits for MSME classification. The continued focus underscores the government's long-term vision for the sector, which contributes nearly 30% to India's GVA and is the second-largest employer after agriculture.

Key Budget 2026 Measures for MSMEs	Allocation / Detail	Intended Impact
SME Growth Fund	₹10,000 Crore	Equity support for scaling high-potential SMEs.
Self-Reliant India Fund	₹2,000 Crore Top-up	Continued risk capital access for micro-enterprises.
TReDS Reforms	Mandatory for CPSEs, Securitisation	Improved cash flow and faster payments.
Legacy Cluster Revival	200 Clusters Identified	Infrastructure and technology upgradation.
Corporate Mitras	Professional Support Network	Affordable and accessible compliance assistance.

Market and Sector Impact

The announcements in Union Budget 2026 are poised to have a transformative impact on the MSME sector. The focus on equity funding through the SME Growth Fund will enable businesses to invest in long-term growth without relying solely on debt. The comprehensive TReDS reforms are a game-changer for working capital management, potentially unlocking lakhs of crores in trapped cash flow and reducing the financial stress on small suppliers.

For investors, these measures signal a more stable and growth-oriented MSME landscape. A healthier MSME sector translates to stronger supply chains for larger corporations, reduced credit risk for lenders, and increased economic activity, ultimately contributing to higher GDP growth and employment generation.

Conclusion

The Union Budget 2026 provides a robust and well-rounded support package for India's MSMEs. By addressing the critical needs of equity, liquidity, and compliance, the government has laid out a clear roadmap to empower small businesses to scale, innovate, and compete on a global stage. The successful implementation of these schemes will be crucial in transforming MSMEs into the 'champion' enterprises envisioned by the Finance Minister, further strengthening India's economic foundation.