Government Announces Major Boost for Startup Investments and MSME Growth

In a significant push to strengthen India’s startup ecosystem and MSME sector, Finance Minister Nirmala Sitharaman announced a series of initiatives, including enhanced credit access, an expanded fund of funds for startups, and the repositioning of India Post as a key player in the rural economy.

Strengthening the startup ecosystem, the government is expanding its Fund of Funds initiative. “The Alternate Investment Funds (AIFs) for startups have already received commitments exceeding INR 91,000 crore, supported by the government’s initial INR 10,000 crore contribution. Now, a new fund of funds with an additional INR 10,000 crore contribution will be established,” she added.

Highlighting MSMEs as the “second engine” of economic growth, Sitharaman emphasised their critical role in India’s manufacturing and exports. “With 5.7 crore MSMEs employing 7.5 crore people and contributing 36% of our manufacturing output, they are positioning India as a global manufacturing hub with quality products,” she noted. 

To support their growth, the investment and turnover limits for MSME classification will be doubled, giving them greater confidence to expand and generate employment.

To ease access to credit, the government has announced a major enhancement in credit guarantee coverage. For micro and small enterprises, the limit will increase from ₹5 crore to ₹10 crore, leading to an additional INR 1.5 lakh crore in credit over the next five years. Similarly, for startups, the limit will be raised from INR 10 crore to INR 20 crore, with a moderated guarantee fee of 1% for loans in 27 key sectors. Additionally, well-run exporting MSMEs will receive term loans of up to ₹20 crore.

A major boost for microenterprises comes with the introduction of customised credit cards, offering a ₹5 lakh limit. “In the first year, 10 lakh such cards will be issued,” Sitharaman announced.

“India Post, with its 1.5 lakh rural post offices and 2.4 lakh dak sevaks, will be repositioned to act as a catalyst for the rural economy,” the minister said. The postal network will also be transformed into a major public logistics organisation to meet the growing needs of new entrepreneurs, MSMEs, women self-help groups, and large businesses.

These measures reflect the government’s continued focus on fostering entrepreneurship, innovation, and job creation across India.