Q. "MSMEs play a crucial role in the nation's manufacturing and industrial ecosystem". Examine their potential in driving economic growth,...
Question
Q. "MSMEs play a crucial role in the nation's manufacturing and industrial ecosystem". Examine their potential in driving economic growth, employment generation and innovation towards realising the vision of Viksit Bharat. (15 marks 250 Words)
Model Answer
Q. "MSMEs play a crucial role in the nation's manufacturing and industrial ecosystem". Examine their potential in driving economic growth, employment generation and innovation towards realising the vision of Viksit Bharat. (15 marks 250 Words)
Paper
GS III
Subject
Economic Development
Syllabus as Per Notification
Indian Economy and issues relating to Planning, Mobilization of Resources, Growth, Development and Employment
Topic
MSMEs
Approach:
Introduction
Introduce with the Contribution of MSMEs to the Indian Economy
Body
Examine the Potential of MSMEs across various Categories
MSMEs as Drivers of Economic Growth
Contribution to GDP and Manufacturing, Export Competitiveness, Regional and Inclusive Development and Formalisation of the Economy
MSMEs as Engines of Employment Generation
Labour-Intensive Production, Rural Non-Farm Employment, Women Entrepreneurship and Inclusive Growth
MSMEs as Catalysts of Innovation
Startup-MSME Synergy, Indigenous Manufacturing, Adoption of Digital Technologies and Green Innovation
Challenges Limiting MSME Potential
Structural Credit Gap, Delayed Payments, Technology and Skill Gaps and Regulatory Compliance
Measures to Unlock MSME Potential for Viksit Bharat
Expanding Affordable Credit, Ensuring Timely Payments, Technology Upgradation, Strengthening Cluster Development and Fostering International Cooperation
Conclusion
Conclude by emphasizing potential of MSMEs to transform India into an Innovation led Economy to realise Viksit Bharat.
Context
27th June Celebrated as International MSME Day.
Introduction
Micro, Small and Medium Enterprises (MSMEs), defined under the MSME Development Act, 2006 (revised criteria in 2025), account for nearly 30% of India's GDP, around 36% of manufacturing output, about 45% of exports, and employ over 28 crore people. As the backbone of India's industrial ecosystem, MSMEs are essential to achieving the vision of Viksit Bharat@2047 through inclusive, innovation-driven, and sustainable growth.
Classification of MSMEs
Category
Investment in Plant & Machinery/Equipment
Annual Turnover
Micro Enterprises
Up to ₹2.5 Crore
Up to ₹10 Crore
Small Enterprises
Up to ₹25 Crore
Up to ₹100 Crore
Medium Enterprises
Up to ₹125 Crore
Up to ₹500 Crore
MSMEs as Drivers of Economic Growth
Significant Contribution to GDP and Manufacturing
As per the Economic Survey 2025-26, MSMEs are the backbone of India's industrial economy, accounting for approximately 35.4% of manufacturing output, around 48.58% of exports, and 31.1% of the GDP.
Export Competitiveness
MSMEs are critical for India's exports, enhancing foreign exchange earnings and promoting deeper integration into global value chains (GVCs).
The Union Budget 2026-27 proposed the complete removal of the current value cap of ₹10 lakh per consignment on courier export.
Regional and Inclusive Development
MSMEs promote industrialization in rural, semi-urban, and aspirational districts, significantly reducing regional disparities.
MSMEs support Cluster-based development, such as Scheme of Fund for Regeneration of Traditional Industries (SFURTI) scheme, supports local production and infrastructure.
Formalisation of the Economy
Digital platforms like the Udyam Registration Portal and Udyam Assist Platform have been instrumental in formalising businesses, with registrations crossing 8.7 Crore as of June 2026.
MSMEs as Engines of Employment Generation
Labour-Intensive Production
As the second-largest employer after agriculture, the sector supports over 32.82 crore people. It generates significant employment with relatively lower capital investment.
Rural Non-Farm Employment
MSMEs, particularly in food processing and agro-based industries, reduce disguised unemployment in agriculture and diversify rural income sources.
NABARD has supported 14.4 million women's groups and financed MSMEs.
Women Entrepreneurship
The Public Procurement Policy mandates that 3% of annual procurement by Central Public Sector Enterprises (CPSEs) be from women-owned micro and small enterprises.
At the 44th India International Trade Fair (IITF) 2025, more than 67% of the stalls allotted to MSMEs and Vishwakarmas were given to women entrepreneurs.
Initiatives like the Yashasvini campaign and support through Self-Help Groups (SHGs) enhance financial inclusion and economic empowerment for women.
Inclusive Growth
Schemes like PM Vishwakarma support traditional artisans from SC/ST, OBC, and tribal communities, providing them with skill training, toolkit support, and collateral-free loans.
The PM JANMAN programme specifically provides skilling and entrepreneurship support to Particularly Vulnerable Tribal Groups, with a significant focus on women.
MSMEs as Catalysts of Innovation
Startup-MSME Synergy
There is a growing synergy between startups and MSMEs. While startups drive innovation, MSMEs bridge the gap to full-scale production.
This collaboration is key to adopting Industry 4.0 technologies like AI, IoT, and automation in traditional manufacturing.
Indigenous Manufacturing
MSMEs are at the forefront of import substitution.
Examples:
Caan Laser Tech designing indigenous CO2 laser tubes to break dependence on costly imports.
Rower India developing precision seeding machinery to reduce seed waste and dependency on skilled labour.
Technology and Skilling Ecosystem
18 Technology Centres support MSMEs. Additionally, 20 new Technology Centres and 100 Extension Centres are being developed under the Technology Centres/Extension Centres (TCEC) Scheme.
Nine new centres have been established under the World Bank-supported Technology Centre System Programme (TCSP), training 59,357 individuals and assisting 1,520 MSMEs.
ZED (Zero Defect Zero Effect) Certification under MSME Champion Scheme certified over 6.68 lakh enterprises to enhance credibility of MSMEs.
Green Innovation
MSMEs are increasingly adopting energy-efficient technologies and circular economy practices to ensure sustainable industrial development.
Example: Nutri Foodzee India creating ready-to-eat meals from locally sourced superfoods.
Challenges Limiting MSME Potential
Structural Credit Gap: A significant credit gap persists, estimated at around ₹30 lakh crore, with only 14% of MSME[1] [2] credit demand being met through the formal financial ecosystem.
Around 6.33 crore unincorporated MSMEs still rely on informal lenders.
Delayed Payments: Despite legal provisions, delayed payments from buyers remain a major issue, straining the working capital of small enterprises.
As per the Delayed Payments Report 3.0 titled “MSME's Access to Finance and Timely Payments”, Delayed payments to MSMEs in India are at Rs 7.34 lakh crore as of March 2024.
Technology and Skill Gaps: Low technology adoption, inadequate digital infrastructure, and skill gaps limit productivity and global competitiveness.
Out of 16,000 MSMEs surveyed across 137 districts found that while digital procurement is rising, over 50% still struggle with supplier management, payments, and compliance.
Regulatory Compliance: The burden of regulatory compliance, especially for informal enterprises, remains a significant hurdle.
Complex GST norms and invoice compliance remain barriers, especially for micro units. 5 in 10 MSMEs struggle with GST/invoicing despite digitization effort.
Measures to Unlock MSME Potential for Viksit Bharat
Expanding Affordable Credit
The Union Budget 2026-27 proposed a ₹10,000 crore SME Growth Fund to create "Champion SMEs".
Self-Reliant India (SRI) Fund: This fund has been augmented with an additional ₹2,[3] [4] [5] 000 crore to support micro-enterprises with risk capital.
The Credit Guarantee Fund Trust has seen significant expansion, with 29.03 lakh guarantees approved amounting to ₹3.77 lakh crore in the first 11 months of 2025.
Ensuring Timely Payments
The government has strengthened MSME Samadhaan Portal and launched Online Dispute Resolution (ODR) Portal to address delayed payment disputes.
CHAMPIONS Portal ensures effective grievance redressal with a 99.72% disposal rate.
Technology Upgradation
The Raising and Accelerating MSME Performance (RAMP) programme works with states to design strategic interventions for area-specific growth.
PM Vishwakarma scheme supports traditional artisans with modern tools and training, enhancing their productivity and market access.
Strengthening Cluster Development
Union Budget 2026-27 proposes the revival of 200 legacy industrial clusters through infrastructure and technology upgradation.
Fostering International Cooperation
In June 2026, India under its BRICS Chairmanship, hosted the First BRICS MSME Forum and the Third SME Working Group Meeting under the theme "Building MSME Ecosystems: Sustainable Roots to Global Routes,". Member countries shared best practices and policy initiatives for MSME development.
Conclusion:
MSMEs must evolve from survival-driven enterprises into globally competitive innovation hubs. By 2047, their role should be to bridge India’s rural–urban divide, generate sustainable livelihoods for around 50 Crore people, and contribute 50% of GDP through green and digital manufacturing. With AI-driven productivity, Credit financing, and inclusive entrepreneurship, MSMEs can transform India into an innovation-led economy, realising the vision of Viksit Bharat and securing global leadership.
Please attach source of this information as a reply to this commenthttps://www.cnbctv18.com/business/finance/msmes-face-rs-30-lakh-crore-credit-gap-women-owned-units-hit-hardest-sidbi-19603914.htm?Please attach source of this information as a reply to this commenthttps://static.pib.gov.in/WriteReadData/specificdocs/documents/2026/may/doc2026514869801.pdf? SRI fund - Page 03/09 Mam.https://www.pib.gov.in/PressReleasePage.aspx?PRID=2221434®=3&lang=1