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The Micro, Small, and Medium Enterprises (MSME) sector is pivotal to India’s economic framework, representing a vast majority of businesses and contributing significantly to employment and GDP. In the Union Budget 2025-26, the government announced substantial revisions to the MSME classification criteria, aiming to foster growth and enhance access to capital. However, a critical examination reveals that these changes may disproportionately benefit larger enterprises within the MSME spectrum, potentially sidelining the micro-enterprises that constitute the sector’s foundation.

Revised MSME Classification: A Closer Look

The 2025 Budget introduced the following enhancements to the MSME classification criteria:

Micro Enterprises:

Investment Limit: Increased from ₹1 crore to ₹2.5 crore.

Turnover Limit: Raised from ₹5 crore to ₹10 crore.


Small Enterprises:

Investment Limit: Elevated from ₹10 crore to ₹25 crore.

Turnover Limit: Enhanced from ₹50 crore to ₹100 crore.


Medium Enterprises:

Investment Limit: Augmented from ₹50 crore to ₹125 crore.

Turnover Limit: Increased from ₹250 crore to ₹500 crore.



These adjustments are designed to enable MSMEs to achieve higher efficiencies of scale, technological upgradation, and better access to capital.

Potential Implications: Favoring the Upper Echelon

While the revised definitions aim to promote growth across the MSME sector, they may inadvertently favor larger enterprises within this classification. The increased thresholds allow relatively larger firms to qualify as MSMEs, granting them access to benefits such as credit guarantees, tax incentives, and priority in government procurement. Consequently, these enterprises, often better equipped with resources and formal structures, are more likely to capitalize on the available support mechanisms.

Challenges for Micro-Enterprises: The Risk of Marginalization

Micro-enterprises, which form the bulk of the MSME sector, may find themselves at a disadvantage due to several factors:

Limited Formalization: Many micro-enterprises operate informally, lacking the necessary documentation to access government schemes.

Resource Constraints: With minimal capital and limited access to credit, these enterprises struggle to compete with larger counterparts.

Awareness and Accessibility: A lack of awareness about available schemes and the complexity of application processes further hinder their ability to benefit from government initiatives.


As a result, the benefits of the revised MSME definitions may not effectively reach the micro-enterprises that are most in need of support.

Recommendations: Ensuring Inclusive Growth

To ensure that the revised MSME classifications foster inclusive growth, the following measures should be considered:

1. Targeted Support for Micro-Enterprises:

Simplified Access to Credit: Implement micro-financing schemes with relaxed collateral requirements to facilitate easier access to capital.

Capacity Building: Provide training programs to enhance business skills and financial literacy among micro-entrepreneurs.

2. Streamlined Regulatory Processes:

Ease of Compliance: Simplify registration and compliance procedures to encourage formalization without imposing excessive burdens.

Digital Integration: Promote digital platforms to facilitate easier access to government schemes and markets.

3. Awareness Campaigns:

Information Dissemination: Conduct outreach programs to inform micro-enterprises about available benefits and how to access them.

Community Engagement: Leverage local networks to reach micro-entrepreneurs in remote and rural areas.

4. Differentiated Policy Framework:

Customized Schemes: Develop policies specifically tailored to address the unique challenges faced by micro-enterprises.

Proportional Allocation of Resources: Ensure that a significant portion of MSME support measures are dedicated to micro-enterprises.

Striving for Equitable Development

While the 2025-26 Budget’s revisions to MSME classifications are a step toward fostering growth, it is imperative to implement complementary measures that address the disparities within the sector. By focusing on the unique needs of micro-enterprises, policymakers can promote a more balanced and inclusive development trajectory, ensuring that the benefits of economic growth are equitably distributed across all levels of the MSME sector.