What MSMEs Want from Union Budget 2026–27 Amid Global Tariff Turbulence

As India braces for continued global trade uncertainty, micro, small and medium enterprises (MSMEs) have urged the Union government to treat Budget 2026–27 as a moment of course correction. In a detailed representation to Finance Minister Nirmala Sitharaman, industry groups have called for targeted credit support, export risk buffers, and simpler compliance norms, arguing that micro enterprises are bearing the brunt of tariff wars, currency volatility and regulatory overload.

Why MSMEs Are Flagging Distress Ahead of the Budget

MSMEs form the backbone of India’s employment and manufacturing ecosystem, feeding larger supply chains and export hubs. Yet representatives argue that micro enterprises, in particular, are being squeezed by policy asymmetries and external shocks rather than inefficiency.

In a December 26 letter, the Association of Indian Entrepreneurs (AIE), a Chennai-based body representing gig workers, traders and self-employed micro entrepreneurs, warned that without decisive, budget-backed interventions, many micro units could “silently exit”, undermining jobs and domestic manufacturing capacity at a time when India is projecting itself as a global manufacturing hub.

Demand for Fair and Counter-Cyclical Access to Credit

At the core of the MSME pitch is easier and cheaper access to finance. AIE has sought statutory collateral-free lending up to ₹1 crore for micro enterprises, with interest capped at 6–7%. It has also proposed built-in interest subvention during stress periods as a counter-cyclical tool, allowing firms to survive downturns triggered by global shocks.

In addition, micro enterprises have sought interest-free loan assistance for import substitution projects, arguing that domestic capacity building should be actively supported rather than left to market forces alone.

Export Risk Buffers in an Era of Tariff Wars

With global trade increasingly disrupted by sudden tariff hikes and geopolitical tensions, MSMEs have proposed the creation of an export risk equalisation fund. Such a fund would compensate micro exporters hit by abrupt tariff changes beyond their control.

Other measures suggested include temporary enhancement of duty drawback rates, interest relief during tariff shocks, and an emergency working capital window when wars or conflicts disrupt raw material supplies, fuel costs, and shipping routes.

GST Compliance: Simplification Over Punishment

A major grievance relates to the compliance burden under the Goods and Services Tax regime. MSMEs have asked for higher exemption thresholds for micro units and a single simplified GST return to replace multiple filings.

They have also demanded time-bound GST refunds within 15 days, with statutory interest for government delays. The letter calls for complete decriminalisation of procedural lapses, arguing that minor errors should not invite prosecution. A unified annual compliance return covering GST, labour and local laws has been proposed to reduce administrative overload.

Shielding Micro Units from Currency Volatility

Given their limited ability to hedge, micro exporters are particularly vulnerable to exchange rate swings. AIE has recommended a forex fluctuation protection scheme specifically for micro enterprises, alongside simplified and subsidised hedging instruments.

The suggestion that the Reserve Bank of India design low-cost, accessible hedging products reflects concerns that existing financial tools are geared towards larger firms with stronger balance sheets.

Freight and Logistics Support During Disruptions

Logistics costs have emerged as another pressure point. MSMEs have proposed freight equalisation subsidies during periods of abnormal container shortages and volatile shipping rates. They have also sought priority access to containers for micro exporters through public sector shipping companies and ports.

Such measures, they argue, would prevent smaller exporters from being priced out of global markets during crises.

Why the Budget’s MSME Choices Matter

The underlying message from micro enterprises is that they are the first to be hit and the last to be supported during global disruptions. Without tailored interventions, shocks that larger firms can absorb may permanently cripple smaller units.

As policymakers prepare the Union Budget 2026–27, MSMEs are seeking not just relief measures, but a recognition that sustaining micro enterprises is central to employment generation, supply-chain resilience, and India’s long-term manufacturing ambitions.