Union Budget 2025-26 recognises MSMEs as one of the key engines in India's journey of development, alongside agriculture, investment, and exports (refer to the infographic).
What Are the Challenges in Enhancing the Competitiveness of MSMEs?
- Formalisation: Around 90% of the informal sector consists of MSMEs (ILO, 2023).
- Access to Finance: MSMEs face a huge ₹80 lakh crore credit gap due to limited formal loans and high risk perception (CRISIL).
- Skill Gaps: A 3.9% drop in knowledge-based hiring (from around 13%) poses a challenge to the growth and innovation capacity of MSMEs (WIPO, 2023).
- Data Gaps: Limited reliable data on MSMES, especially on jobs, exports, etc. hinders policymaking.
- Even the UDYAM database lacks detailed insights. This hinders policymaking.
- Other Issues: MSMEs struggle with low product variety, outdated tech, and the "missing middle (too few medium-sized firms in manufacturing)”.
Ways to Improve Competitiveness of MSMEs
- Finance Accessibility: Enhance finance access by reforming the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), supporting NBFCs, and easing state-level subsidy norms
- Skilling: Aligning training programs with industrial needs, focusing on financial literacy and business skills for MSME owners.
- Data: Upgrade the UDYAM portal with detailed, cluster-wise and state-level data to guide better policy.
- Technology & Innovation: Create targeted policies for small firms, strengthen Institutes for Collaboration (IFC) to promote innovation.
