The Union Budget 2026-27 MSME reforms, unveiled on 1 February 2026, mark a decisive policy shift from short-term stimulus to long-term structural transformation.
Anchored around three priorities – accelerating growth, building human capacity, and ensuring inclusive development – the Budget places strong emphasis on strengthening MSMEs, infrastructure-led expansion, and manufacturing competitiveness.
A major highlight is the government’s focus on addressing long-standing MSME challenges related to working capital constraints and delayed payments.
The proposal to mandate the Trade Receivables Discounting System (TReDS) as the compulsory transaction settlement platform for all Central Public Sector Enterprise (CPSE) purchases from MSMEs is being viewed as a landmark reform.
The move is expected to improve payment timelines, enhance transparency, and significantly strengthen MSME cash flows.
Union Budget 2026-27 MSME Reforms Strengthen Capital Access and Credit Ecosystems
To further support enterprise scale-up, the Budget announces the creation of a ₹10,000 crore fund for developing future champion MSMEs, along with a ₹2,000 crore top-up to the Self-Reliant India Fund.
These measures aim to expand access to equity and risk capital while continuing targeted support for micro enterprises.
The TReDS ecosystem is also set for further expansion through credit guarantee support for invoice discounting, integration of the Government e-Marketplace (GeM) with TReDS, and the introduction of TReDS receivables as asset-backed securities. Industry bodies have also highlighted the potential benefits of integrating TReDS with GSTIN to widen credit access for a larger pool of MSMEs.
Manufacturing Push Anchors Union Budget 2026-27 MSME Reforms
The Budget outlines targeted interventions to scale manufacturing across strategic and frontier sectors. Key announcements include the Biopharma SHAKTI scheme, an enhanced outlay for the Electronics Components Manufacturing Scheme, India Semiconductor Mission 2.0, development of Rare Earth Corridors, and the establishment of chemical parks.
Capital expenditure has been increased by nearly 9%, with total capex pegged at ₹12.2 lakh crore for FY27. Infrastructure development remains a core pillar, with initiatives spanning tool rooms, textile parks, railway corridors, and the development of city economic regions over a five-year period. Special interventions such as SHE-Mart have been announced to support women entrepreneurs.
Also Read: Mega Textile Parks in Challenge Mode: Budget 2026 Announces Five-Component Textile Programme
Industry Voices Reflect Mixed Sectoral Impact of Union Budget 2026-27 MSME Reforms
Rathnakar Samavedam, Investment Director and Managing Partner, Hyderabad Angles Fund (haf.vc) – VC said, “The Budget 2026 meets India’s structural requirements over the long term with a strong emphasis on small industries through dedicated funds such as the Small Industries Fund and the Resilient India Fund. The exemption on income tax for data centers gives a big fillip to digital infrastructure, and cross-border e-commerce opportunities unlock new routes for growth. This is a balanced and growth-oriented Budget for the economy and the startup ecosystem.”
Dr Dhananjay Datar, Chairman, Adil Group of Super Stores (Dubai) said, “The retail sector holds immense latent potential to significantly strengthen the Indian economy. The government should reduce the tax burden on professionals and the common public, and encourage NRIs as well as international businesses to invest directly in India’s retail sector. If the government attracts NRIs and international businesses to the Indian retail sector by offering tax incentives and encouraging foreign direct investment (FDI), it will lead to the creation of new jobs and both direct and indirect employment. Employees will receive better wages, and as the number of professionals increases, competition will reduce product prices, making goods more affordable for the common consumer. Many NRIs run highly successful businesses across the world, but are reluctant to invest in India. This situation needs to change.”
Mohammed Salman, Co-founder of Tint, Tone & Shade Interiors, said the Budget prioritises macroeconomic stability, infrastructure expansion, and MSME support, but does not offer sector-specific interventions for residential interior design.
While increased capital expenditure and improved urban connectivity are expected to indirectly support housing demand, he noted the absence of GST rationalisation and targeted skilling initiatives for finishing trades.
From a fiscal standpoint, the government has targeted a fiscal deficit of around 4.3% of GDP, down from approximately 4.4% in FY26. Gross market borrowing is estimated at ₹17.2 lakh crore for FY27, enabling capex funding while raising considerations around borrowing costs and interest rates.
Tax Simplification and Capital Market Measures Under Union Budget 2026-27 MSME Reforms
Shivam Budhiraja, finance content creator and entrepreneur, highlighted the simplification measures announced in the Budget, including the removal of the TAN requirement for NRI property transactions and allowing PAN-based TDS compliance.
The decision to tax buybacks as capital gains and reduce the Minimum Alternate Tax (MAT) to 14% was also noted as supportive of business competitiveness, alongside higher foreign participation limits in Indian equity markets.
CA Srishti Gosavi noted that following last year’s major direct tax overhaul, Budget 2026 focuses on stability and predictability rather than new tax relief. While there are no changes to income tax slabs, she pointed to reductions in TCS on overseas travel, education, and medical remittances to 2%, easing upfront financial burdens for taxpayers.
Logistics, Supply Chains and Rural Manufacturing Gain from Union Budget 2026-27 MSME Reforms
Dr Ashvini Jakhar, Founder and CEO of Prozo, said the Budget reinforces the centrality of technology-led supply chains through increased public capital expenditure, dedicated freight corridors, operationalisation of national waterways, and a push for greener logistics. Enhanced TReDS-based liquidity and logistics-linked industrial corridors were cited as enablers for MSME integration into global value chains.
ZOFF Foods Co-founder Akash Agrawalla described the Budget as a forward-looking blueprint for manufacturing and rural economic growth. He highlighted the revival of 2,000 industry clusters, logistics infrastructure expansion, support for women-led enterprises through SHE-Mart, and high-value agriculture initiatives as critical enablers for Tier-2 and Tier-3 city-based enterprises.
