'With over 59 million enterprises powering nearly a third of India’s gross domestic product (GDP) and almost half of its exports, and employing 41.8% of its working population, micro, small, and medium enterprises (MSMEs) are the invisible engine of India’s growth and employment. As global supply chains pivot toward Asia, many of its MSMEs remain locked in a low-value cycle, discouraged from formalising and subtly coerced into staying informal, despite government policy support intended to foster formalisation and competitiveness.
Sometimes, regulatory leniencies have been extended to ensure MSMEs’ survival during challenging times. For instance, the objective of the regulatory body, the Competition Commission of India (CCI), is to protect consumers’ interests and ensure freedom of trade. However, the regulatory body, at times, has not strictly applied a few provisions of the Act to MSMEs and instead, has cut them a bit of slack to preserve their existence. A case in point is where the CCI issued a cease-and-desist order against eight firms, which had contravened Section 3 of the Act. These firms had embroiled themselves in cartelisation (which is one of the things that the Competition Act frowns upon, and MSMEs are not immune) by manipulating the bidding process during stressful times of Covid-19 due to limited staff and turnover. They later cooperated in owning up, avoiding monetary penalties under lenient enforcement.
However, despite a series of well-meaning reforms, formalisation incentives, and leniencies in recent years, the sector continues to operate largely in the shadows of the informal economy. One reason is that large-scale corporations, who are their vendors and clients, tend to maximise the market share, trivialising the aforesaid benefits available to MSMEs. When the stronger parties, particularly large corporations, externalise their working capital burdens onto weaker MSMEs, it not only undermines trust and policy but also creates a profound ethical and economic challenge. Larger corporations have access to greater resources, economies of scale, and technology. Yet, MSMEs are penalised for seeking timely payments, which is their right. Buyers have repeatedly delayed payments yet have escaped scrutiny due to lobbying muscle, while informality has become a survival tactic for MSMEs.
At a time when trade and policy uncertainties in the West and geopolitical conflicts are prompting global firms to rethink their supply chain strategies, India has a rare window of opportunity. Countries and multinational companies alike are seeking resilient, efficient, and scalable alternatives in Asia, and India, standing at the forefront of that shortlist, should not miss the opportunities coming its way. To seize this moment, India must ensure that its MSMEs are not just present but prepared. This means giving them the tools, training, and financial backing to help them deal with constant financial struggles and scale up to meet global standards. Targeted collateral-free loans and equity infusion through Self Reliant India Fund to MSMEs with a proven track record of financial prudence, growth potential, and formal operations will provide them access to much-needed working capital. Digitisation will be a key component of all such endeavours, as it will ensure transparent data capture and objective assessment to evaluate eligibility and impact. Additionally, upskilling the workforce and enabling technology adoption must become foundational efforts, not peripheral ones. To speed the reskilling of the workforce in MSMEs, technology centres should be built across India. This will help MSMEs adopt smart manufacturing and Industry 4.0 solutions equitably, further aided by SME 4.0 competency centres.
MSMEs, too, have to step up and ensure increased digitisation and take advantage of supportive policies. Some small businesses are concerned that recent changes in MSME definitions might disproportionately benefit larger companies. On the contrary, they should embrace challenges, recognising that their operational scale can serve as a foundation for business growth and expanded income opportunities.
Given the vast reach and deep penetration of MSMEs across India’s economic landscape, the sector can be a pivotal driver in achieving the country’s vision of inclusive and sustainable growth. Initiatives like the MSME GIFT scheme (which aims to support growth, innovation, and technology adoption), and MSE-SPICE (a comprehensive platform for supply chain efficiency and cluster development) can unlock new potential for MSMEs to scale up responsibly. These initiatives, combined with a focus on sustainability, digitisation, and responsible finance, can transform MSMEs from survival-led enterprises to competitive and resilient engines of India’s growth to Viksit Bharat.
Views are personal.
