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2 Feb 2026·Source: The Hindu
6 min
EconomySocial IssuesNEWS

Textile, MSME Sectors to Receive Boost with New Government Schemes

Textile and MSME sectors get a boost with new schemes and allocations.

Textile, MSME Sectors to Receive Boost with New Government Schemes

Photo by Jacob McGowin

The labour-intensive textile and apparel and Micro, Small and Medium-scale Enterprise (MSME) sector, impacted by geopolitical developments, will receive a boost from the Budget with new schemes and higher allocations. The textile sector will see almost a 25% jump in budgetary allocation for 2026-2027. The MSME sector will see a doubling of allocation. The Union Finance Minister said Central Public Sector Enterprises would establish high technology tool rooms in two locations as digitally enabled automated service bureaux. A Scheme for Enhancement of Construction and Infrastructure Equipment would be introduced to boost local manufacturing of high-value and technologically-advanced equipment. A sum of ₹10,000 crore would be allocated during the next five years for a scheme for container manufacturing. For the labour-intensive textile sector, the government proposed comprehensive measures that would include a special programme to promote sports goods, a National Fibre Scheme for man-made fibre, silk, wool, mega textile parks developed on challenge mode for value addition to technical textiles, a Textile Expansion and Employment Scheme to modernise traditional clusters with capital support for machinery, technology upgradation and common testing and certification centres. A National Handloom and Handicraft programme would ensure targeted support for weavers and artisans, Mahatma Gandhi Gram Swaraj initiative would boost khadi, handloom and handicraft, Tex-Eco Initiative would promote globally competitive and sustainable textiles and apparel and Samarth 2.0 would upgrade the textile skilling ecosystem. Under rejuvenation of legacy industrial clusters, the budget proposed a scheme to revive 200 legacy industrial clusters, create dedicated ₹10,000 crore SME Growth Fund to create future champions and top up the Self-Reliant India Fund set up in 2021 with ₹2,000 crore to enable micro units access risk capital. The TReDS (Trade receivables discounting scheme) would be a mandatory transaction settlement platform for all purchases from MSMEs by CPSEs. A credit guarantee support mechanism would be introduced through CGTMSE for invoice discounting on TReDS platform; GeM would be linked with TReDS and TReDS receivables would be introduced as asset-backed securities, helping develop a secondary market.

Key Facts

1.

Textile sector allocation jump: 25%

2.

MSME sector allocation: Doubling

3.

SME Growth Fund: ₹10,000 crore

UPSC Exam Angles

1.

GS Paper 3: Economy - Issues related to MSMEs, industrial policy

2.

Connects to syllabus topics like inclusive growth, government budgeting, and industrial development

3.

Potential question types: Statement-based, analytical questions on government schemes and their impact

Visual Insights

More Information

Background

The MSME sector's growth is vital for economic development. Historically, these enterprises have been the backbone of local economies, providing employment and fostering innovation. The sector's evolution has been shaped by various government policies and economic reforms aimed at enhancing their competitiveness and access to finance. Key milestones in the sector's development include the establishment of institutions like the Small Industries Development Bank of India (SIDBI) and the introduction of schemes like the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE). These initiatives have played a crucial role in addressing the challenges faced by MSMEs, such as limited access to credit and technology. The legal and constitutional framework governing the MSME sector is primarily defined by the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. This act provides a framework for the promotion, development, and enhancement of the competitiveness of micro, small, and medium enterprises. It also defines the criteria for classifying enterprises based on investment and turnover. Internationally, the importance of MSMEs is recognized by organizations like the United Nations, which promotes their development through various programs and initiatives. Comparing the MSME sector in India with those in other countries reveals both similarities and differences in terms of challenges, opportunities, and policy approaches.

Latest Developments

Recent government initiatives have focused on providing financial assistance and technological support to the MSME sector. Schemes like the Prime Minister's Employment Generation Programme (PMEGP) and the Credit Linked Capital Subsidy Scheme (CLCSS) aim to facilitate access to credit and promote entrepreneurship. There are ongoing debates regarding the effectiveness of these schemes and the need for further reforms to address the challenges faced by MSMEs. Stakeholders, including industry associations and policymakers, have different perspectives on the optimal strategies for promoting the growth and competitiveness of the sector. The future outlook for the MSME sector is positive, with expectations of continued growth and innovation. Government targets include increasing the sector's contribution to GDP and creating more employment opportunities. Upcoming milestones include the implementation of new policies and initiatives aimed at enhancing the sector's competitiveness and sustainability. Challenges facing the sector include access to finance, technology adoption, and regulatory compliance. The way forward involves addressing these challenges through targeted interventions and policy reforms that promote innovation, entrepreneurship, and sustainable development.

Frequently Asked Questions

1. What are the key facts about the boost to the Textile and MSME sectors that are important for the UPSC Prelims exam?

Key facts include the 25% jump in budgetary allocation for the textile sector by 2026-2027, the doubling of allocation for the MSME sector, and the ₹10,000 crore allocated for the SME Growth Fund.

Exam Tip

Remember the percentages and amounts for matching-type questions in Prelims. Focus on the sectors receiving the boost and the timelines.

2. What is the importance of the MSME sector for economic development, as highlighted in the background context?

The MSME sector is vital for economic development as these enterprises have historically been the backbone of local economies, providing employment and fostering innovation.

3. Why are the textile and MSME sectors in the news recently?

These sectors are in the news due to new government schemes and higher allocations aimed at boosting them, as announced in the budget. The sectors have been impacted by recent geopolitical developments.

4. What are some of the government initiatives mentioned that support the MSME sector?

Government initiatives include the Prime Minister's Employment Generation Programme (PMEGP) and the Credit Linked Capital Subsidy Scheme (CLCSS), which aim to facilitate access to credit and promote entrepreneurship.

5. What is the SME Growth Fund, and how much has been allocated to it?

The SME Growth Fund is a scheme with an allocation of ₹10,000 crore over the next five years, aimed at supporting the growth of small and medium enterprises.

6. What are the potential benefits and drawbacks of increasing budgetary allocations for the textile and MSME sectors?

Increased allocations can lead to higher production, more employment, and greater innovation in these sectors. However, effective implementation and monitoring are crucial to avoid misuse of funds and ensure the intended benefits reach the target beneficiaries.

7. What reforms are needed to further boost the MSME sector, considering the current developments?

Reforms could focus on simplifying regulatory processes, improving access to technology and markets, and providing skill development programs to enhance the competitiveness of MSMEs. Addressing the ongoing debates regarding the effectiveness of existing schemes is also crucial.

8. How does the Scheme for Enhancement of Construction and Infrastructure Equipment impact local manufacturing?

The Scheme for Enhancement of Construction and Infrastructure Equipment aims to boost local manufacturing of high-value and technologically-advanced equipment, potentially reducing reliance on imports and creating jobs in the domestic manufacturing sector.

9. Who is Nirmala Sitharaman and what is her role in these schemes?

Nirmala Sitharaman is the Union Finance Minister. As the Finance Minister, she is responsible for the budgetary allocations and the introduction of new schemes to support the textile and MSME sectors.

10. What is the significance of the ₹2,000 crore top-up for the Self-Reliant India Fund?

The ₹2,000 crore top-up for the Self-Reliant India Fund indicates a continued government focus on promoting self-reliance and supporting domestic industries, particularly MSMEs, to reduce dependence on imports.

Practice Questions (MCQs)

1. Consider the following statements regarding the Trade Receivables Discounting System (TReDS): 1. It is a digital platform to facilitate the financing of trade receivables of MSMEs. 2. The recent budget proposes making TReDS mandatory for all purchases from MSMEs by CPSEs. 3. TReDS receivables will be introduced as asset-backed securities to develop a secondary market. Which of the statements given above is/are correct?

  • A.1 and 2 only
  • B.2 and 3 only
  • C.1 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: D

All three statements are correct. TReDS is indeed a digital platform for financing MSME trade receivables. The recent budget proposes making it mandatory for CPSEs. Also, TReDS receivables will be introduced as asset-backed securities to develop a secondary market, as mentioned in the news summary.

2. Which of the following initiatives is/are aimed at supporting the textile sector, as mentioned in the news? 1. National Fibre Scheme for man-made fibre, silk, and wool. 2. Textile Expansion and Employment Scheme to modernize traditional clusters. 3. Tex-Eco Initiative to promote globally competitive and sustainable textiles and apparel. Select the correct answer using the code given below:

  • A.1 only
  • B.2 only
  • C.1 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: D

All the initiatives mentioned (National Fibre Scheme, Textile Expansion and Employment Scheme, and Tex-Eco Initiative) are aimed at supporting the textile sector, as explicitly stated in the news summary.

3. With reference to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), consider the following statements: 1. It provides credit guarantee support to banks and financial institutions lending to MSMEs. 2. The scheme is jointly implemented by the Ministry of Finance and SIDBI. 3. It facilitates invoice discounting on the TReDS platform. Which of the statements given above is/are correct?

  • A.1 and 2 only
  • B.2 and 3 only
  • C.1 and 3 only
  • D.1, 2 and 3
Show Answer

Answer: D

All three statements are correct. CGTMSE provides credit guarantee support to banks lending to MSMEs, is jointly implemented by the Ministry of Finance and SIDBI, and facilitates invoice discounting on the TReDS platform, as mentioned in the news and is a well-established fact.

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