India’s MSME Growth Challenge: Bridging the Gap from Micro to Large Enterprises

New Delhi: India’s micro, small, and medium enterprises (MSMEs) sector, often referred to as the backbone of the economy, faces significant hurdles in scaling up to larger businesses. While the sector contributes nearly 30% to the country’s GDP and provides employment to millions, the absence of sufficient medium-sized firms capable of growing into large enterprises remains a structural challenge, according to NITI Aayog CEO BVR Subrahmanyam.

Speaking at the launch of a new MSME initiative, Subrahmanyam highlighted critical issues such as regulatory barriers, technology upgradation, and skilling gaps that hinder MSME expansion. He pointed out that India has a strong presence of large enterprises but an inadequate number of mid-sized firms, which raises concerns about sustained economic growth.

Challenges in MSME Expansion

The ability to transition from micro to small, small to medium, and eventually into large enterprises is a key concern. Despite government support, many MSMEs struggle due to high input costs, limited access to affordable credit, increased compliance requirements, and weak consumer demand.

In response to these challenges, the government has revised the MSME classification thresholds in the 2025-26 budget, increasing the investment limit by 2.5 times and the turnover limit by twice the previous cap. This move aims to encourage businesses to expand without the fear of losing MSME benefits prematurely.

However, recent statistics paint a concerning picture. According to the MSME ministry, only 1,835 micro enterprises scaled up to medium enterprises in 2023-24, while 15,918 small enterprises transitioned into medium businesses. Additionally, Union Minister of State for MSMEs, Shobha Karandlaje, informed the Rajya Sabha that over 35,000 MSMEs have shut down between 2020 and 2025, with more than 75,000 closures reported since the pandemic.

The Need for Structural Reforms

For India to achieve its goal of a USD 1 trillion MSME sector by 2028, there is an urgent need for policy interventions that address key growth barriers. Simplified regulations, better access to credit, reduced compliance burdens, and stronger digital adoption initiatives are critical to empowering MSMEs and ensuring their long-term sustainability.

As the government continues its push for MSME development, fostering an ecosystem that supports seamless scalability will be crucial in strengthening India’s economic resilience and driving long-term growth.

Disclaimer: This summary is for informational purposes and readers should verify specific details through official reports or consult industry professionals for comprehensive insights.