“The expenditure on the MSME Champions program may be revised upwards to approx ₹8000 crores or ₹10,000 crore in the next five years and the proposal has reached the EFC (expenditure finance committee) stage,” said one of the officials cited above on condition of anonymity.
Gradually, once the Economic and Financial Committee – chaired by Minister of Expenditure V. Vualnam – approves the plan, a Cabinet Note will be circulated for approval.
The second official quoted above said that the entire process including approvals from the EFC and the Union Cabinet may take about 3-5 more months.
Key things
- The central government plans to increase the Champion Scheme budget by almost nine times.
- The main driver behind this update is growing “protectionism” and new environmental taxes abroad.
- While the scheme is positive, experts warn that micro and small businesses face different barriers than medium-sized businesses.
- The proposal is currently at the Expenditure Finance Committee (EFC) stage.
- Full rollout – including Union Cabinet approval – is expected to take another 3 to 5 months.
- Once approved, it will be in line with a broader plan proposed by NITI Aayog to harness artificial intelligence and reduce overlapping government schemes.
“The MSME ministry is working to increase spending on this scheme following consultations where the industry sought increased funding to boost cleaner and more efficient manufacturing practices to be competitive in global markets,” the second official added.
The MSME Champions program started with the allocation of an amount ₹875 crore (actual) in FY22, followed by subsequent allocations ₹52 crore (actual FY23), ₹80 crore (actually FY24), ₹55 crore (revised FY25 estimates) a ₹55 crore (FY26 budget estimates), according to budget documents.
According to the India SME Forum, an industry lobby group representing about 100,000 SMEs, only about 173,000 of the country’s 74 million SMEs are exporters, contributing about 45% to the country’s total exports. The number of small and medium-sized enterprises increased from 58 million a year ago, according to data from the UMSME ministry’s portal.
However, SMEs are facing uncertainty and optimism has cooled due to global challenges and US tariff measures, often leading to disruption of business operations, according to 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 finance and MSME ministries remained unanswered till going to press.
What is the champion scheme?
The MSME Champions scheme was created by merging the six components of the earlier technology upgradation scheme. It provides financial assistance to SMEs in the country to expand their global reach through three components.
The first component is the MSME Sustainable (ZED) certification, which supports their sustainable and efficient operation. Here, the government subsidizes the cost of the “zero defect, zero effect” certification and provides additional support for upgrading technology to obtain the ZED certificate.
The second component is the MSME Competitive (Lean) component, which aims to make them competitive with global counterparts. Here, the government plans to increase their domestic and global competitiveness by applying lean techniques such as optimizing resources and reducing product and logistics costs. This includes supporting SMEs to reduce waste and improve energy efficiency to increase productivity.
The third component is aimed at increasing the rate of innovation through the creation of intellectual property rights (IPR). Here, the government provides financial assistance to SMEs seeking global and domestic patents, geographical indication certificates, trademarks and design registrations.
According to the Ministry’s Annual MSME Report for FY25, about 107,000 MSMEs obtained ZED certificates under this scheme in FY25; 12,995 enterprises registered within the lean production component; and 727 IPs were created under the IP creation component as of December 2024.
A NITI Aayog report released on January 15 proposed a plan to help the SME sector by merging government schemes and reducing overlaps and using technological advances such as artificial intelligence (AI) to facilitate solutions for these businesses.
Positive for micro and small businesses
Experts believe that the increase in overall Champions spending appears to be positive for micro and small businesses, but may not make much of a difference to medium-sized businesses. “Many medium-sized enterprises already have zero defects and lean manufacturing,” said Gurudas Nulkar, professor and director of the Center for Sustainable Development, Gokhale Institute of Politics and Economics.
Nulkar said that medium-sized enterprises are usually part of the supply chain of large manufacturers and rely on the end customer for specifications and designs. This leaves very little scope for developing your own unique IPs.
According to Nulkar, creating IP is likely to be a major hurdle for SMEs. “It’s not enough to secure intellectual property, computers and access to technology, you need raw talent. It’s a daunting task for micro-enterprises to hire graduates from top technical schools or nurture research and development units within their organization,” said Nulkar, an expert in industrial sustainability and environmental management.
Few meet the 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 example, very few businesses actually have the necessary documents to prove that their products meet adequate standards,” Kumar said, adding that Indian SMEs also need support for IP security. CBAM, or the Carbon Border Adjustment Mechanism, is the European Union’s carbon tax that allows the import of only sustainably produced goods.
Dun & Bradstreet’s January 2026 report on MSME credit lines said exporters faced headwinds. “For SMEs around the world, the impact of US tariffs could be more destabilizing than for large businesses unless exposed countries find alternatives to US markets,” the report said.
Drawing on examples from Taiwan, China and Brazil, the report added that MSMEs need targeted government support.
“Going forward, the resilience of MSMEs will depend on their country’s ability to adapt to changing global trade dynamics and rising protectionism. While US tariffs pose a serious threat to small exporters, especially in industries with tight margins, proactive measures such as market diversification, digital transformation and targeted government support can help mitigate the impact,” the report said.
