Budget 2026: Time To Rewire MSME Policy For A Digital, Service-Led Economy

As India heads into Union Budget 2026, the focus on economic growth, employment generation and fiscal discipline is intensifying.

As per Ritesh Jain,Co-Founder,Flexiloans.com, India's MSMEs today are increasingly digital, service-oriented and data-driven. Pre-budget discussions across industry forums suggest a growing consensus that structural facilitation, rather than short-term stimulus, should drive the next phase of MSME growth.

Scaling Credit Guarantee Frameworks

"Credit guarantee schemes have played a critical role in expanding formal credit access. However, their reach remains limited relative to the overall scale of MSME lending. This has emerged as a key theme in pre-budget conversations," said Ritesh Jain.

There is a strong case for:

• Broadening guarantee coverage to include a wider set of regulated lenders, including NBFCs
• Reviewing interest rate and credit-rating thresholds that restrict access despite healthy repayment behaviour
• Enhancing applicability for working capital loans, which account for the bulk of MSME borrowing
• The emphasis is shifting toward improving the usability and inclusiveness of existing schemes rather than introducing new ones.

Service MSMEs in Policy Focus

As per Ritesh Jain, India's MSME ecosystem is no longer dominated by manufacturing alone. A rapidly growing share of enterprises operates in services - including logistics, digital commerce, professional services and platform-led businesses.

Budget 2026 could address this transition by:

• Uniform extension of MSME schemes to service enterprises
• Removal of sectoral exclusions rooted in legacy policy design
• Formal recognition of cash-flow-based business models

Such measures would align policy with India's consumption- and services-led economy.

Simplifying Compliance to Improve Credit Flow

Documentation and compliance complexity continue to constrain MSME access to credit. Encouragingly, policy discussions are increasingly centred on simplification.

Key areas include:

• Recognising loans routed through current accounts as MSME loans for scheme eligibility
• Greater reliance on GST data, bank statements and Account Aggregator frameworks
• Reducing duplicative documentation without compromising regulatory oversight
• These steps could significantly improve credit turnaround times and lower operational friction.

Looking Ahead

"With global borrowing costs remaining elevated, targeted interest support mechanisms and blended finance structures are gaining attention over broad subsidies. Alongside this, technology is increasingly being viewed as policy infrastructure - enabling transparency, resilience and formalisation," said Ritesh Jain.

The narrative ahead of Budget 2026 points clearly toward alignment. Credit access, sector inclusion, cost efficiency and digital enablement must move in tandem. Budget 2026 offers an opportunity to recalibrate MSME policy to match the sector's evolving reality and support sustainable, long-term growth.