Unlocking the Potential of India's MSMEs: A Comprehensive Report by NITI Aayog
NITI Aayog's New Report on MSMEs
New Delhi: On Friday, NITI Aayog unveiled an in-depth report aimed at unlocking the vast potential of India's Micro, Small, and Medium Enterprises (MSMEs) through essential reforms in financing, skill development, innovation, and market access.
Titled ‘Enhancing MSMEs Competitiveness in India,’ this report, created in partnership with the Institute for Competitiveness (IFC), explores the significant challenges that hinder the competitiveness of the MSME sector in the country.
Utilizing firm-level data alongside the Periodic Labour Force Survey (PLFS), it outlines a strategic plan to promote sustainable integration and enhance the participation of MSMEs in global value chains.
The focus is on four critical sectors: textiles and apparel, chemical products, automotive, and food processing, while also addressing sector-specific challenges and opportunities essential for unlocking the potential of MSMEs in India.
The report reviews existing national and state policies, identifying gaps in implementation and a lack of awareness among MSMEs.
A key finding indicates a significant improvement in MSMEs' access to formal credit.
From 2020 to 2024, the percentage of micro and small enterprises obtaining credit from scheduled banks increased from 14% to 20%, while medium enterprises saw a rise from 4% to 9%.
Despite these advancements, the report highlights a considerable credit gap.
By FY21, only 19% of the credit demand from MSMEs was met through formal channels, leaving an estimated ₹80 lakh crore unfulfilled.
Although the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) has expanded, it still encounters numerous limitations.
To address the credit gap and facilitate inclusive, scalable financing for MSMEs, the report advocates for a restructured CGTMSE, backed by institutional collaboration and more focused services.
Additionally, the report emphasizes the urgent issue of skill shortages within the MSME sector.
A significant portion of the workforce lacks formal vocational or technical training, which adversely affects productivity and the capacity of MSMEs to scale effectively.
Many MSMEs also underinvest in research and development (R&D), quality enhancement, or innovation, which hampers their competitiveness in both national and international markets.
The report further notes that MSMEs face challenges in adopting modern technologies due to unreliable electricity, poor internet connectivity, and high implementation costs.
Despite state government initiatives aimed at supporting technological advancements in MSMEs, many enterprises remain unaware or unable to access these resources.
In its cluster analysis, the report identifies the need for upgrading outdated technologies and enhancing marketing and branding capabilities as vital for improving competitiveness.
The conclusion of the report suggests that, despite various support policies for MSMEs and recent boosts from Union Budgets, effectiveness is limited by low awareness.
To improve policy impact, the report recommends stronger design and implementation at the state level, emphasizing consistent monitoring, better data integration, and enhanced stakeholder engagement in policy development.
By focusing on targeted interventions, building robust institutional collaborations, and enhancing global competitiveness, India's MSMEs can emerge as a crucial driver of sustainable economic growth, according to the report.
It calls for increased support for MSMEs through digital marketing training, partnerships with logistics providers, and the creation of platforms for direct market linkages, particularly in high-growth regions like India's northeastern and eastern areas.
The report also advocates for a strong, adaptive, and cluster-based policy framework at the state level that promotes innovation, boosts competitiveness, and enables MSMEs to lead inclusive economic transformation.