As India prepares for Union Budget 2026, startup founders and MSME leaders have voiced clear expectations from the government. Industry bodies have called for liquidity relief, tax reforms, and simplified compliance rules to strengthen the entrepreneurial ecosystem. Their demands reflect real challenges that young companies face in scaling operations and surviving market uncertainty.
Startups and MSMEs contribute significantly to employment, exports, and innovation. Yet many of them struggle with high compliance costs, limited access to capital, and delayed payments. Business associations now urge policymakers to design Budget 2026 as a growth-focused blueprint rather than a revenue-driven exercise.
The wishlist highlights three main priorities: improved liquidity, easier regulations, and stronger incentives for innovation and investment.
Liquidity Relief Tops the Priority List
Liquidity stands as the most urgent concern for startups and MSMEs. High interest rates and cautious investors have tightened access to funds. Many early-stage companies rely heavily on working capital loans to manage payroll, rent, and supply chains.
Industry bodies have asked the government to expand credit guarantee schemes and reduce borrowing costs. They want banks and NBFCs to lend more freely to small businesses without demanding heavy collateral.
Several associations have proposed:
- Lower interest rates on MSME loans
- Faster loan approval through digital platforms
- Increased allocation to the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
- Special liquidity windows for tech startups
Entrepreneurs believe these steps will allow them to invest in product development and hiring instead of focusing solely on survival.
Demand for Easier Compliance and Fewer Regulations
Complex compliance requirements drain time and resources from startups. Founders often spend more effort on paperwork than on innovation. Industry groups have therefore asked the government to simplify tax filing, labor laws, and reporting obligations.
They want a single-window compliance system that integrates GST, income tax, and corporate filings into one digital process. This approach can reduce errors and cut administrative costs.
Key suggestions include:
- Quarterly compliance instead of monthly filings for small firms
- Reduced penalties for first-time errors
- Clearer GST rules for SaaS and digital startups
- Fewer inspections for low-risk enterprises
These changes aim to create a business-friendly environment where startups can grow without fear of regulatory hurdles.
Tax Relief and Incentives for Innovation
Tax policy plays a major role in startup growth. Industry bodies have asked for tax holidays to continue and expand for eligible startups. They also want the government to revise capital gains and angel tax rules that discourage investment.
Startups seek clarity and stability in taxation. Frequent rule changes make long-term planning difficult. Founders argue that predictable tax policies will attract more domestic and foreign investors.
The wishlist includes:
- Extension of the startup tax exemption period
- Reduction in long-term capital gains tax for startup investments
- Clear guidelines on employee stock ownership plans (ESOPs)
- Removal of tax ambiguity for cross-border investments
These measures can boost investor confidence and encourage risk-taking in innovation-driven sectors.
Focus on Job Creation and Skill Development
MSMEs and startups generate millions of jobs each year. Industry leaders have urged the government to align Budget 2026 with employment goals. They want incentives that encourage companies to hire young professionals and reskill existing workers.
Proposals include wage subsidies for startups that hire first-time employees and tax benefits for firms that invest in training programs. Entrepreneurs believe such policies will strengthen India’s talent pipeline and reduce unemployment.
Skill development also supports emerging sectors such as artificial intelligence, renewable energy, and health technology. By linking budget incentives to job creation, the government can ensure inclusive growth.
Boosting Manufacturing and Export-Oriented Startups
Industry bodies have also stressed the need to support manufacturing startups under the “Make in India” and “Atmanirbhar Bharat” visions. They want easier access to land, infrastructure, and export incentives.
Startups in electronics, clean energy, and medical devices require long-term capital and stable policies. Business groups have asked for:
- Increased subsidies for domestic manufacturing
- Export tax rebates for startup-led enterprises
- Faster customs clearance for raw materials
- Special economic zones for innovation clusters
These measures can help Indian startups compete with global players and expand into international markets.
Strengthening Digital and Tech Startups
Digital startups form a key pillar of India’s growth story. From fintech and edtech to agritech and healthtech, technology-driven companies continue to transform traditional sectors.
Industry leaders have requested special incentives for deep-tech startups working on AI, blockchain, and space technology. They argue that such ventures require long gestation periods and higher risk capital.
Suggested steps include:
- Dedicated innovation funds
- Government-backed venture capital participation
- Increased R&D tax deductions
- Support for patent registration and intellectual property protection
These actions can position India as a global technology powerhouse.
Addressing the Issue of Delayed Payments
Delayed payments remain a persistent problem for MSMEs. Large corporations and government agencies often take months to clear dues. This practice creates severe cash flow stress for small businesses.
Industry associations have urged the government to enforce strict payment timelines and impose penalties on defaulters. They also recommend digital invoice tracking systems that ensure transparency and accountability.
A stronger legal framework can protect MSMEs from financial instability and build trust within supply chains.
Creating a Startup-Friendly Budget Environment
Beyond financial measures, industry bodies want Budget 2026 to send a positive signal to entrepreneurs. They expect the government to recognize startups as engines of economic transformation rather than tax sources.
A startup-friendly budget can encourage young Indians to launch ventures instead of seeking traditional employment. It can also attract global investors who view policy stability as a key factor in decision-making.
The wishlist emphasizes collaboration between government, industry, and financial institutions. Stakeholders believe that a unified approach can unlock India’s full entrepreneurial potential.
Challenges for Policymakers
While the wishlist appears ambitious, policymakers must balance fiscal responsibility with growth goals. The government must manage inflation, public debt, and social spending alongside startup incentives.
However, experts argue that supporting startups and MSMEs delivers long-term returns through higher tax revenue, job creation, and export growth. Strategic investment today can reduce economic risks tomorrow.
The real challenge lies in effective implementation. Even the best policies fail without efficient execution and monitoring.
A Turning Point for India’s Startup Ecosystem
Budget 2026 holds the potential to redefine India’s startup and MSME landscape. Liquidity relief, easier compliance, and tax incentives can transform struggling enterprises into high-growth companies.
Industry bodies have presented a clear roadmap for action. Their demands focus on sustainability, innovation, and inclusion. If the government addresses these priorities, India can strengthen its position as one of the world’s leading startup hubs.
Entrepreneurs now wait for Budget 2026 with cautious optimism. They hope it will deliver practical solutions rather than symbolic announcements. A supportive budget can empower startups and MSMEs to drive India’s next phase of economic growth with confidence and resilience.
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