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Union Budget 2025 – An Overview for Startups, Corporates, and MSMEs

Union Budget 2025

Introduction

On February 1, 2025, Finance Minister Nirmala Sitharaman presented the Union Budget 2025-26 to Parliament. The budget, guided by the principles of “Sabka Vikas” and the broader vision of “Viksit Bharat,” aims to accelerate inclusive growth, ensure fiscal prudence, and stimulate investments across various sectors of the economy. This report provides an analysis of the key measures, focusing on their implications for India’s economic future, particularly for Micro, Small, and Medium Enterprises (“MSMEs”), startups, and large corporations.

Overview of Key Fiscal and Strategic Priorities

 A. Growth Drivers

  •  Sectoral Focus: The budget identifies four pillars as the primary engines of economic growth: agriculture, MSMEs, investment, and exports.
  • Inclusive Development: Initiatives are designed to uplift the rising middle class, promote balanced regional growth, and ensure that the benefits of development reach all sections of society.

B. Fiscal Consolidation and Infrastructure Investment

  • Fiscal Discipline: The government demonstrates its commitment to macroeconomic stability with a projected fiscal deficit of 4.4% of GDP for 2025-26. The budget also outlines a roadmap for fiscal consolidation in the FRBM statement, aiming for a declining path for the Central Government debt as a percentage of GDP over the next six years.
  • Infrastructure Initiatives:

PPP Pipeline: Each infrastructure-related ministry will develop a three-year pipeline of projects suitable for implementation through Public-Private Partnerships (“PPPs”). States are encouraged to participate and can seek support from the India Infrastructure Project Development Fund (“IIPDF”) scheme.

– Interest-Free Loans: States will have access to ₹1.5 lakh crore in 50-year interest- free loans for capital expenditure and to incentivize reforms.

– Asset Monetization: Building on the success of the first Asset Monetization Plan, the second Plan for 2025-30 will be launched, aiming to reinvest ₹10 lakh crore in new projects.

  • Urban and Rural Development:

 Urban Challenge Fund: An Urban Challenge Fund of ₹1 lakh crore is established to implement proposals for ‘Cities as Growth Hubs,’ ‘Creative Redevelopment of Cities,’ and ‘Water and Sanitation.’

Jal Jeevan Mission: The Jal Jeevan Mission is extended until 2028 with an enhanced total outlay to achieve 100% coverage of potable tap water connections for rural households.

  • Clean Energy: The budget includes a Nuclear Energy Mission for research and development of Small Modular Reactors and support for clean tech manufacturing, reflecting a commitment to sustainable growth.

Support Measures for MSMEs

 Recognizing the crucial role of MSMEs, which contribute 36% to manufacturing and 45% to exports, the budget introduces several measures to enhance their growth and competitiveness.

A. Revised Classification Criteria

  •  New Thresholds: The investment and turnover limits for the classification of MSMEs have been revised upwards, providing them with more flexibility to grow and scale:
Entity Size Investment (Crore) Turnover ( Crore)
Micro Enterprises 1 → 2.5 5 → 10
Small Enterprises 10 → 25 50 → 100
Medium Enterprises 50 → 125 250 → 500
  • Rationale: These revisions will allow MSMEs to expand their operations without prematurely losing access to beneficial government schemes designed for smaller enterprises.

B. Enhanced Credit Facilities

  • Credit Guarantee Scheme: The credit guarantee cover for Micro and Small Enterprises is increased from ₹5 crore to ₹10 crore, projected to lead to an additional credit flow of ₹1.5 lakh crore over the next five years. For Startups, the guarantee is increased from ₹10 crore to ₹20 crore. For well-run exporter MSMEs, there is a provision for term loans up to ₹20 crore.
  • Customized Credit Products: Customized credit cards with a ₹5 lakh limit will be introduced for micro-enterprises registered on the Udyam portal, with a target to issue 10 lakh such cards in the first year.

C. Sector-Specific Initiatives

  •  Toy Sector: A scheme will be implemented to make India a global hub for toy manufacturing, focusing on cluster development, skill development, and the creation of a supportive ecosystem.
  • Fisheries: An enabling framework will be introduced for sustainable harnessing of fisheries from the Indian Exclusive Economic Zone and High Seas, with a special focus on the Andaman & Nicobar and Lakshadweep Islands.
  • Financial Inclusion: India Post, with its extensive network, will be repositioned as a catalyst for the rural economy and transformed into a large public logistics organization. Support will also be provided to the National Cooperative Development Corporation (“NCDC”) for its lending operations.

D. Agricultural Support

  • Kisan Credit Card (KCC): The loan limit under the Modified Interest Subvention Scheme for loans taken through KCC will be enhanced from ₹3 lakh to ₹5 lakh, improving credit access for farmers, fishermen, and dairy farmers.
  • Prime Minister Dhan-Dhaanya Krishi Yojana: This program will cover 100 districts with low productivity, moderate crop intensity and below-average credit parameters, in partnership with states to improve agricultural productivity.
  • Mission for Aatmanirbharta in Pulses: This 6-year mission will have a focus on Tur, Urad, and Masoor.
  • Comprehensive Programme for Vegetables & Fruits: This program is for promoting production, efficient supplies, processing, and remunerative prices for farmers.

Measures to Boost the Startup Ecosystem

 The budget emphasizes nurturing innovation and supporting startups as key drivers of growth and technological advancement.

A. Capital Infusion and Funding Mechanisms

  • Fund of Funds: A new Fund of Funds for Startups will be established with an expanded scope and a fresh contribution of ₹10,000 crore from the government.
  • Deep Tech Fund of Funds: A Deep Tech Fund of Funds will be explored to catalyse the next generation of startups.

B. Tax Incentives and Regulatory Reforms

  • Extension for Incorporation of Start-Ups: The period of incorporation is extended by 5 years to allow the benefit available to start-ups which are incorporated before 1.4.2030.

C. Improved Credit Access

  • Enhanced Credit Guarantee for Startups: The credit guarantee cover for startups is raised from ₹10 crore to ₹20 crore, with the guarantee fee being moderated to 1% for loans in 27 focus sectors important for Atmanirbhar Bharat.

Initiatives for Corporates

 The budget outlines strategic measures to enhance the competitiveness and global integration of large corporate entities.

A. Promoting Domestic Manufacturing and Industry 4.0

  • National Manufacturing Mission: A National Manufacturing Mission will be set up to further “Make in India” initiatives across small, medium, and large industries by providing policy support, execution roadmaps, and a governance and monitoring framework.
  • Clean Tech Manufacturing: Support for Clean Tech manufacturing is included under the National Manufacturing Mission to improve domestic value addition in sectors like solar PV cells, EV batteries, and wind turbines.
  • Industry 4.0: The budget provides support for integration with Global Supply Chains and the development of domestic manufacturing capacities and talent to leverage opportunities related to Industry 4.0.

B. Global Integration and FDI Reforms

  • Global Capability Centers (GCC): A nationwide strategy will be developed to assist states in advancing GCCs in up-and-coming tier 2 cities.
  • FDI in Insurance: The FDI limit for the insurance sector will be raised from 74% to 100%, subject to certain conditions, to attract foreign capital and enhance sectoral competitiveness.

C. Regulatory and R&D Incentives

  • Regulatory Reforms: A High-Level Committee on Regulatory Reforms will be formed to assess regulations, certifications, licenses, and permissions in the non-financial sector, aiming to improve the ease of conducting business.
  • Corporate R&D Support: An allocation of ₹20,000 crore is made for private sector- driven research, development, and innovation initiatives.
  • Tourism for employment-led growth: The leading 50 tourist spots nationwide will be enhanced in collaboration with states via a competitive challenge approach.

Remarks

 The Union Budget 2025-26 presents a comprehensive and forward-looking roadmap for India’s economic development, with a strong emphasis on inclusive growth, fiscal consolidation, and strategic investments. The budget’s focus on key sectors like agriculture, MSMEs, startups, and large corporations, combined with measures to enhance credit access, streamline regulations, and promote innovation, lays a solid foundation for achieving the vision of “Viksit Bharat.” The long- term success of these initiatives will hinge on effective implementation and continued monitoring.

For personalized support on how the Union Budget 2025 can impact startups and to ensure your business is aligned with the latest developments, contact us today.

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