The PHD Chamber of Commerce and Industry has urged the Centre to prioritise easier access to finance at lower interest rates and reduce regulatory burdens for micro, small and medium enterprises in the Union Budget 2026–27, citing the sector’s critical role in driving economic growth and employment.
In its pre-Budget recommendations, the business chamber said MSMEs are central to pushing India towards a sustained 10 per cent growth trajectory. The sector’s contribution to manufacturing output, exports and job creation has steadily increased, with MSMEs accounting for nearly 30 per cent of manufacturing output in 2025 and emerging as the second-largest employer after agriculture.
According to PHDCCI, formalisation of the sector has gathered pace in recent years, with over 7.30 crore micro and small enterprises registering on the Udyam Registration Portal and the Udyam Assist Platform between July 2020 and December 2025. The chamber said this expanding database provides a strong foundation for designing targeted and structured policy interventions.
The chamber called for the reintroduction of an interest subvention scheme for MSMEs, proposing a 2 per cent interest subsidy on new and incremental loans from banks and non-banking financial companies. It said lowering the cost of credit would help MSMEs remain competitive, particularly amid geopolitical uncertainties affecting global markets.
PHDCCI also sought an upward revision of loan limits under the Pradhan Mantri MUDRA Yojana, stating that project costs have risen significantly since the scheme was launched in 2015. Higher limits, it said, would better reflect present-day capital requirements of small businesses.
To support exporters, the chamber recommended reinstating the Interest Equalisation Scheme on pre- and post-shipment export credit. It proposed extending the scheme to service exporters in addition to manufacturing exporters, noting that broader coverage would help MSMEs absorb the impact of rising global tariff pressures and improve price competitiveness.
The chamber further highlighted the need for alternative financing avenues, suggesting infusion of equity through the Fund of Funds mechanism, particularly for startups. Such support, it said, would address seed capital needs and encourage innovation-led growth among MSMEs.
On the regulatory front, PHDCCI flagged that under the MSME Development Act, 2006, only small enterprises can approach Facilitation Councils for relief in cases of delayed payments. It recommended extending this provision to medium enterprises to strengthen payment security across the sector.
To accelerate adoption of modern and eco-friendly technologies, the chamber proposed enhancing the Credit-Linked Capital Subsidy Scheme by raising the investment ceiling to Rs 2 crore from the existing Rs 1 crore, stating that the current cap does not align with prevailing technology costs.
In addition, it sought amendments to Section 44AB of the Income Tax Act to exempt micro enterprises with turnover up to Rs 10 crore from mandatory tax audits, regardless of profit margins. The chamber said this would significantly reduce compliance costs, estimated at Rs 75,000 to Rs 1.5 lakh annually for small businesses.
