Union Budget 2026 Backs MSME Scale With Champion Fund and TREDS Push

In her ninth consecutive Union Budget, Nirmala Sitharaman, Finance Minister, Government of India, placed Micro, Small, and Medium Enterprises (MSMEs) at the center of India’s growth strategy, outlining a three-pronged framework to help them evolve into “champions”.

The approach, anchored around equity, liquidity, and professional support, reflects the government’s intent to move MSMEs beyond survival capital toward scale, resilience, and formal integration into India’s economic engine.

₹10,000 Crore Fund to Build ‘Champion’ SMEs

At the core of the proposal is a dedicated ₹10,000-crore SME Growth Fund, aimed at incentivising enterprises based on defined performance and growth criteria. The fund is positioned to support job creation and help select MSMEs transition into larger, competitive enterprises.

“I propose to introduce a dedicated 10,000 crore SME growth fund to create future champions,” Sitharaman said during her budget speech.

In addition, the government will top up the Self-Reliant India Fund, set up in 2021, with ₹2,000 crore, extending risk capital access for micro-enterprises and early-stage businesses.

Liquidity Push Through TREDS and Credit Guarantees

Liquidity remains a structural constraint for MSMEs, particularly those dependent on delayed payments from large buyers. The budget addresses this through a set of reforms centred on the Trade Receivables Discounting System (TREDS).

The Finance Minister announced four measures:

• Mandating TREDS as the settlement platform for all purchases from MSMEs by Central Public Sector Enterprises (CPSEs)

• Introducing credit guarantee support through CGT-MSE for invoice discounting on TREDS

• LinkingGeM (Government e-Marketplace) with TREDS to enable financiers to assess government-linked receivables

• Enabling TREDS receivables to be structured as asset-backed securities, creating a secondary market and improving liquidity

To date, the government has made over ₹7 lakh crore available to MSMEs through liquidity support, Sitharaman noted.

Professional Support and Market Access

Beyond capital, the budget recognises that MSME scale-up requires institutional support. The three-pronged framework includes professional assistance to help enterprises adopt better governance, financial discipline, and market access practices.

The government also reiterated its focus on Tier II and Tier III cities, particularly urban centres with populations above five lakh, positioning them as future growth hubs through continued infrastructure investment.

Macro Context: Growth, Capex, and Stability

The MSME push comes against a broader macroeconomic backdrop outlined in the Economic Survey 2025–26, which projects:

• GDP growth of 6.8–7.2% for FY27

• 7.4% growth estimate for FY26

• Average CPI inflation of 1.7% between April–December 2025, the lowest since the series began

Public capital expenditure has increased sharply from ₹2 lakh crore in FY15 to ₹11.2 lakh crore, with the budget proposing a further rise to ₹12.2 lakh crore in FY27, reinforcing demand-side support for small businesses.

The budget’s MSME strategy marks a shift from broad-based relief toward targeted scale-building. By combining equity infusion, receivables-based liquidity, and professional enablement, the government is attempting to convert MSMEs into durable growth engines rather than perpetual dependents on credit guarantees.

Execution will determine outcomes. But on policy intent, Budget 2026 makes one thing clear: MSMEs are no longer treated as a vulnerable segment alone, they are being positioned as the next layer of India’s economic champions.