Centre weighs scaling up MSME Champions Scheme outlay ninefold to ₹10,000 crore

“The outlay for the MSME Champions scheme may be upwardly revised to about ₹8,000 crore or ₹10,000 crore over the next five years, and the proposal has reached the EFC (expenditure finance committee) stage," said one of the officials cited above, speaking on the condition of anonymity.

Procedurally, once the EFC — chaired by the expenditure secretary V. Vualnam — approves the plan, a cabinet note will be circulated for approval.

The second official cited above said that the entire process including approvals from the EFC and the Union cabinet may take about 3-5 more months.

“The MSME ministry is working on increasing the outlay of this scheme following consultations where the industry sought an increase in funds for strengthening cleaner and more efficient manufacturing practices, in order to be competitive in global markets," the second official added.

The MSME Champions scheme started with an allocation of ₹875 crore (actual) in FY22, followed by subsequent allocations of ₹52 crore (actual FY23), ₹80 crore (actual FY24), ₹55 crore (revised estimates FY25) and ₹55 crore (budget estimates FY26), according to budget documents.

According to the India SME Forum, an industry lobby group representing about 100,000 MSMEs, only about 173,000 of the country’s 74 million MSMEs are exporters, contributing about 45% to the country’s total exports.The number of MSMEs has risen from 58 million a year ago, according to data from the MSME ministry’s Udyam portal.

However, the MSMEs have been facing uncertainties and optimism has cooled due to global challenges and US tariff measures, often leading to disruption in business operations, as per the Small Industries Development Bank of India’s (Sidbi’s) business sentiment surveys for the first and second quarters of FY26.

Queries emailed to the ministries of finance and MSME remained unanswered till press time.

What is the Champions scheme?

The MSME Champions scheme was created by merging six components of the erstwhile Technology Upgradation Scheme. It provides financial assistance to the country’s MSMEs for extending their global reach using three components.

The first component is the MSME Sustainable (ZED) certification to promote their sustainable and efficient operations. Here, the government subsidises the cost of a ‘zero defect, zero effect’ certification and provides additional support for technology upgradation to achieve the ZED certificate.

The second component is the MSME Competitive (Lean) component, which is aimed to make them competitive with global peers. Here, the government plans to enhance their domestic and global competitiveness through the application of lean techniques such as resource optimisation and reduction in product and logistics costs. This includes support to MSMEs to reduce wastage and improve energy efficiency to boost productivity.

The third component is aimed at increasing the rate of innovation using intellectual property rights (IPR) creation. Here, the government provides financial assistance to MSMEs seeking global and domestic patents, geographical indication certificates, trademarks, and design registrations.

According to the MSME ministry’s FY25 annual report, about 107,000 MSMEs secured ZED certificates under the scheme in FY25; 12,995 businesses registered under the lean manufacturing component; and 727 IPs were created under the IP creation component, as of December 2024.

A NITI Aayog report published on 15 January suggested a roadmap to aid the MSME sector by merging government schemes and reducing overlap and leveraging technological advancements such as artificial intelligence (AI) to facilitate solutions for these businesses.

Positive for micro, small businesses

Experts feel the increase in the Champions scheme’s overall outlay seems positive for micro and small businesses, but it may not make much difference for medium enterprises. “Many medium enterprises already have zero defect and lean manufacturing," said Gurudas Nulkar, professor and director, Centre for Sustainable Development, Gokhale Institute of Politics and Economics.

Nulkar said medium enterprises are usually part of the supply chain of large manufacturers, and rely on the end customer for specifications and designs. This gives very little room for developing their own unique IPs.

IP creation is likely to be a major hurdle for MSMEs, according to Nulkar. “To secure intellectual property, computers and access to technology is not enough, you need raw talent. For micro enterprises, it is a formidable task to hire graduates from top engineering schools, or nurture R&D units within their organisation," said Nulkar, an expert of industrial sustainability and environmental management.

Few meet standards

India SME Forum president Vinod Kumar added that very few MSMEs in the country have the necessary certifications to meet high export standards.

“Even with CBAM, for instance, very few businesses actually have the necessary documents in place to prove that their products meet adequate standards," said Kumar, adding that Indian MSMEs also need support to secure IPs. CBAM, or carbon border adjustment mechanism, is the European Union’s carbon tax to only allow imports of sustainably made goods.

A January 2026 report by Dun & Bradstreet on MSME credit lines noted that exporters had faced headwinds. “For MSMEs across the globe, the impact of US tariffs can be more destabilising than for large enterprises, unless the exposed countries find an alternative to the US markets," the report noted.

Drawing on examples from Taiwan, China, and Brazil, the report added that MSMEs needed targeted government support.

“Looking ahead, the resilience of MSMEs will depend on their country’s ability to adapt to shifting global trade dynamics and rising protectionism. While US tariffs pose a serious threat to small exporters, especially in sectors with tight margins, proactive measures, such as market diversification, digital transformation, and targeted government support, can help cushion the impact," the report said.