Government Launches Key Initiatives To Boost MSMEs And Housing In India

The government launched the Mutual Credit Guarantee Scheme for MSMEs on Monday, aimed at supporting micro, small, and medium enterprises (MSMEs) across India. This scheme, announced in the Union Budget 2024-25, will provide collateral-free loans to MSMEs for purchasing plant, machinery, or equipment. Under this scheme, eligible MSMEs can access loans of up to Rs 100 crore, with the National Credit Guarantee Trustee Company Ltd (NCGTC) offering 60% guarantee coverage to member lending institutions (MLIs).

Finance Minister Nirmala Sitharaman launched the scheme in Mumbai and personally distributed sanction letters to eligible MSMEs. She expressed that the initiative would facilitate easier access to credit and provide a significant boost to India’s manufacturing sector.

The Mutual Credit Guarantee Scheme is aimed at strengthening the MSME sector by removing barriers to credit access. The loan amount, however, cannot exceed Rs 100 crore, with a minimum of 75% of the project cost earmarked for machinery or equipment purchase. Borrowers must also have a valid Udyam Registration Number to be eligible for the scheme.

SWAMIH Fund Empowers Homebuyers

In a related development, Sitharaman, along with Minister of State for Finance Pankaj Chaudhary, handed over keys to homebuyers who have benefited from the SWAMIH (Special Window for Affordable and Mid-Income Housing) Fund. The SWAMIH Fund has successfully delivered over 50,000 homes as of January 2025 and aims to complete 20,000 additional homes annually for the next three years.

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Looking ahead, the government plans to establish SWAMIH Fund 2, a Rs 15,000 crore blended finance facility, with contributions from the government, banks, and private investors. The new fund will expedite the completion of 1 lakh additional affordable housing units.

Focus On Capital Expenditure And MSME Support

Finance Minister Sitharaman, during the event, underscored the government’s continued focus on capital expenditure. She remarked that the last three budgets, including the 2025-26 Budget, focused on improving the MSME sector, and the latest scheme would help strengthen this focus.

She emphasized that the shift in government expenditure strategy had not moved from capital expenditure to consumption expenditure, with the current Budget increasing capital spending by 10.2%, totaling nearly Rs 16 lakh crore. Sitharaman also took a moment to respond to the opposition’s claims, asserting that capital expenditure had indeed been significantly boosted.

Further Reforms And FDI In The Insurance Sector

Sitharaman also spoke about ongoing reforms, particularly in the insurance sector, where the government has allowed 100% Foreign Direct Investment (FDI). She announced plans to raise the FDI cap in the sector from 74% to 100% and stated that the government would implement strict guardrails to ensure that citizens’ money in insurance premiums stays within the country.

Sitharaman also highlighted the taxpayer relief measures introduced in the 2025-26 Budget. The government extended income tax relief to middle-income earners, up to Rs 12 lakh annually, expecting to benefit around 1 crore taxpayers. Sitharaman also emphasized that under the Prime Minister’s leadership, the government focuses on responsibly handling taxpayer money, especially in borrowing for capital asset building.

Fiscal Deficit And Capex Commitment

Sitharaman confirmed the government’s commitment to a fiscal deficit target of under 4.5% of GDP, set in the July 2024 Budget. The Finance Minister stated that the Budget 2025-26 aligns with this target, with a notable 10.2% rise in capital expenditure from the previous year.

The government is focusing on inclusive growth driven by investments in sectors like agriculture, rural development, MSMEs, and exports. The Centre’s overall expenditure for FY26 is projected to increase to Rs 50.7 lakh crore, signaling a strong commitment to growth and development.

Reforms In The Financial Sector And Deposit Insurance

In another key development, M Nagaraju, Secretary at the Department of Financial Services, confirmed that the government is actively considering increasing the deposit insurance cover beyond the current Rs 5 lakh limit. This step follows concerns regarding the New India Cooperative Bank, which has been facing financial difficulties.

Nagaraju assured the public that the government would notify any changes to the deposit insurance scheme once approved. The scheme, introduced in 1962, currently protects depositors with insurance claims up to Rs 5 lakh. The Reserve Bank of India (RBI) has taken action against New India Cooperative Bank following governance concerns, restricting its operations and withdrawal facilities.

Conclusion: A Comprehensive Approach To Economic Growth

The Union Budget 2025-26 reflects the government’s focus on driving growth through capital expenditure, MSME empowerment, and inclusive development across various sectors. The introduction of schemes like the Mutual Credit Guarantee Scheme and the expansion of SWAMIH Fund demonstrate a holistic approach to both economic development and social welfare. As reforms continue to unfold, India’s economic trajectory is poised for sustainable growth with an emphasis on infrastructure, rural development, and financial sector stability.