From small towns to India Inc: Sitharaman’s bold bet on Bharat in Budget 2026
When Sitharaman talked about creating SME “champions” in her speech, the reference was closer to Germany’s Mittelstand than to the traditional idea of national champions, large firms growing to dominate their sectors with long-term government support. Mittelstand consists mainly of small and mostly family-owned firms that dominate niche markets through specialized products, high-quality engineering and long-term thinking. These companies have deep roots in small towns, export a significant proportion of their output, continually invest in skills and technology, and maintain close links with banks, local institutions and professional systems.
II in India. Tier and III. For tier-one businesses, the Mittelstand represents an aspirational benchmark rather than an immediately repeatable model. The corporate ecosystem supporting German firms is much more mature, with stable financing, strong apprenticeship systems and predictable regulations. But the underlying philosophy is relevant. The idea that small-town businesses can compete globally without losing their local roots challenges India’s long-standing prejudice that scale and sophistication must come from metros. The Mittelstand ideal, though ambitious, provides a useful direction for policy; It fosters depth, resilience and professionalism rather than the pursuit of greatness alone.
“Champions” in the small business context
The term “champions” is often associated with large firms that benefit from government support or policy protection. It will mark a conceptual shift when applied to SMEs. The government now views small businesses not just as job creators in need of protection, but as potential corporate assets that can scale, formalize and compete internationally.
This shift is particularly important in the context of India’s expanding free trade agreements (FTAs). As tariff barriers fall, small exporters in sectors such as textiles, leather, sporting goods and engineering will face sharper competition and stricter standards as opportunities open up abroad. Success will depend less on informality and more on efficiency, adaptability and integration with larger value chains. Creating SME champions is therefore not about picking winners, but about creating the conditions under which small town firms can develop into reliable, trustworthy and investable businesses.Equity Support: Guiding SMEs towards growth and governance
The expansion of the Rs 10,000-crore MSME Growth Fund and the Self-Reliant India Fund, both aimed at creating “champions” in the budget, reflects a recognition that debt-heavy financing constrains the growth ambitions of small businesses. Many II. Tier and III. Tier 1 firms operate with limited capital buffers, making them risk averse and hesitant to invest in capacity expansion, technology or brand building.
Equity support changes this equation by rewarding growth, transparency and performance rather than pure continuity. It also introduces external review, encouraging better accounting practices and clearer strategic thinking. For small-town businesses, this can be a gentle step towards institutionalization and allow them to professionalize while maintaining their entrepreneurial character. In this sense, equality support is as much about shaping behavior as it is about providing capital.
Liquidity support
Delayed payments have long been a structural weakness for small businesses dealing with larger buyers. The Budget aims to normalize the timely and transparent resolution of SME transactions by strengthening the Trade Receivables Discount System (TReDS) and mandating its use in procurements of centralized public sector enterprises. Linking TReDS to government procurement platforms and providing credit guarantees for invoice discounting further integrates small businesses into the formal financial system.
The proposal to securitize TReDS receivables takes this logic one step further. When receivables become tradable financial assets, SMEs are evaluated on the strength of their business relationships, not just on collateral. For small-town firms with stable orders but limited assets, this can significantly improve access to working capital and reduce dependence on informal credit.
The role of “institutional Mithras”
While access to capital is critical, the most binding constraint for many small town SMEs is the lack of affordable professional support. Compliance with tax laws, company regulations, labor norms and digital reporting requirements often overwhelms small entrepreneurs, pushing them to remain informal or semi-formal.
The proposal to create a “Corporate Mitras” network provides a solution to this problem. By training semi-professionals through institutions like ICAI, ICSI and ICMAI, the government is and III. The Tier aims to make compliance and corporate practices accessible in towns. These professionals are expected to act as translators between the regulatory world and small businesses, helping them adopt better management, keep proper records, and meet legal obligations without exorbitant costs. This support is crucial because scaling up is not a single leap, but a gradual process. Professional guidance can ease the transition from owner-focused operations to structured businesses that can confidently engage with banks, investors and large corporations.
Sitharaman’s three-pronged approach has led small-town SMEs to India Inc. It points to a conscious attempt to integrate the so-called mainstream corporate economy. India’s II. Tier and III. For Tier 1 towns, this vision is particularly promising. The next phase of industrial growth, he says, will come from strengthening local enterprise ecosystems rather than concentrating opportunities in a few urban centres.
