MSME Expectations From Union Budget 2026: Higher GST Exemptions and Interest Subsidies, Check Details
The MSME sector, often described as the backbone of the Indian economy, contributes approximately 27% to the national GDP and accounts for nearly 45% of total exports. However, the sector has recently flagged concerns over "policy asymmetries" and external shocks, such as fluctuating global tariffs.
Mumbai, January 8: As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2026-27 in February, representatives from the Micro, Small, and Medium Enterprises (MSME) sector are calling for targeted financial interventions to safeguard the industry against rising industrial stress and global trade volatility. Leading industry bodies, including the PHD Chamber of Commerce and Industry (PHDCCI) and the Federation of Indian Micro, Small and Medium Enterprises (FISME), have submitted proposals centered on lowering borrowing costs and simplifying tax compliance.
The MSME sector, often described as the backbone of the Indian economy, contributes approximately 27% to the national GDP and accounts for nearly 45% of total exports. However, the sector has recently flagged concerns over "policy asymmetries" and external shocks, such as fluctuating global tariffs. Industry leaders emphasise that without decisive, budget-backed support, many micro-units risk a "silent exit," which could undermine domestic manufacturing capacity and the government’s broader employment goals. Budget 2026-27: Want to Share Your Ideas? Here’s a Step-by-Step Guide to Participate in Union Budget Process.
MSME Expectations From Union Budget 2026
Focus on Affordable Credit and Liquidity
At the forefront of the MSME wishlist is the reintroduction of an interest subvention scheme for new and incremental loans. The PHDCCI has proposed a 2% interest subsidy to reduce the burden of borrowing, while other bodies like the Association of Indian Entrepreneurs (AIE) have suggested capping interest rates at 6-7% for micro-enterprises.
In addition to cheaper credit, the industry is pushing for an upward revision of the Pradhan Mantri MUDRA loan ceilings to better align with current financing needs. There are also calls for exclusive lending targets for SIDBI and public sector banks to ensure that funds reach the smallest units at the "last mile" without the hurdle of traditional collateral requirements. Union Budget 2026 Date: Will Next Budget Be Presented on Weekend? Confusion Rises As February 1 Falls on a Sunday.
GST Simplification and Compliance Relief
Taxation remains a significant pain point for small business owners, who frequently cite the complexity of the Goods and Services Tax (GST) regime as a barrier to growth. Proposals include raising the GST exemption threshold to INR 1.5 crore for goods and services—a move that could potentially free 99% of small businesses from a heavy compliance burden.
Furthermore, the sector is advocating for:
- Quarterly GST Payments: Allowing micro-enterprises to pay taxes quarterly rather than monthly to improve cash flow.
- Automatic Refunds: Implementing a time-bound and automatic refund process for inverted duty structures.
- Decriminalisation: Eliminating prosecution for minor or accidental procedural lapses in tax filing.
Mitigating Global Trade and Export Risks
With global trade increasingly disrupted by geopolitical tensions and sudden tariff hikes, MSMEs are seeking a safety net in the form of an "Export Risk Equalisation Fund." This proposed fund would compensate micro-exporters hit by abrupt international policy changes beyond their control.
Industry representatives also urged the government to establish a foreign exchange fluctuation protection scheme. Such a mechanism would help micro-enterprises, which lack the expertise to use complex financial hedging tools, absorb losses from extreme currency movements.
The Union Budget 2026 comes at a critical juncture as India aims to solidify its position as a global manufacturing hub. While large capital-intensive sectors like automobiles and electronics have benefited from existing policy measures, the traditional MSME-led segments continue to struggle with narrow margins and outdated technology.
Government initiatives like "Make in India" and "Atmanirbhar Bharat" have provided long-term vision, but small business owners argue that immediate, granular support, such as stricter enforcement of the 45-day payment rule for corporate clients, is essential for their day-to-day survival.
(The above story first appeared on LatestLY on Jan 08, 2026 05:20 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).