Budget 2026 vs MSMEs: Will India Finally Fix The ‘Missing Middle’ Crisis?

The Union Budget 2026, the long-awaited day for MSMEs, gives the government a hard task to solve. The sector is not only the main driver of the Indian economy, with the contribution of almost 30%, but also a major employer of over 110 million workers. The budget is said to be a starting point for the realignment of fiscal and policy instruments within the MSME ecosystem that will bring about access to credit, digital transformation, and global competitiveness.

The government has been making various attempts to uplift the situation of MSMEs and these include the Emergency Credit Line Guarantee Scheme (ECLGS) and the MSME Samadhan portal; however, the industry experts still label it as the "missing middle" challenge, where scaling businesses are stuck between microcredit and large institutional financing.

Stakeholders from both the manufacturing and digital service segments now expect a Budget 2026 backed by the data and a robust approach designed to unlock seamless credit and ease of doing business.

According to Abbhinav R. Jain, Co-founder & Chief Financial Officer, AdCounty Media, the need for an integrated, tech-enabled financing ecosystem to address these structural limitations is crucial.

"Getting rid of the 'missing middle' problem through a data-driven and seamless financing solution is one of the main expectations that media and digital service MSMEs have from Budget 2026. Therefore, we need not only to increase the credit guarantee limit for MSEs and exporters to Rs 10 crore and Rs 20 crore, respectively, but also a common digital platform that will integrate the cash flow data from GST, e-invoicing, ITR, and bank statements for instance, collateral-free loans of up to Rs 50 lakh," said Abbhinav R. Jain.

Easing of GST 2.0—quarterly filing for the turnover of less than Rs 5 crore and AI-enabled compliance tools—will bring down the administrative burden by 40%. The enabled 5 million new entrepreneurs will include the share of the industry's 30% contribution to GDP through the secretly routed Rs 10,000 crore MSME growth fund via fintechs, along with the scaling up of mentorship through district transformation cells.

Digital credit delivery and compliance simplification are the main focus areas anticipated to significantly reduce working capital management problems for start-ups operating in digital marketing, SaaS, and e-commerce segments. Economists predict that the combination of fintech innovation and GST data transparency can open up the credit market and therefore encourage entrepreneurial participation in the lesser developed areas of Tier-2 and Tier-3 India.

Raghunandan Saraf, Founder & CEO, Saraf Furniture, points out that the manufacturers of MSMEs are looking for the budget to provide support in the areas of credit depth, export resilience, and local production incentives.

Manufacturing MSMEs, especially those in the furniture and consumer goods sectors, will expect two main benefits from Budget 2026: faster, cheaper credit and trade resilience. The limit on exporter term loan guarantees has to be raised to Rs 40 crore from the current amount, and the establishment of a Trade Resilience Fund for the sectors suffering from tariffs, like gems and leather, should be set up.

Besides, this will also aid in fraud-proofing GST-linked scorecards that can unlock Rs 1.5 lakh crore in new liquidity. Along with public procurement preferences for ZED-certified units, a Rs 5 lakh credit card scheme for micro-enterprises will upgrade product quality and widen markets. The training centres will be Industry 4.0 and green tech-focused and will not only be supportive of these initiatives but will also gradually transform MSMEs from 36% of manufacturing output to global supply chain anchors.

With the rising importance of export-driven growth and green industrialization, Budget 2026 can be a significant player by closing the financing gap, digitalizing MSME operations, and providing competition-ready entrepreneurs with the tools. A unified policy framework that combines fiscal stimulus with digital governance could place the sector on the path to sustainable, inclusive and innovation-led growth in the next decade.