India’s MSMEs Get a Fresh Boost with NITI Aayog’s Competitiveness Roadmap

New Delhi: Micro, Small, and Medium Enterprises (MSMEs) form the heart of India’s economy, contributing significantly to employment generation, exports, and industrial output. Recognising their crucial role, NITI Aayog, in association with the Institute for Competitiveness (IFC), has recently released an insightful report titled ‘Enhancing MSMEs Competitiveness in India’. This comprehensive study outlines a strategic pathway to empower MSMEs through key reforms in financing, skill development, innovation, and market access.

Unlocking MSME Potential Through Targeted Reforms

The report delves into persistent challenges that restrict MSME growth and their participation in global value chains. It analyses firm-level data alongside insights from the Periodic Labour Force Survey (PLFS), focusing on four major sectors: textiles and apparel, chemical products, automotive, and food processing. These sectors are recognised for their growth potential but face sector-specific hurdles that require tailored policy solutions.

Improved Credit Access, but Gaps Remain

One of the notable findings from the report is the progress in formal credit accessibility for MSMEs. Between 2020 and 2024, credit access via scheduled banks increased from 14% to 20% for micro and small enterprises, and from 4% to 9% for medium enterprises. However, despite this improvement, a significant credit gap continues to burden the sector. As of FY21, only 19% of total MSME credit demand was met through formal channels, leaving an unmet demand estimated at ₹80 lakh crore.

While initiatives like the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) have expanded, the report recommends a comprehensive overhaul of such schemes. It highlights the need for collaborative institutional support, better service delivery, and more targeted outreach to address existing gaps.

Addressing the Skills Deficit and Innovation Barriers

The report underscores a pressing issue within the MSME workforce — a considerable skills deficit, especially in formal vocational and technical training. This shortfall hampers productivity, innovation, and scalability. Furthermore, limited investment in research and development, coupled with challenges in adopting modern technologies — such as erratic electricity supply, poor internet connectivity, and high implementation costs — continues to obstruct sectoral growth.

Insights from Cluster-Level Analysis

Through detailed cluster-level analysis, the study identifies critical areas requiring immediate attention, such as upgrading outdated technologies, enhancing branding and marketing capabilities, and improving awareness and accessibility of government support schemes at the state level. Despite numerous policy initiatives and incentives introduced through Union Budgets and central government programmes, many MSMEs remain uninformed or find it difficult to benefit from them.

To bridge this gap, the report calls for a dynamic, cluster-based policy framework. It advocates for stronger monitoring mechanisms, better integration of data, and increased involvement of stakeholders in policy formulation and implementation to ensure that support reaches where it’s needed the most.

A Call to Action for Inclusive Growth

The report concludes with a forward-looking vision for India’s MSME ecosystem. It emphasizes investing in digital marketing training, establishing efficient logistics partnerships, and creating market linkage platforms, particularly in the northeastern and eastern regions of the country. These efforts can play a pivotal role in positioning MSMEs as drivers of inclusive, sustainable economic growth.

By addressing structural challenges and capitalizing on sector-specific opportunities, India can unlock the full potential of its MSMEs — ensuring that they not only contribute to domestic economic resilience but also emerge as strong contenders in global markets.

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