NITI Aayog Highlights Missing Middle in MSME Policy

Context:

Medium enterprises form only 0.3% of India’s MSMEs but contribute an outsized 40% of MSME export income. They operate in innovation-driven and globally integrated sectors like pharmaceuticals, auto components, and IT services. Despite their economic importance, they receive limited policy attention, as most schemes are targeted at micro and small enterprises (MSEs), which make up 99% of the MSME base.

Economic Contribution and Characteristics

• Average foreign exchange income per medium enterprise: ₹39 crore.
• Average employment per firm: 90 people.
• Average annual R&D expenditure: ₹2.07 crore.
• Medium enterprises often drive R&D and technology adoption, participating in global value chains.

Policy Asymmetry and Its Consequences

• Current MSME policy structure incentivizes firms to stay small and informal.
• This leads to:
  • Disincentivized scaling up
  • Reduced productivity
  • Missed opportunities in innovation and export competitiveness

NITI Aayog Recommendations: A Multi-Pronged Policy Approach

a. Financial Support

• Launch a credit card facility with ₹5 crore pre-approved limit.
• Introduce a dedicated working capital support scheme tailored to medium firms’ higher capital needs.
• Expand access to concessionary finance, currently available mostly to micro and small units.

b. Innovation and Technology

• Transform existing Technology Centres into SME Competence Centres focusing on Industry 4.0.
• Provide medium enterprises access to:
  • Advanced technologies
  • Skill development programs
  • Technology consultancy services

c. R&D and Cluster-Based Innovation

• Establish a dedicated R&D cell under the Ministry of MSME, inspired by EU funding models.
• Identify cluster-specific innovation needs and invite R&D proposals from medium enterprises.
• Extend the Cluster Development Programme to include medium enterprises for:
  • Product testing
  • Quality certification
  • Regulatory compliance support

d. Digital Access and Awareness

• Develop a centralized digital portal for medium enterprises to:
  • Access government schemes
  • Track compliance requirements
  • Access sectoral market research
• Address the persistent lack of awareness that hampers scheme utilization among medium enterprises.

5. Strategic Significance

• Medium enterprises are crucial to:
  • India’s export growth
  • Manufacturing competitiveness
  • Technological innovation
• Without focused policy support, India’s Make in India goals and export expansion plans may fall short.

BS