Revival of MSME Sector in India

Micro, Small, and Medium Enterprises (MSMEs) are essential to India’s economy, contributing significantly to employment and GDP. Despite several government initiatives, the sector continues to struggle, particularly due to bottlenecks in eligibility criteria for government schemes and inadequate support for micro-enterprises.

Budget 2025:

• Budget 2025 introduced several new provisions for MSMEs, including raising the credit cover for MSMEs from Rs.5 crore to Rs.10 crore.
• However, the biggest concern is the doubling of eligibility criteria from a 250 crore to Rs.500 crore turnover.
• This change means many smaller micro and small enterprises will no longer benefit from key provisions under the MSME Act, such as priority sector lending, government procurement preferences, and price advantages in tenders.
• Corporates may even create separate entities to take advantage of these benefits, further sidelining genuine MSMEs.
• New Initiatives:
• Focus Product Scheme for Footwear and Leather: This aims to boost the production of leather and footwear, potentially creating 2 million jobs and generating a turnover of Rs.4 lakh crore.
• Toys Sector Development: Under the National Action Plan for Toys, the government plans to develop toy manufacturing clusters and promote India as a global toy manufacturing hub.

What MSMEs Actually Need?

Rather than simply offering broad-based credit guarantees, what MSMEs urgently need are policies tailored to their specific challenges. These challenges can be categorized into four ‘M’s:

• Money: Many MSMEs face liquidity issues, unable to secure affordable credit.
• Manpower: There is a need for skilled labor, but MSMEs struggle to offer competitive wages.
• Marketing: MSMEs often lack access to markets, particularly global ones.
• Materials: Increasing raw material costs have made operations unprofitable for many MSMEs.

The government could support MSMEs by ensuring stable raw material prices, offering affordable credit, and providing training programs for upskilling workers.

Policy Suggestions:

• Separate Ministry for Micro Enterprises: Micro-enterprises face challenges different from those of small and medium enterprises. A dedicated ministry could focus on their unique needs and create specific policies for their growth and sustainability.
• Relax Eligibility Criteria: The government should relax eligibility criteria for credit guarantee schemes and other government schemes to ensure that struggling MSMEs can access the necessary support.
• Address Price Hikes: The government should work towards stabilizing the prices of basic raw materials and offer subsidies to help MSMEs manage costs.
• Long-Term Support: More comprehensive and long-term policies are needed, focusing on sustainable growth, market access, and technological upgradation.