The Union Budget 2025 provided much-needed stability to India’s MSME ecosystem at a time when businesses were emerging from prolonged uncertainty. With sustained focus on credit guarantees, PLI-linked manufacturing, digital public infrastructure, skilling, and GST system stabilisation, the Budget helped restore confidence, formalisation, and market access for millions of enterprises. Consumption-led measures supported demand, while incremental compliance reforms improved predictability for many MSMEs integrated into formal supply chains.
However, as India enters 2026, the expectations from policymakers have evolved. MSMEs today are not only contributors to growth—they are critical enablers of India’s ambitions in manufacturing, exports, technology leadership, and employment generation. The challenge is no longer policy intent but policy convergence and execution at scale. Fragmented compliance, capital constraints, delayed payments, uneven access to technology, and global uncertainty continue to test resilience.
Against this backdrop, Union Budget 2026 is widely expected to mark a shift—from incremental support to structural, outcome-driven reform. To capture this moment, Small Enterprise India brings together voices from MSMEs, financial markets, technology leaders, legal experts, and startup ecosystem enablers, reflecting what India’s growth engine truly needs next.
Industry 4.0: The Make-or-Break Moment for MSMEs
Dr Krishnan N places MSME digitalisation at the centre of India’s global competitiveness. MSMEs contribute nearly 30% of GDP, 45% of exports, and employ over 11 crore people, yet global manufacturing is rapidly moving toward digitally enabled, high-productivity supply chains.
While PLI schemes and cluster programs have delivered local successes, structural gaps remain—high capex costs, short loan tenors, fragmented schemes, skills shortages, and weak demand pull from procurement and global supply chains.
He proposes five high-impact interventions for Budget 2026:
- 7–10 year Industry 4.0 capital credit lines with interest subvention
- Technology adoption vouchers for micro and small enterprises
- Scaled Common Facility Centres and mobile tech labs
- A national Industry 4.0 skills and integrator mission
- Procurement-linked incentives for digitally certified MSMEs
Without a converged, cluster-led digitalisation push, he warns, MSMEs risk being locked out of global value chains despite Make in India progress.
Simplifying Compliance and Restoring Entrepreneurial Momentum
Chetan Nagendra, Founder & CEO, Quoqo Technologies, underscores that the biggest burden on MSMEs today is not fees, but time, uncertainty, and lost momentum. Despite reforms, compliance remains fragmented—forcing businesses to submit identical data across portals, repeat KYC processes, and navigate overlapping inspections. Even company closure, he notes, lacks clear, trackable standards.
He proposes four pragmatic Budget 2026 interventions:
- A single MSME compliance window with consent-based data reuse, pre-filled forms, a unified dashboard, and a common grievance tracker.
- Digital-first contracting, using government-approved templates with end-to-end digital workflows accepted by lenders and procurement agencies.
- Fast-track online mediation for MSME disputes with enforceable outcomes.
- Prompt-payment accountability, including public “prompt-payer scores” linked to buyer incentives.
Reducing compliance friction, he argues, will allow MSMEs to focus on building products, serving customers, and creating jobs.
Credit Structures That Enable MSME Scale
Nisha P, draws attention to a critical limitation in PMFME loan structures. Currently, enterprises can avail the loan only once, often at modest amounts. Entrepreneurs who start cautiously cannot access a second loan or top-up—even if they have not reached the ₹10 lakh subsidy cap.
This restriction, she argues, constrains expansion precisely when entrepreneurs gain confidence and market traction. Allowing second loans or top-ups would directly enable scaling, rural employment, and value-added food enterprises.
AI, Deep Tech, and India’s Next Growth Frontier
As India stands on the cusp of an AI revolution, technology leaders are calling for a shift from experimentation to sovereign AI infrastructure. Amit Kumar Tyagi, CEO, TrueReach AI, urges restoring 200% R&D deductions, introducing national compute credit schemes, reducing duties on GPUs and TPUs, accelerating the ₹20,000 crore Deep Tech Fund of Funds, and extending PLI to AI and robotics. Structured data platforms and tax incentives for upskilling, he adds, are non-negotiable.
Srikanth Chakkilam, CEO & Executive Director, Covasant Technologies, echoes the need for affordable AI infrastructure, R&D tax credits, accelerated depreciation, regulatory sandboxes, and procurement-led demand to position India as a global hub for enterprise-grade agentic AI.
GST, Working Capital, and Services Sector Realities
From the services economy, @Vinod Sah, CTO & Co-founder, CoTrav, highlights persistent GST input credit delays, especially in corporate travel and events. GST paid to hotels, transporters, and service partners often remains blocked for long periods, directly impacting MSME cash flows.
He calls for simplified and faster GST input credit mechanisms, clearer guidelines on bundled services and multi-vendor billing, and process-level incentives for businesses that maintain transparent, audit-ready compliance systems. Unlocking GST credits, he notes, would immediately improve working capital efficiency without diluting tax discipline.
Startups, Talent, and ESOP Reform
From the startup finance ecosystem, Devansh Lakhani, Director, Lakhani Financial Services, calls for urgent reform in ESOP taxation. Today, employees are taxed twice, at exercise (on notional gains) and again at sale—creating severe cash flow burdens for early-stage teams.
He urges deferring ESOP taxation until sale and aligning capital gains tax treatment for unlisted shares with listed ones. Startups, he notes, are riskier, less liquid, and demand longer holding periods, yet face harsher taxation. Correcting this imbalance is essential to attract private capital and retain high-quality talent in India’s innovation economy.
Capex, Markets, and the Investment Climate
From the capital markets perspective, C.A Arpit Jain, Joint MD, Arihant Capital Markets Ltd, believes Budget 2026–27 must clearly pivot toward capex-led growth, which was relatively muted in the previous Budget that leaned heavily on consumption. Encouraging both government and private sector capital expenditure is critical for sustainable growth.
He points to early signs of capex revival in sectors such as metals and suggests that tax relief for sovereign funds investing in India could act as a strong catalyst. While financials and pharma remain well positioned, he cautions that global uncertainty persists and underscores the need for policy clarity to sustain investor confidence, particularly for MSME-linked supply chains.
Household Economics and Financial Security
Chakravarthy V, Co-Founder & Director, Prime Wealth Finserv, Hyderabad, highlights middle-class pressures that indirectly impact MSMEs and consumption. With rising living costs, he calls for increasing the standard deduction to ₹1 lakh and restoring health insurance deductions under the new tax regime.
Without tax relief on insurance premiums, he warns, families may reduce coverage, posing long-term risks. Rationalising personal taxation, he argues, would support household stability and demand-led growth.
Real Estate, Housing, and Urban Affordability
From the legal and real estate lens, Apurva Agarwal, Founder, Universal Legal, Mumbai, calls for revising the definition of affordable housing. The current ₹45 lakh cap no longer reflects market realities in urban and Tier-2 cities, excluding genuine first-time buyers from benefits.
He recommends raising the cap to ₹75–90 lakh with city-specific thresholds, revising the ₹2 lakh home loan interest deduction under Section 24(b), and rationalising transaction costs by reducing GST on under-construction properties and stamp duties for first-time buyers.
Conclusion: From Fragmented Support to Future-Ready Partnership
The collective voice emerging ahead of Union Budget 2026 is both pragmatic and visionary. MSMEs, startups, and industry leaders are not asking for short-term relief alone, they are calling for systems that work seamlessly, capital that scales patiently, and policies that reward capability and compliance.
Across sectors, a common thread is evident: fragmentation must give way to convergence. Whether it is compliance, credit, GST, skilling, digitalisation, or innovation funding, the need is for integrated, outcome-driven frameworks that reduce friction and restore entrepreneurial momentum. Faster payments, simpler taxation, flexible credit structures, and accessible technology are not administrative tweaks, they are growth accelerators.
Budget 2026 has the opportunity to redefine the state–enterprise relationship, from regulator and beneficiary to partner and enabler. A single-window approach across compliance, finance, technology, and procurement can dramatically improve productivity. Strategic capex-led growth, AI infrastructure, Industry 4.0 adoption, and housing affordability can unlock demand, competitiveness, and employment at scale.
India’s MSMEs are ready to invest, innovate, and integrate with global value chains. What they seek now is clarity, confidence, and continuity. A Budget that listens to these voices and acts decisively will not only strengthen MSMEs but anchor India’s economic trajectory for the next decade.
Union Budget 2026 can and must be the Budget that empowers India’s entrepreneurs to build the future they already believe in.