The ‘Yuva-Shakti’-driven Union Budget for FY 27 made the right noises when it comes to promoting productivity in India and dealing with global headwinds on trade. For India’s small businesses and entrepreneurs, the Budget had multiple announcements on formalising the sector, improving liquidity, and availability of risk capital to fast-track growth.
The Budget announced a Rs 10,0000-crore SME Growth Fund, offering equity support to enterprises based on select criteria. The government has also announced an additional corpus of Rs 2000 crore towards the Self-Reliant India Fund announced in 2021 at a corpus of Rs 50,000 crore initially, to provide equity funding to MSMEs with high growth potential. The move improves capital support for MSMEs, which is the second largest contributor to India’s GDP at 30.1 percent, employing 28 crore people as of July, 2025.
“The proposed Rs 10,000-crore SME Growth Fund complements traditional bank credit by addressing the equity gap for scalable MSMEs. This is positive for banks as better-capitalised enterprises typically demonstrate stronger repayment capacity and lower credit risk, creating opportunities for long-term lending and cross-selling,” says Madhur Kumar, chief general manager-MSME banking, co-lending, and supply chain finance, Bank of Baroda. “Expanded credit guarantee coverage further strengthens lender confidence, particularly for micro and small enterprises, supporting both growth and priority sector objectives.”
The Minister of Finance Nirmala Sitharaman in her ninth consecutive Budget speech also promoted cash flow and liquidity support for MSMEs by mandating TReDS (Trade Receivables Discounting System) as the default settlement platform for all purchases from them by Central Public Sector Enterprises (CPSEs).
“By positioning TReDS as the settlement platform for liquidity support for MSMEs for their supplies to CPSEs, the government encourages wider participation in invoice discounting,” says Sundeep Mohindru, founder and promoter of M1xchange, online invoice discounting platform on TReDS. “Credit guarantee support on invoice discounting on TReDS and the integration of GeM [Government e-Marketplace] with TReDS will enable quicker and more affordable financing for suppliers. Treating TReDS receivables as asset-backed securities will deepen liquidity multifold and enhance the secondary market expansion for invoices discounted.”
Alok Mittal, co-founder and executive chairman of Indifi Technologies, a fintech lending platform for MSMEs, says the direction taken by the government offers the sector a data-led and inclusive credit ecosystem. “For lenders, these risk-sharing and growth capital mechanisms are particularly relevant, as India’s MSMEs are becoming increasingly data-rich while remaining asset-light, enabling underwriting anchored in business performance, transaction depth, and supply chain integration rather than static balance sheet strength.”
The government also announced that it will enable professional institutions such as ICAI, ICSI, ICMAI to design short-term, modular courses and practical tools to develop a cadre of ‘Corporate Mitras’, especially in tier 2 and 3 cities to help MSMEs meet compliance requirements at affordable costs. The move further formalises the sector
Read Forbes India's complete Budget 2026-27 coverage here
First Published: Feb 01, 2026, 18:46
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