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Designing a
POLICY FOR MEDIUM
ENTERPRISES
Designing a Policy for Medium Enterprises DESIGNING A
POLICY FOR
MEDIUM
ENTERPRISES DISCLAIMER:
Administrative Staff College of India, Hyderabad has
received financial assistance under the Research
Scheme of NITI Aayog to prepare the report. While
due care has been exercised to prepare the report
using the data from various sources, NITI Aayog
does not confirm the authenticity of data and
accuracy of the methodology to prepare the report.
NITI Aayog shall not be held responsible for the
findings or opinions expressed in the document. This
responsibility completely rests with ASCI. AUTHORS
Administrative Staff College of India (ASCI)
Principal Investigator
Dr. Karnak Roy, Associate Professor, ASCI
Co-Principal Investigator
Dr. Sweety Pandey, Assistant Professor, ASCI
Research Team
Dr. Raman Ghosh, Assistant Professor, ASCI
Ms. Surabhi Mishra, Senior Research Associate, ASCI
Ms. Bindu Madhavi, Senior Research Associate, ASCI
STUDY ADVISORS
Dr. Nirmalya Bagchi, Professor and Director, ASCI Business School
Dr Valli Manickam, Dean of Research Studies (DoRS), ASCI
B.P. Acharya (IAS. Retd.) Former Special Chief Secretary, Government of Telangana
Dr. Yerram Raju, Founder Director, Telangana Industrial Health Clinic Ltd
iiiAuthors CONTENTS
Acknowledgement............................................................................................................................................. vii
Message, Vice Chairman, NITI Aayog........................................................................................................ ix
Message, Member, NITI Aayog...................................................................................................................... xi
Message, Chief Executive Officer, NITI Aayog..................................................................................... xiii
Message, Programme Director, NITI Aayog ...........................................................................................xv
List of Abbreviations......................................................................................................................................xvii
Preface...................................................................................................................................................................xxi
Executive Summary .......................................................................................................................................xxiii
1.India’s MSME Landscape: An Overview ....................................................................1
2.Role and Economic Impact of Medium Enterprises in India ............................ 11
2.1. Export............................................................................................................................................................13
2.2. R&D Investment.......................................................................................................................................14
2.3. Employment Generation......................................................................................................................16
2.4. Profitability..................................................................................................................................................17
2.5. Scenario Analysis ....................................................................................................................................19
2.6. Potential loss/gain for the economy.......................................................................................... 20
3.Challenges and Current State of Affairs – A Deep Dive into Medium
Enterprises......................................................................................................................23
3.1. Challenges and Current State of Affairs...................................................................................25
Awareness of Schemes .................................................................................................................................. 26
Technological Upgradation ............................................................................................................................27
Skilled Manpower.............................................................................................................................................. 29
Compliance ...........................................................................................................................................................32
Innovation Barrier ............................................................................................................................................. 34
Funding ................................................................................................................................................................. 36
Land & Infrastructure ...................................................................................................................................... 38
4.MSME Policy Landscape............................................................................................. 41
4.1 Ministry of Micro, Small and Medium Enterprises (MoMSME) ......................................42
4.2 State Government Initiatives........................................................................................................... 60
4.3 Gaps in the Policy ecosystem.........................................................................................................63
5.International Best Practices.......................................................................................65
6. Recommendations........................................................................................................75
6.1 Facilitating Financial Access and working capital Support............................................76
vContents 6.2 Technology Integration and Industry 4.0 adoption. ...........................................................78
6.3 Strengthening R&D and innovation ecosystem......................................................................81
6.4 Enhance support for cluster-based testing and quality certification........................82
6.5 Customized skill development for Medium Enterprises....................................................86
6.6 Need for a Centralized Digital Portal for Medium Enterprises......................................91
7. Annexures.......................................................................................................................95
Annexures-1: MoMSME Schemes..............................................................................................................96
Annexures-2: State Schemes: ....................................................................................................................98
Telangana.............................................................................................................................................................. 98
Maharashtra ......................................................................................................................................................... 99
West Bengal........................................................................................................................................................ 99
Uttar Pradesh ................................................................................................................................................... 100
Gujarat ...................................................................................................................................................................101
Tamil Nadu..........................................................................................................................................................102
vi
Designing a Policy for Medium Enterprises
Contents ACKNOWLEDGEMENT
The authors extend their sincere gratitude to NITI Aayog for its leadership, guidance,
and support in the successful completion of this study. We would like to express our
gratitude to Shri Suman K. Bery, Vice Chairman, NITI Aayog; Dr. V.K. Saraswat, Member, NITI
Aayog and Shri B.V.R. Subrahmanyam, CEO, NITI Aayog, whose vision and encouragement
have been instrumental in shaping this report. Their guidance and encouragement were
invaluable throughout the entire process. The role of their leadership was instrumental in
facilitating the development of this report.
Furthermore, we would like to extend our heartfelt gratitude to Shri Ishtiyaque Ahmed,
Program Director, Industry and Foreign Investment Division. His support and incisive
feedback were pivotal in shaping the report’s direction and depth ensuring a robust policy
framework tailored to the unique needs of medium enterprises. Finally, we would also like
to acknowledge Ms. Neha Nautiyal, Deputy Secretary, NITI Aayog; Shri Upendra Kumar
Gupta, Deputy Advisor, NITI Aayog; Shahid Qayoom, Consultant, NITI Aayog; and Karun
Gupta, Young Professional, NITI Aayog, for their valuable insights and continuous support
throughout the study. Their expertise and strategic direction have significantly contributed
to the depth and relevance of this report. This study reflects the collective efforts of all
involved in strengthening the ecosystem for medium enterprises in India.
viiAcknowledgement MESSAGE
VICE CHAIRMAN
NITI AAYOG MESSAGE
MEMBER
NITI AAYOG MESSAGE
CHIEF EXECUTIVE OFFICER
NITI AAYOG MESSAGE
PROGRAMME DIRECTOR
NITI AAYOG LIST OF ABBREVIATIONS
ASPIRE A Scheme for Promotion of Innovation, Rural Industries &
Entrepreneurship
ATIAssistance to Training Institutions
CVYCoir Vikas Yojana
CGTMSE Credit Guarantee Fund Trust for Micro and Small Enterprises
ESDPEntrepreneurship and Skill Development Programme
EUEuropean Union
GDPGross Domestic Product
GoIGovernment of India
ICInternational Cooperation Scheme
IoTInternet of Things
KGVYKhadi Gramoday Vikas Yojana
MEMedium Enterprises
MSEMicro and Small Enterprises
MSE-CDP Micro and Small Enterprises-Cluster Development Programme
MSMEMicro, Small and Medium Enterprises
MoMSME Ministry of MSME
PMEGP Prime Minister’s Employment Generation Programme
PMSProcurement and Marketing Support
RAMPRaising and Accelerating MSME Performance
R&DResearch & Development
SFURTI Scheme of Fund for Regeneration of Traditional Industries
SMESmall and Medium Enterprise
SRI Fund Self-Reliant India (SRI) Fund
TCsTechnology Centres
xviiList of Abbreviations LIST OF TABLES
LIST OF FIGURES
Table 1.1.Classification of the MSME Units................................................................................................2
Table 1.2.Funds Allocated during 2022-23 to Schemes for Medium Enterprises...............8
Table 2.1:Classification of MSMEs Based on Turnover......................................................................12
Table 2.2:R&D Expenditure Per Unit by MSME Categories (INR crore)..................................15
Table 3.1:Priority sectors at 6 FGD locations .......................................................................................25
Table 4.1:Snapshot of support not provided to Medium Enterprises .....................................59
Table 5.1:International Best Practices for Technology Adoption................................................68
Table 5.2:International Best Practices for Addressing Skill Gap ..................................................71
Table 5.3:International Best Practices for Promoting Innovation................................................72
Table 5.4:International Best Practices for Access to Working Capital ....................................73
Table 6.1:Sector-Specific Concentration of MSMEs in Six States .............................................84
Table 6.2:The comparison between proposed portal and existing portal of MSMEs ...92
Figure 1.1:Percentage Share of MSME Unit.............................................................................................3
Figure 1.2:Activity Wise MSME Registrations .........................................................................................3
Figure 1.3:Contribution of MSMEs in GDP for the Last Three Years......................................3
Figure 1.4:Employment per Unit of MSME..............................................................................................4
Figure 1.5:Percentage share of Export by MSMEs in All India Export....................................4
Figure 1.6:Exports by Registered MSMEs .................................................................................................5
Figure 2.1:Classification of Enterprises as per the analysis ..........................................................13
Figure 2.2:MSMEs Export Contribution (USD million)......................................................................13
Figure 2.3:Average Ratio of (ForEx Income/Entity).....................................................................14
Figure 2.4:Category-wise R&D Expenditure Per Unit .......................................................................15
Figure 2.5:Employment Distribution in MSMEs ....................................................................................16
Figure 2.6:Profit to Capital Investment Ratios by Sectors. ...........................................................18
Figure 3.1:Awareness of portals..................................................................................................................26
Figure 3.2:Access to technology.................................................................................................................28
Figure 3.3:Technology Adoption Rate.....................................................................................................28
Figure 3.4:Access to training program and their relevance........................................................ 30
Figure 3.5:Availability of skilled labour (%).......................................................................................... 30
xixList of Tables Figure 3.6:Inputs from stakeholders – on – improving ease of doing business............. 32
Figure 3.7:Innovation Index ............................................................................................................................36
Figure 3.8:Funding Pattern of Medium Enterprises.....................................................................37
Figure 3.9:Credit Demand Vs Supply in Medium Enterprises.....................................................38
Figure 3.10:Stakeholders input on land related issues..................................................................39
Figure 4.1:Percentage Distribution of Funds Allocated Under Each Scheme..................42
xx
Designing a Policy for Medium Enterprises
List of Tables PREFACE
The Micro, Small, and Medium Enterprises (MSME) sector is a cornerstone of India’s
economy, significantly contributing to GDP, exports, and employment generation. Among
these, medium enterprises play a critical role, in the manufacturing and service sector, where
they drive industrial growth, innovation, and global competitiveness. Despite their immense
potential, medium enterprises face challenges such as limited access to finance, inadequate
technological integration, and a lack of tailored policy support. While various government
schemes exist for the MSME sector, only a few specifically address the unique needs of
medium enterprises. Bridging this gap through targeted policy interventions can enhance
their scalability, sustainability, and competitiveness in the global market. Recognizing their
importance, this report, Designing a Policy for Medium Enterprises, seeks to explore the
challenges and opportunities within this sector while proposing a comprehensive policy
framework to support its growth.
The study aims to address gaps in the current policy landscape and identify measures
to enhance the competitiveness, sustainability, and scalability of medium enterprises
in India. Through extensive research, stakeholder consultations, and data analysis, this
report presents recommendations to foster a conducive business environment for medium
enterprises. The report brings together insights from government agencies, industry bodies,
and financial institutions to ensure that the proposed policy framework is well-grounded
in the realities of the sector. It examines existing policies while integrating global best
practices to provide a comprehensive roadmap for strengthening the medium enterprise
ecosystem in India.
As part of the consultation process, discussions were held with officials from the Ministry
of Micro, Small & Medium Enterprises (MoMSME) to gain insights into existing policies and
regulatory frameworks. Shri S.C.L. Das, Secretary of MoMSME, provided invaluable support
and insightful feedback on this report. Other key officials of MoMSME who contributed
include Dr. Rajneesh (AS & DC); Shri Vipul Goel (JS-ARI); Ms. Mercy Epao (JS-SME); Ms.
Sudha Keshari (ADC); Dr. Ishita Ganguli Tripathy (ADC); Shri Bharat Prakash (JDC); Ms.
Rukmani Attri (JDC); Shri Arun G. (Director); Shri Sunil Kumar Newar (Joint Director);
Shri Amit Kumar Tamaria (Joint Director); and Shri O P Singh (Deputy Director). Their
perspectives on policy implementation, sectoral challenges, and potential reforms were
instrumental in shaping the recommendations.
In addition to government consultations, discussions were also held with key industry
stakeholders to incorporate their perspectives on the needs and challenges faced by
medium enterprises. Inputs were gathered from senior officials and experts from the
Federation of Telangana Chambers of Commerce and Industry (FTCCI), Indian Industries
Association (IIA), World Trade Centre (WTC), Association of Lady Entrepreneurs of India
(ALEAP), Industry Development Council (IDC), Industry, Commerce & Export Promotion
Department of the Government of Telangana, Maharashtra Small Scale Industries
Development Corporation (MSSIDC), Department of MSME & Export Promotion of the
Government of Uttar Pradesh, Small Industries Development Bank of India (SIDBI), and
other banking institutions. Additionally, the team engaged with the management, CEOs,
xxiPreface and representatives of various MSMEs to ensure that first hand industry insights were
incorporated into the policy framework.
Drawing upon the findings of extensive research and stakeholder consultations, this
report identifies the critical challenges facing medium enterprises in India and explores
opportunities to enhance their growth and competitiveness. It highlights key intervention
areas, including access to finance, technology adoption, and market linkages. Furthermore,
the report provides detailed policy recommendations with action points across multiple
domains, such as financial initiatives, skill development, infrastructure development,
technology upgradation, and institutional support for R&D initiatives. It is expected to
serve as a comprehensive guiding document for policymakers, industry leaders, and other
stakeholders, fostering a robust ecosystem that enables medium enterprises to thrive and
contribute significantly to India’s economic progress. With the right policy interventions,
this sector can significantly contribute to economic growth, job creation, and technological
innovation. With this report, we aspire to initiate a meaningful dialogue on the future of
medium enterprises and pave the way for their sustained growth and success.
xxii
Designing a Policy for Medium Enterprises
Preface EXECUTIVE SUMMARY
The Micro, Small, and Medium Enterprises (MSME) sector in India plays a crucial role in
the country’s economic landscape, contributing approximately 29% to the nation’s GDP,
40% to total exports, and employing over 60% of the workforce. MSMEs cater to the
demand for a wide variety of products, with the sector producing 6,000 distinct items.
The sector remains largely dominated by micro enterprises, which constitute 97% of the
registered MSMEs, followed by Small Enterprises (2.7%) and medium enterprises (0.3%).
Medium enterprises are vital contributors to India’s GDP, particularly within the
manufacturing sector. In addition, they contribute 40% of MSME export income, and are
more innovation driven than small and micro enterprises.
Despite immense potential and strengths, medium enterprises need certain interventions to
unlock their full potential. These include improved access to working capital, technology
integration in business operations, availability of a conducive R&D innovation ecosystem,
availability of skilled manpower, and better awareness of schemes. To address these
needs, the Government of India has been implementing a wide array of schemes aimed
at supporting MSMEs. However, only a small proportion of these initiatives are tailored
specifically for medium enterprises. If targeted interventions are made in this direction, it
will augment the ability of Medium Enterprises to scale and compete in the global market.
Through this report, we aim to design a policy framework that addresses the specific needs
of medium enterprises by analysing existing opportunities and reviewing international best
practices. Each recommendation focuses on areas identified for improvement, ensuring a
targeted and effective approach.
1.TAILORED FINANCIAL INITIATIVES FOR MEDIUM
ENTERPRISES
Medium enterprises typically have significantly higher capital requirements than micro
and small enterprises. There is currently no dedicated scheme for addressing the
working capital needs of medium enterprises. A dedicated financing scheme under
the Ministry of M6M( is proposed allowing Medium (nterprises to apply for loan at
concessional rates at their local retail banNs and receive fast tracN decisions. /oan up
to a certain percentage of revenue depending upon the sector of the unit i.e.
manufacturing or service capped at Rs. crores with a ma[imum of Rs. crores
per reTuest can be availed. Introduce a credit card with a pre-approved limit of up to
`5 crore for medium enterprises, aligned with marNet rate of interest. The
implementation can be handled by MoMSME in collaboration with other ministries.
2.TECHNOLOGY INTEGRATION IN BUSINESS
OPERATIONS
Medium enterprises have enormous scope of incorporating advanced technologies into
theiroperations. It is proposed to leverage the e[isting 7echnology Centres 7Cs under
the Ministry of M6M( and revamp them into ?,ndia 6M( . Competence Centres.
xxiiiExecutive Summary New TCs can be designed to act as competence centres that will cater to various
industries, including General Engineering, Fragrance and Flavour, Electronics Systems
Design and Manufacturing (ESDM), Sports, and other sect ors based on regional and
industry-specific demands. The integration will ensure these centres become innovation
hubs for MSMEs, equipping them with the tools and knowledge needed to adopt
Industry 4.0 technologies.
3.R&D PROMOTION FOR MEDIUM ENTERPRISES
Being more expor t orient ated and having larger presence in manufacturing
sector, investment in R&D is a compulsion rather than a choice for the medium
enterpr ises. A dedicated cell focused on promoting technology development and R&D
activities within the MSME sector may be created for fostering coordinated efforts.
Identify cluster specific R&D projects of National Importance, adopt (8 type funding
mechanism in which the government after due process will identify a set of major
R&D gaps and invite proposal from the Medium (nterprises to bridge those gaps.
and create a three-tier mechanism of managing the funding process. At the ape[ level
there could be an ?([pert Committee? consisting of e[pert bodies that will chalN out
the research agenda for the near future and for the longterm future. Below this can be
a Research Funding Management Committee that will call for R&D proposals from
medium enterprises based on identified gaps. And finally the Project Review and
Monitoring Committee will monitor the performance and progress of these R&D
initiatives. The existing financing under Self-Reliant India Fund may be utilized by
reserving a certa in port ion for focusing exclusively on financing Medium Enterprise
projects in this regard. This intervention may be supported by ministries/Agencies
decided by Ministry of MSME.
4.ENHANCING MSE-CDP: INTEGRATING CLUSTER-WISE
TESTING FACILITIES FOR MEDIUM ENTERPRISES
Cluster-wise testing facilities are crucial for medium enterprises in India because they
enable easier access to quality assurance, product certification, and regulatory compliance,
especially in sectors like manufacturing, pharmaceuticals, and textiles. Currently, the MSE-
CDP focuses on micro and small enterprises only. Extending the scheme to include medium
enterprises through the establishment of cluster-based testing facilities aligns with the
scheme’s core objective of fostering collective growth. First step should be identifying the
predominant sectors in each state and then investigate to determine the concentration of
Medium Enterprises within those sectors. Once the sectoral concentrations are identified,
the next logical step is to establish cluster wise testing facilities as a core component
of MSE-CDP .
5.CUSTOMIZED SKILL DEVELOPMENT INITIATIVES FOR
MEDIUM ENTERPRISES
xxiv
Designing a Policy for Medium Enterprises
Medium Enterprises require continuous upskilling to remain competitive, especially in
sectors like manufacturing, IT, and services. It is proposed to map the skill requirements
of Medium Enterprises, focus on specific skills and regional clusters to identify unique
requirements of Medium Enterprises, and provide customized skill development courses.
The three components of the ESDP Scheme—Entrepreneurship cum Skill Development
Programme (E-SDP), a six-week training programme; the One Week Advanced ESDP
programmes; and the One Week Advanced MDP Training Programmes can be
Executive Summaryxxiii e[panded to incorpora te skill development initiatives tailored for medium enterprises.
Ministry of Skill Development and Entrepreneurship may play a pivotal role in
implementing the changes. Design e[portoriented curriculum for Medium (nterprises
including sustainable products and lifecyclespecific programs to address different
growth stages of medium enterprises.
6.CENTRALIZED PORTAL FOR MEDIUM ENTERPRISES
Medium Enterprises need timely access to relevant information about government
programs, compliance requirements, and financial assistance. The creation of a
centralized, user-friendly,and credible platform asasub-portal of the Udyam Portal
specifically designed for Medium Enterprises, will help then in accessing information,
applications, and support schem es tailored specifically for them. The sub-portal should
havethree modules Basic informationmoduleProcess module andMarNet research
moduleOverall, the potential of Medium Enterprises to drive India’s economic growth,
innovation, and employment generation is largely underutilized.The focus of our
recommendations has been tooptimizetheexisting policy framework and
initiatives, ensuringthey better caterto theunique needs of Medium Enterprises
instead of proposing additional schemes, which could lead to redundancy and
fragmentation. Withastrategic and coordinated approach, the growth trajectory of
Medium Enterprises can be accelerated, enabling them to emerge as apillar of India’s
industrial ecosystem and a key driver of the nation’s long-term economic resilience.
xxv
Designing a Policy for Medium Enterprises
Executive Summary India’s MSME Landscape: An Overview1
INDIA’S MSME
LANDSCAPE:
AN OVERVIEW
1 CHAPTER 1
INDIA’S MSME LANDSCAPE:
AN OVERVIEW
The Micro, Small, and Medium Enterprises (MSME) sector in India is characterized by
diverse range of businesses that vary in size, technological capability, and employment
generation. The sector’s significance is underscored by its contribution of nearly 29%
1
to
the country’s GDP, 40%
2
to total exports and employing more than 60%
3
of the nation’s
workforce. With the capacity to produce 6,000 distinct products, MSMEs play a pivotal role
in catering to the demand for mass consumption goods. Given its strategic importance,
the MSME sector has the potential to serve as an engine of economic growth, provided
it is supported by a conducive policy environment and targeted developmental initiatives.
In accordance with the provision of Micro, Small & Medium Enterprises Development
(MSMED) Act, 2006 of Government of India, a classification came into effect on 1st July,
2020, based on investment in plant and machinery and turnover. A revised classification
has come into effect from April 1, 2025, as per the Ministry of MSME’s Notification S.O.
No. 1364(E) dated March 21, 2025.
Table 1.1. Classification of the MSME Units
Enterprise
Earlier classification (July 2020) Revised Classification (April 2025)
Investment in plant
and machinery
Turnover
Investment in plant
and machinery
Turnover
Micro
Not exceeding
Rs. 1 crore.
Not exceeding
Rs. 5 crores.
Not exceeding
Rs. 2.5 crore.
Not exceeding
Rs. 10 crore.
Small
Not exceeding
Rs. 10 crores.
Not exceeding
Rs. 50 crores.
Not exceeding
Rs. 25 crores.
Not exceeding
Rs. 100 crores.
Medium
Not exceeding
Rs 50 crores.
Not exceeding
Rs. 250 crores.
Not exceeding
Rs 125 crores.
Not exceeding
Rs 500 crores.
This report is based on the earlier classification of Micro, Small and Medium Enterprises (MSMEs) as applicable at the time of data collection and analysis.
There are approximately 6 crore
4
unincorporated non-agricultural MSMEs (excluding
construction) in the country engaged in different economic activities. Only 3.35 crore of
these MSMEs are registered on the Udyam Registration Portal. Another 2.55 crore micro
1Source: Press Information Bureau (11 December 2023)
2Source: Data Dissemination Portal of Directorate General of Commercial Intelligence and Statistics (DGCIS)
3Source: Report by McKinsey Global Institute (MGI)
4As per the latest National Sample Survey (NSS) 73rd round, conducted by National Sample Survey Office, Ministry of Statistics & Programme Implementation
2 India’s MSME Landscape: An Overview and tiny enterprises are registered on the Udyam Assist Platform. 97% of registered
MSMEs are micro enterprises
5
.
M icroSmall
Small
2 .7 %
M edium
Micro
9 7%
M edium
0 .3 %
Figure 1.1: Percentage Share of MSME Unit
Out of 2.95 crore registered MSMEs, 72% are engaged in the service sector and remaining
28% in manufacturing sector
6
.
Manufacturing Service
58%42%
48%52%
30%70%
MEDIUM
SMALL
MICRO
Figure 1.2: Activity Wise MSME Registrations
MSMEs, contribute approx. 29%
7
to India’s Gross Domestic Product (GDP), playing a
crucial role in driving economic growth.
2 5.0 0%
3 1.0 0%
3 0.0 0%
2 9.0 0%
2 8.0 0%
2 7.0 0%
2 6.0 0%
2 0 19-2 0 2 0 20-2 1 2 0 21-2 2
Share of M SM E in all
India G ross Domestic
Product(G DP)
3 0.4 8% 2 7.2 4% 2 9.1 5%
Figure 1.3: Contribution of MSMEs in GDP for the Last Three Years
5Source: Udyam Registration Portal
6MSME Annual Report 2023-24
7This represents the total value added by MSMEs (Gross Value Added) in the production of goods and
services. It measures the contribution of MSMEs to the economy after accounting for the costs of inputs
and raw materials. Source: Press Information Bureau (11 December 2023)
India’s MSME Landscape: An Overview3
Designing a Policy for Medium Enterprises Employment per U nit
1 0 0.0 0
5 0.0 0
0 .0 0
M icroSmallM edium
5 .7 01 9.1 18 9.1 4Employment per U nit
Figure 1.4: Employment per Unit of MSME
MSME sector employs 62%
8
of the country’s workforce. The sector generates employment
for 18.36 crore
9
people including approximately 5 crore women. The Micro Enterprises
comprise about 89% of total MSME employment in 2024. Medium Enterprises contributed
3% to the total MSME employment in 2023-24. However, per unit employment generated
by Medium Enterprise is 89.14.
MSMEs’ share in the country’s export is about 40%
10
. However, only 1.36% of registered
MSMEs export
11
–out of which 64% units have export turnover less than Rs. 1 crore. While
micro & small enterprises make up most exporting units (91%), their contribution to the
total export value is 60% of total MSME exports. While Medium Enterprises comprise 9%
of exporting units that contribute to 40% of MSME exports.
4 9 . 7 7 %
4 9 . 3 5 %
4 5. 0 3 %
4 5. 5 6 %
4 3. 5 9 %
2019-20 2020-21 2021-22 2022-23 2023-24*
Figure 1.5: Percentage share of Export by MSMEs in All India Export
8Report by McKinsey Global Institute (MGI)
9Source: Udyam Registration Portal
10 Source: Data Dissemination Portal of Directorate General of Commercial Intelligence and Statistics (DGCIS)
11 EXIM Report 2023
India’s MSME Landscape: An Overview4
Designing a Policy for Medium Enterprises 7 0,0 00
6 0,0 00
5 0,0 00
6 0,9 08
4 5 0 8 6.9 9
5 0 5 6 2.1
4 0,0 00
3 0,0 00
2 9 8 7 6.6 5 3 8,3 65
2 0,0 00
9 ,7 41
1 0,0 00
0
5 0 5 6 2.14 5 0 8 6.9 92 9 8 7 6.6 5
Exports
(U SD M illion)
9 ,7 413 8,3 656 0,9 08
Exporting
U nits
M ediumSmallM icro
Figure 1.6: Exports by Registered MSMEs
The MSME sector has long been recognized as the backbone of the economy. In view
of this, the Government of India has implemented a robust array of initiatives aimed at
bolstering the sector, recognizing its pivotal role in the economy. These efforts range from
financial support, skill development and training programmes, quality upgradation and
procurement policies to capacity building and market integration.
BOX 1.1: BUDGET 2023-24 INSIGHTS
Budget 2023-24 announced to revamp the credit guarantee scheme for MSMEs, adding Rs. 9,000 crores to the corpus, enabling Rs. 2 lakh crores in collateral-free credit and reducing borrowing costs by 1%. Additionally, Government support for the sector has significantly increased, with the MoMSME’s spending rising to Rs. 23,583.90 crore in FY23, a 260% increase from FY19. The Interim Budget 2024-25 introduced a Rs. 1 lakh crore corpus for 50-year interest-free loans to boost R&D in emerging sectors. These measures, along with a Rs. 22,137.95 crore allocation in the Interim Budget 2024 for new clusters and technology centers, underscore the government’s focus on strengthening the MSME sector.
The Ministry of MSME alone has announced 18 schemes
12
for MSMEs, while several other
ministries also offer schemes tailored to support MSMEs. In addition to these Central schemes, State governments have introduced their own programs to further support MSMEs. Maharashtra has the highest number of MSMEs in the country
13
, accounting for
16.5% of the total, followed by Tamil Nadu (9.8%), Uttar Pradesh (9.5%), Rajasthan (7.1%), and Gujarat (7.1%). Each of these states have their own MSME programs ranging from 8
12 Source: MSME Booklet 2024
13 As per Udyam Registration Dashboard (https://dashboard.msme.gov.in/Udyam_Statewise.aspx)
India’s MSME Landscape: An Overview5
Designing a Policy for Medium Enterprises to 15 schemes across each state. Across various ministries and states, there are over 250
schemes available for MSMEs. (For the list of schemes, refer to Annexure II).
These schemes cater to one or more key areas, including:
Credit Assistance
0 1
Skill Development
0 2
Market Assistance
0 3
Technology and
Quality Upgradation
0 5
R&D Innovation
0 6
Infrastructure
Development
0 4
Snapshot of Ministry of MSME Schemes:
Scheme Name
Funds Allocated
(2022-23) Rs. (Crores)
Self-Reliant India (SRI) Fund is a Fund of Funds (FoF) scheme
that involves investing in daughter funds managed by professional
investment firms, which in turn, provide growth capital to promising
MSMEs.
This scheme is available to Medium Enterprises.
392.78
International Cooperation Scheme provides international marketing
opportunities to MSMEs by providing financial assistance on
reimbursement basis for airfare, space rent, freight charges, etc.
This scheme is available to Medium Enterprises.
11.28
Entrepreneurship and Skill Development Programme (ESDP) provides
training and development to youth of the country in order to motivate
them to consider self-employment or entrepreneurship as one of the
career options.
This scheme is available to Medium Enterprises.
80 (Budget Estimate)
Assistance to Training Institutions (ATI) Scheme strengthens the
capacity of training institutions.
This scheme is available to Medium Enterprises.
21.99
Technology Centres (TCs) focus on supporting industries to train and
support first-generation entrepreneurs.
This scheme is available to Medium Enterprises.
100 (Budget Estimate)
Promotion of MSME in NER provides financial support for enhancing
the productivity and competitiveness as well as capacity building of
MSMEs in the NER and Sikkim.
This scheme is available to Medium Enterprises.
50 (Budget Estimate)
India’s MSME Landscape: An Overview6
Designing a Policy for Medium Enterprises Scheme Name
Funds Allocated
(2022-23) Rs. (Crores)
Raising and Accelerating MSME Performance (RAMP) scheme backed
by the World Bank, boosts MSME performance through state-prepared
Strategic Investment Plans (SIPs). Grants support projects to enhance
innovation, market access, and infrastructure.
This scheme is available to Medium Enterprises.
269.38
MSME Champions objective is to modernize the processes, reduce
wastages, sharpen business competitiveness consists of MSMEs through
three sub-components–MSME- Sustainable (ZED), MSME-Competitive
(Lean) and MSME-Innovative.
This scheme is available to Medium Enterprises.
44.05
Prime Minister’s Employment Generation Programme (PMEGP) is a
unique scheme that focuses on employment generation of unemployed
youth. Under the scheme, Margin Money (Subsidy) is provided to
individuals availing loan from banks for setting up new enterprises.
This scheme is not available to Medium Enterprises.
2733.21
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
provides collateral-free credit support to Micro and Small Enterprises
(MSEs) through a credit guarantee for loans extended by Member
Lending Institutions.
This Fund Trust is not available to Medium Enterprises.
This scheme is being
revamped
Procurement and Marketing Support (PMS) Scheme supports the
marketing activities of MSEs, helping them explore and access new
markets.
This scheme is not available to Medium Enterprises.
27.49
Coir Vikas Yojana (CVY) is an Umbrella Scheme being implemented by
Coir Board for the Development of Coir Industry all over the Country.
This scheme is not available to Medium Enterprises.
87.14
Khadi Gramoday Vikas Yojana (KGVY) was set up to revive khadi
institutions by providing training and skill development, subsidy on
raw material procurement and interest subsidy.
This scheme is not available to Medium Enterprises.
344.17
A Scheme for Promotion of Innovation, Rural Industries &
Entrepreneurship (ASPIRE)’s main objective is promoting
entrepreneurship and employment generation in agro-rural sector with
special focus on rural and underserved areas.
This scheme is not available to Medium Enterprises.
4
Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
organizes artisans into clusters to provide support for their long-term
sustainability.
This scheme is not available to Medium Enterprises.
1.95
India’s MSME Landscape: An Overview7
Designing a Policy for Medium Enterprises Scheme Name
Funds Allocated
(2022-23) Rs. (Crores)
Micro and Small Enterprises-Cluster Development Programme (MSE-
CDP) was launched for the development of clusters across country
for creation of Common Facility Centres (CFCs).
This scheme is not available to Medium Enterprises.
150 (Budget Estimate)
National SC-ST Hub is an umbrella scheme set up to provide advisory
and business support to SC/ST Entrepreneurs.
This scheme is not available to Medium Enterprises.
135
PM Vishwakarma Scheme provides holistic support to artisans and
craftspeople including credit support, digitization, and marketing
assistance.
This scheme is not available to Medium Enterprises.
989.52 (Revised
Estimate)
As understood from scheme guidelines, there are only 8 schemes specifically targeted at
Medium Enterprises and only one of which provides credit support. Most of the schemes
are designed to support micro and small enterprises. Details of each scheme and the
components applicable to Medium Enterprises is discussed in depth in Chapter 4.
This inference of distorted incentive structure is based on data that is available in
the public domain. As per the Expenditure Budget published by MoF, the total funds
allocated to the MSME sector in the year 2022-23 is approximately Rs. 5,442 Crores out
of which 68% of the funds are allocated to only two schemes – PMEGP (50%) and PM
Vishwakarma (18%), both of which are not meant for Medium Enterprises. Interestingly, the
percentage share of the total funds allocated to schemes that are available for Medium
Enterprises is only 17.81%.
Table 1.2. Funds Allocated during 2022-23 to Schemes for Medium Enterprises
Schemes available for Medium Enterprises
Funds Allocated
(Rs. in Crores)
MSME Champions44.05
Raising and Accelerating MSME Performance (RAMP)269.38
International Cooperation (IC) Scheme11.28
Entrepreneurship and Skill Development Programme80
Assistance to Training Institutions (ATI) Scheme21.99
Technology Centres Scheme100
Promotion of MSME in NER and SIKKIM50
Self-Reliant India (SRI) Fund392.78
Total969.48
Percentage of Total17.81%
India’s MSME Landscape: An Overview8
Designing a Policy for Medium Enterprises The rationale behind the heavy focus on micro and small enterprises may be multi-fold:
Large chunk of MSME population: MSEs constitute 99% of the MSME population.
Resource Constraints: MSEs often lack resources and access to formal credit
channels, making them more vulnerable compared to medium enterprises.
Employment Generation: MSEs are labor-intensive, providing a significant share
of employment in sectors like manufacturing, agriculture, and services.
Sustainable Development Goals: Many international organizations, such as the
International Labour Organization (ILO) and World Bank, have long emphasized
the role of small businesses in poverty reduction and sustainable development.
The Sustainable Development Goals (SDGs) also highlight the importance of
supporting micro and small enterprises, aligning government schemes with
broader global commitments.
Perceived Inclusivity: Supporting micro and small enterprises is viewed as
pro-poor and inclusive. Many of these enterprises are owned by marginalized
communities, women, or socially disadvantaged groups. Therefore, policies
targeting MSEs align with broader goals of social equity and inclusive growth.
Owing to this rationale, majority of the schemes emphasize training for unemployed youth,
credit assistance for setting up micro enterprises, support for domestic marketing and
infrastructure, quality certification, international marketing, and sustained credit flow.
While the preferential treatment of MSEs can spur growth and reduce unemployment,
the current structure of MSME schemes may lead to distorted incentives. The Economic
Survey 2023-24 implications published through Press Information Bureau testifies the same
by mentioning that the “threshold effect” (i.e., a reluctance to grow beyond certain financial
limits) leads to an underutilization of growth potential in India’s industrial ecosystem
14
.
The disproportionate support for smaller enterprises might encourage businesses to remain
small to continue benefiting from these schemes, thus avoiding natural growth to the
medium enterprise category. This can result in several adverse outcomes:
1.Missed Opportunities for Job Creation: By maintaining micro or small status,
enterprises miss out on opportunities to scale up operations, potentially stunting
larger employment generation.
2.Reduced Innovation and Productivity: Economies of scale often allow for greater
innovation and improved operational efficiencies. The existing incentive structure
may deter businesses from expanding to achieve such economies, limiting competitiveness and
productivity gains.
3.Weak Global Competitiveness: Medium enterprises typically possess the potential
to scale up and compete internationally, but the lack of targeted support for
medium firms may hinder their ability to take advantage of global market
opportunities. In contrast, MSEs may remain domestic players, limiting the sector’s
contribution to export-driven growth.
14 Economic Survey 2023-24 https://pib.gov.in/PressReleseDetail.aspx?PRID=2034922®=3&lang=1
India’s MSME Landscape: An Overview9
Designing a Policy for Medium Enterprises The current focus of MSME schemes on Micro and Small Enterprises, while important
for fostering inclusive growth, may unintentionally hold back the expansion of Medium
Enterprises. With less schemes and less funds to support Medium Enterprises, there may
be an imbalance that needs to be addressed. A more balanced approach that recognizes
the distinct needs of medium enterprises could create a more robust and diversified MSME
ecosystem, supporting the overall growth trajectory of the sector and the Indian economy.
This report aims to explore whether a policy intervention to address the challenges
faced by the Medium Enterprises is the need of the hour. The next chapter decodes the
role of Medium Enterprises in the economy and paves the way to answer this question.
India’s MSME Landscape: An Overview10
Designing a Policy for Medium Enterprises Role and Economic Impact of Medium Enterprises in India11
2
ROLE AND ECONOMIC
IMPACT OF MEDIUM
ENTERPRISES IN INDIA CHAPTER 2
ROLE AND ECONOMIC
IMPACT OF MEDIUM
ENTERPRISES IN INDIA
In this chapter, we have tried to identify the role and economic impact of Medium enterprises
in India. The economic impact refers to the influence that the Medium Enterprises have
on the economy, particularly through its contribution to, employment generation, export
activity and Investment in Research & Development (R&D). By analyzing this parameter,
we have tried to understand the overall significance of MEs shaping economic health and
sustainability.
Medium Enterprises accounts for only 0.3% of the total MSMEs with a total of 67,923
entities. Out of these, 39,395 (58%) Medium Enterprises are engaged into manufacturing
activities, while remaining 42% Medium Enterprises are in service sector
15
.
The contribution of MSMEs to India’s GDP is substantial, as MSMEs account for about
31.8% of India’s Gross Value Added (GVA)
16
, translating to approximately $1.18 trillion USD
of India’s overall GDP of $3.7 trillion
17
. Specifically, the manufacturing sector accounts for
around 13-14% of India’s total GDP, amounting to approximately $481 billion to $518 billion
USD in 2023.
We utilized a sample of 8,686 medium-sized enterprises (data collected from the
ProwessIQ
18
) and analysed the contribution of Medium Enterprises in terms of export,
R&D investment, employment and profitability.
15 MSME Annual Report 2023-24
16 Press Information Bureau
https://www.pib.gov.in/Pressreleaseshare.aspx?PRID=1579757
17 https://tradingeconomics.com/india/gdp
18 The CMIE database developed by the Centre for Monitoring Indian Economy provides financial and
operational information on over 55,000 companies across various sectors, including both listed and unlisted
firms. This database includes detailed financial statements, stock market data, and insights into company
ownership, products, and services, making it a valuable tool for research and analysis. The companies can
be classified based on their turnover and capital investment. The companies having turnover between Rs.
50 to 250 crores are considered as medium enterprises.
12Role and Economic Impact of Medium Enterprises in India Table 2.1: Classification of MSMEs Based on Turnover
Classification
Turnover Range
(INR Crore)
Investment Range
(INR Crore)
No. of Entities
Micro0 > to <= 5 0 > to <= 1 16,477
Small5 > to <= 50 1 > to <= 10 11,166
Medium 50 > to <= 250 10 > to <= 50 8,686
M ed ium,2 4%
M ic ro,4 5%
S m a ll,3 1%
Figure 2.1: Classification of Enterprises as per the analysis
Small,
M edium,
6 0 ,0 0 0.0 0
M icro,
2 9,8 7 6.6 5
Small,
4 5 ,08 6 .9 9
5 0,5 6 2.1 0
4 0 ,0 0 0.0 0
2 0 ,0 0 0.0 0
0 .0 0
M icroSmallM edium
2 0 20-2 12 0 21-2 22 0 22-2 3
Figure 2.2: MSMEs Export Contribution (USD million)
2.1. EXPORT
In FY 2022-23, Medium Enterprises contributed USD 50,562.1 million to India’s forex
earnings, accounting for nearly 40% of the total MSME export income
19
Medium
Enterprises are particularly dominant in sectors such as textiles, pharmaceuticals, and auto
components, where their export contributions far exceed those of smaller enterprises. For
19 Source: EXIM Analysis Report 2023
Role and Economic Impact of Medium Enterprises in India13
Designing a Policy for Medium Enterprises example, in the automotive components sector, Medium Enterprises have pioneered the
export of green technologies, contributing significantly to India’s growing reputation as a
hub for automotive innovation
20
.
Participation in global supply chains allows Medium Enterprises to increase foreign exchange
earnings while contributing to India’s overall economic stability
21
. While innovation barriers
remain a challenge, the efficiency and export orientation of Medium Enterprises continue
to drive their foreign exchange performance
22
.
3 9 . 95
8 . 3 0
1 . 39
M icroSmallM edium
F O RE X I N CO M E P E R E N T I T Y ( I N R I N CRO RE )
Figure 2.3: Average Ratio of (ForEx Income/Entity)
The analysis shows that on an average Medium Enterprises generated INR 39.95 crore
per entity in terms of foreign exchange income, compared to INR 1.39 crore for Micro Enterprises and INR 8.30 crore for Small Enterprises
23
.
2.2. R&D INVESTMENT
The analysis reveals that Medium Enterprises contribute 81% of the total R&D investment
made by MSMEs. This enables them to innovate and expand their market share both
20 Venkateswarlu, M. (2011). Role of Micro, Small and Medium Enterprises in Indian Economic Development.
Asian Pacific Journal of Research, 2(3), 210-223. https://dx.doi.org/10.15373/2249555X/APR2014/20
21 Sharma, N. (2014). Barriers to Innovation in Small and Medium Enterprises in India. SSRN Electronic Journal.
https://dx.doi.org/10.2139/ssrn.2397991
22 Uma, R., & Anbuselvi, R. (2023). Role of Micro Small and Medium Enterprises (MSME) in Employment
Generation in India. Shanlax International Journal of Economics, 11(2), 1-14. https://dx.doi.org/10.34293/economics.v11i2.5809
23 Uma, R., & Anbuselvi, R. (2023). Role of Micro Small and Medium Enterprises (MSME) in Employment
Generation in India. Shanlax International Journal of Economics, 11(2), 1-14. https://dx.doi.org/10.34293/economics.v11i2.5809
Role and Economic Impact of Medium Enterprises in India14
Designing a Policy for Medium Enterprises domestically and globally. Medium Enterprises are more likely to invest in new technologies
and processes compared to small and micro enterprises, giving them a competitive
advantage
24
.
Micro, 2 %
Small, 1 6 %
M edium, 8 1 %
% S H A RE O F R& D E X P E N S E
Figure 2.4: Category-wise R&D Expenditure Per Unit
Medium Enterprises play a larger role in fostering technological advancements in sectors such as pharmaceuticals, IT services, and automotive components. R&D focus helps the Medium Enterprises to drive innovation, which in turn enhances their profitability and long-term sustainability
25, 26
.
The analysis reveals that on average Medium Enterprises spent INR 2.07 crore per entity on R&D, significantly more than Small Enterprises (INR 0.84 crore) and Micro Enterprises (INR 0.73 crore).
Table 2.2: R&D Expenditure Per Unit by MSME Categories (INR crore)
Classification Per Unit R&D Expense
Micro0.73
Small0.84
Medium2.07
24Singh, A. K. (2022). A study on the growth and role of SMEs in the Indian economy. International Journal of Finance, Management & Economics, 5(2), 114-117. https://dx.doi.org/10.34293/economics.v11i2.5809
25 Chandramouli, V. V., & Mahanty, B. (2016). Subcontracting dimensions in the small and medium
enterprises: Study of auto components’ manufacturing industry in India. Proceedings of the Institution of Mechanical Engineers, Part B: Journal of Engineering Manufacture, 230(2), 345-355. https://dx.doi.org/10.1177/0954405414565137
26 Dinesha, P. T., Jayasheela, & Hans, V. (2008). Micro, Small and Medium Enterprises in India:
Trends and Challenges. Indian Journal of Industrial Relations, 44(2), 123-134. https://dx.doi.org/10.1177/0970846420080204
Role and Economic Impact of Medium Enterprises in India15
Designing a Policy for Medium Enterprises BOX 2.1: CASE – MEDIUM ENTERPRISES ARE LEADERS IN
R&D-DRIVEN INNOVATION
In the IT services and automotive sectors, Medium Enterprises like KPIT Technologies
have emerged as leaders in R&D-driven innovation. These firms have developed
cutting-edge solutions, such as green vehicle technologies, which have enhanced
their competitive position globally.
2.3. EMPLOYMENT GENERATION
Medium Enterprises are significant contributors to employment generation in India,
particularly in tier-2 and tier-3 cities. These enterprises employ more people per entity
compared to Micro and Small Enterprises, thus playing a crucial role in addressing
unemployment and fostering regional development.
9 0
8 0
7 0
6 0
5 0
4 0
3 0
2 0
1 0
0
M icro
Small
M edium
M icro Small M edium
AverageEmploymentper
Entity
5 .7 1 9 .11 8 9 .14
Figure 2.5: Employment Distribution in MSMEs
Role and Economic Impact of Medium Enterprises in India16
Designing a Policy for Medium Enterprises Medium Enterprises have a higher employment-to-capital ratio. Their presence in both
the manufacturing and services sectors provides widespread employment opportunities
across less industrialized regions of India
27
.
Medium Enterprises employ an average of 89.14 people per entity, compared to 19.11
in Small Enterprises and 5.70 in Micro Enterprises. This demonstrates the critical role of
Medium Enterprises in reducing unemployment, particularly in rural and semi-urban areas.
BOX 2.2: CASE – MEDIUM ENTERPRISES ARE LEADING JOB
CREATORS
In manufacturing sectors such as food processing, textiles, and automotive components, Medium Enterprises are leading job creators. These industries have helped to generate employment in regions that previously lacked industrial infrastructure, contributing significantly to inclusive and balanced economic development
28
.
2.4. PROFITABILITY
Medium Enterprises have consistently demonstrated higher profitability ratios compared
to smaller businesses. This is largely due to their ability to make larger capital investments and leverage economies of scale. Medium Enterprises benefit from their capacity to invest in infrastructure, technology, and human resources, leading to improved returns on investment
29
. The profitability of Medium Enterprises is reflected in higher returns on
capital compared to micro and small firms. Their strategic investments in sectors such as manufacturing and technology have not only increased profitability but also enhanced their global competitiveness
30, 31
.
27Garima, C., & Singh, G. (2023). A Study on Marketing Aspect of Medium and Small Enterprises. Shanlax International Journal of Economics, 11(2), 1-12. https://dx.doi.org/10.34293/economics.v11i2.5809
28 Nayak, S. S., & Mahapatra, P. (2016). FDI in Retail Sector and its impact on MSMEs in India. Journal of
Business Management Studies, 5(3), 111-118. https://dx.doi.org/
29https://financialexpress.com/business/sme-msme-tech-one-third-of-indian-smbs-will-invest-more-in-automation-by-2026-to-tackle-manpower-issues-idc-report-2997664/
30 Sharma, N. (2014). Distinguishing Sectoral Innovation Behaviour: A Study of SMEs in India. SSRN Electronic
Journal. https://dx.doi.org/10.2139/ssrn.2391928
31https://www.business-standard.com/article/sme/return-on-capital-non-corporates-have-an-edge-over-corporates-in-msme-sector-113120901025_1.html
https://www.emerald.com/insight/content/doi/10.1108/ejmbe-03-2021-0077/full/html
https://manufacturing.economictimes.indiatimes.com/news/industry/indian-manufacturers-to-allocate-11-15-
pc-of-investments-on-smart-tech-in-2-years-cii/116762184
Role and Economic Impact of Medium Enterprises in India17
Designing a Policy for Medium Enterprises M anufacture ofceramic laboratory, chemicaland industrial…
Retail sale of refrigerators, washing machinesand other…
M anufacture of non-refractoryceramic pipes, conduits,…
Growing of spices, aromati c, drugand pharmaceuti cal crops
M anufacture of R.C.C. bricks and blocks
M anufacture of protective safety equipment (fi?e-resistant…
M anufacture of railway or tramway rolling stock,not self-…
Real estate activities on afee or contract basis
M anufacture of cigare?es, cigare?e tobacco
G athering of lac, resinsand rubb
M ining of lignite
M anufacture of measuring instrumentssuc as thermometers…
M anufacture of other non-metallic mineral products
M anufacture of basic preciousand other non-ferrous metals
M ining of barytes
M anufacture of other perfumesand toilet preparati ons n.e.c.
M anufacture of pan masala and related products.
Raisingand breeding of petanimals (cats, dogs, birds,…
M anufacture of vitaminised high proteinflour, frying of dal…
M anufacture of railway track materials (unassembled ra
M anufacture sweetmeats includind dairy based sweetmeats
M anufacture of catechu(katha)and chewinglime
M anufacture of other coke oven products such as gas, crude…
M anufacture of prepared feeds for pets, including dogs, cats,…
0 .0 0 1 0 0 .0 0 2 0 0 .0 0 3 0 0 .0 0 4 0 0 .0 0 5 0 0 .0 0
Figure 2.6: Profit to Capital Investment Ratios by Sectors.
Medium Enterprises in sectors such as automotive components, IT services, and
pharmaceuticals have consistently outperformed smaller enterprises in terms of profitability.
Their capacity to make targeted capital investments in high-growth areas ensures sustained
financial performance and long-term competitiveness
32
. This data analysis and review
of previous research reports underscores that Medium Enterprises are key drivers of
innovation, employment generation, and export orientation, with a significant focus on
manufacturing.
32 Venkateswarlu, M. (2011). Role of Micro, Small and Medium Enterprises in Indian Economic Development.
Asian Pacific Journal of Research, 2(3), 210-223. https://dx.doi.org/10.15373/2249555X/APR2014/20
https://www.ceoinsightsindia.com/news/midcap-erd-firms-thrive-in-automotive-sector-nwid-18541.html
Role and Economic Impact of Medium Enterprises in India18
Designing a Policy for Medium Enterprises 2.5. SCENARIO ANALYSIS
Presently, there are 67,923 MEs registered in Udyam Portal in India. We have analysed, how
incremental increases in the number of MEs impact three key parameters: employment
generation, R&D investment, and foreign exchange (forex) income.
For this analysis, the Multiplier Effect Methodology (Swaroop, 2021) is used which assumes
that MEs have a direct impact, employment, R&D, and foreign exchange (forex) income.
By scaling the contributions per entity based on the new Medium Enterprises count, we
can estimate the overall effect.
Contribution of Medium Enterprises (As per our analysis in section 2.1, 2.2
and 2.3)
1. Forex Income per Unit: `39.94 crore
2. R&D Investment per Unit: `2.07 crore
3. Employment per Unit: 89.14 persons
SCENARIO - 1
10% Increase:
Parameter
Per Unit
Value
Current
(67,923)
10% Increase
(74,715)
Percentage
Increase
Forex Income (` Crore) 39.94 2712844.62 2984117.110.0%
R&D Investment (`Crore) 2.07 140600.61 154660.0510.0%
Employment (Persons) 89.14 6054656.22 6660095.110.0%
SCENARIO - 2
15% Increase:
Parameter
Per Unit
Value
Current
(67,923)
15% Increase
(78,111)
Percentage
Increase
Forex Income (` Crore) 39.94 2712844.62 3119753.34 15.0%
R&D Investment (`Crore) 2.07 140600.61 161689.77 15.0%
Employment (Persons) 89.14 6054656.22 6962814.54 15.0%
Role and Economic Impact of Medium Enterprises in India19
Designing a Policy for Medium Enterprises SCENARIO - 3
20% Increase:
Parameter Per Unit Value
Current
(67,923)
20% Increase
(81,507)
Percentage
Increase
Forex Income (` Crore) 39.94 27,12,844.62 32,55,389.5820.0%
R&D Investment (`Crore) 2.07 1,40,600.61 1,68,719.49 20.0%
Employment (Persons) 89.14 60,54,656.22 72,65,533.98 20.0%
2.6. POTENTIAL LOSS/GAIN FOR THE ECONOMY
1.Underutilization of Employment Potential: Under the 20% growth scenario,
approximately 12 Lakh additional jobs could be created, which are not being
realized under the current count of Medium Enterprises. The missed opportunity of
providing millions of jobs is critical, especially in areas with higher unemployment
rates.
2.Suboptimal R&D Investment: The shortfall in the number of Medium Enterprises
leads to a significant loss in R&D investment. For example, with the 20% increase
in Medium Enterprises, an additional `28,118.88 crore could be directed towards
R&D, boosting innovation in critical sectors like pharmaceuticals and automotive
technology. This would also increase India’s Gross Expenditure on R&D (GERD),
helping to meet the 2% target set by the Science, Technology, and Innovation
(STI) Policy, 2013.
3.Lower Forex Income: The gap in forex earnings due to fewer Medium Enterprises
severely impacts India’s foreign exchange reserves. Under the 20% increase
scenario, the country could generate an additional `5,42,544.96 crore in forex
earnings.
Despite their significant contribution to India’s economy, Medium Enterprises face substantial
challenges. Access to finance remains a key issue, with many Medium Enterprises relying
on personal savings due to limited funding options
33
. Inadequate infrastructure, particularly
in rural areas, further constrains their growth, affecting productivity and market access
34
.
Additionally, regulatory barriers, including complex compliance requirements, create further
33 Eniola, A. A., & Entebang, H. (2015). Small and Medium Business Management-Financial Sources and
Difficulties. International Journal of Finance Management.
DOI:10.18052/www.scipress.com/ILSHS.58.49
34 Shinozaki, S. (2014). A new regime of SME finance in emerging Asia: Enhancing access to growth capital
and policy implications. Journal of International Commerce.
https://doi.org/10.1142/S1793993314400109
Role and Economic Impact of Medium Enterprises in India20
Designing a Policy for Medium Enterprises obstacles for Medium Enterprises, hindering their ability to scale
35
. The existing regulatory
landscape often places an undue burden on Medium Enterprises, limiting their ability to
expand and compete with larger firms
36
. These challenges are compounded by the evolving
needs of the global market, where Medium Enterprises must adapt to new technologies
and business models but often struggle due to insufficient resources
37
. Chapter 3 will
examine these challenges in detail.
35MSME Financing–Key Issues and Solutions. (2016). Resurgent India.https://www.resurgentindia.com/pdf/1868771320Innovative%20Financial%20Solutions%20for%20MSMEs.pdf
36 Roy, A., Sekhar, C. & Vyas, V. Barriers to internationalization: A study of small and medium enterprises in
India. J Int Entrep 14, 513–538 (2016). https://doi.org/10.1007/s10843-016-0187-7
37i. Alwabel, Rakan & Chaudhary, Arslan & Lazab, Lahcene. (2024). Digital Transformation in Small and Medium
Enterprises (SMEs): Challenges, Opportunities, and Future Directions. https://www.researchgate.net/publication/386375382_Digital_Transformation_in_Small_and_Medium_Enterprises_SMEs_Challenges_Opportunities_and_Future_Directions
ii. putri, aulia utami (2023) “Digital Transformation for MSME Resilience in The Era of Society 5.0,”
Proceedings IAPA Annual Conference. Indonesian Association for Public Administration. https://www.academia.edu/126735679/Digital_Transformation_for_MSME_Resilience_in_The_Era_of_Society_5_0
Role and Economic Impact of Medium Enterprises in India21
Designing a Policy for Medium Enterprises Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises23Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises23
CHALLENGES AND CURRENT
STATE OF AFFAIRS –
A DEEP DIVE INTO MEDIUM
ENTERPRISES
3 CHAPTER 3
CHALLENGES AND CURRENT
STATE OF AFFAIRS – A
DEEP DIVE INTO MEDIUM
ENTERPRISES
Having established the role and importance of medium enterprises, this chapter delves
into the various challenges they face in sustaining growth and competitiveness. It examines
obstacles such as limited access to finance, outdated technology, and a shortage of skilled
manpower. Additionally, the chapter explores regulatory complexities and constraints that
hinder innovation and expansion. The study identifies the challenges and current state of
affairs of Medium Enterprises using a two-fold approach:
1.Inferences were derived after analysing the questionnaire responses received
from entrepreneurs (MSMEs): The respondents were selected using cluster
sampling from six states, namely Maharashtra, Gujarat, Uttar Pradesh, Tamil
Nadu, West Bengal, and Telangana. The rationale for choosing these states is:
®High concentration of medium enterprises: The selected states collectively
represent a large share of India’s medium enterprise population (54% of total
Medium Enterprises in India).
®Geographical and economic significance: The six states cover different regions
of India (north, south, west, and east), ensuring that the study captures region-
specific challenges and opportunities.
A total of 207
38
responses were received from beneficiaries for the survey.
2.Insights were gathered from Stakeholder Consultation Workshops: In addition to
the survey, qualitative insights were gathered through a series of six stakeholder
consultation workshops and two FGDs with bankers and key persons from
the Ministry of MSME. The participants included representatives from industry
associations, government officials, financial institutions, and enterprises. A stratified
sampling method was used to select participants, ensuring that all key strata,
including industry sectors and regions, were adequately represented.
38 To calculate the sample size, the following standard formula was used: n=z
2
×p×(1−p)/E
2
Where, n = required sample size, Z = Z-score for the desired confidence level (1.98 for a 95% confidence
level), p = assumed population proportion (0.5 for maximum variability), E = margin of error (set to 0.05).
Using this, we arrived at a sample size of 388, which is proportionally distributed among the six states
based on their share of the total population. This approach allows the study to be both statistically reliable
and representative. However, 207 responses were received for the survey.
24Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises Six FGDs conducted between June to September 2024:
Table 3.1: Priority sectors at 6 FGD locations
Workshop
Location
Sectors
1 2 3 4 5 6
Mumbai,
Maharashtra
Textiles Pharma Chemicals AutomobileEngineering Leather
Lucknow,
UP
Food
Products
Hosiery and
Garments
Metal
Products
Cotton
textiles
Ceramics
Wool, Silk,
Synthetic
Fibre
Textiles
Chennai, TN Coir Automobile
Food
Processing
Textiles
Leather &
Footwear
Precision
Engineering
Tiruppur,
TN
Coir Automobile
Food
Processing
Textiles
Leather &
Footwear
Precision
Engineering
Guntur, AP
Pharma
& Life
Science
Defence and
Precision
Engineering
Electronics
Food
Products
IT Services —
Hyderabad,
TS
Pharma
& Life
Science
Defence and
Precision
Engineering
Electronics
Food
Products
IT Services —
In addition, secondary sources such as the World Bank Report on Ease of Doing Business
(2023), various committee reports on MSMEs, and research articles on MSMEs are used
to arrive at the challenges.
3.1. CHALLENGES AND CURRENT STATE OF AFFAIRS
The main challenges faced by Medium Enterprises are:
Awareness of
Schemes
Skilled Manpower
Technology
Upgradation
Compliance
InnovationBarrierFunding
Land &
Infrastructure
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises25
Designing a Policy for Medium Enterprises Awareness of Schemes
The lack of awareness about government schemes significantly
limits the ability of medium enterprisestotake advantage of
available support. Only 10% of Medium Enterprises
39
reported
having availed of any of the 18 schemesbyMoMSME Scheme.
Some of the most recognized schemes include PMEGP, PM
Vishwakarma, CGT-MSE, and RAMP. While there is some awareness
of the schemes, detailed knowledge on how to effectively utilize
them is lacking. This highlights a disconnect between policy
design and practical implementation. In a poll of 39 associations
at Hyderabad workshop, only one had used the Procurement and Marketing Scheme
(PMS), despite many being eligible. Even when MSMEs are aware of schemes such as ZED,
MSME Champions, and RAMP, they lack knowledge on how to apply or navigate the
process, rendering these schemes ineffective in practice. Out of 18 schemes listed, the
awareness regarding the schemes is only about 25%,i.e. 4-5 schemes. While government
efforts are commendable, such as the introduction of the.RAMP scheme, there are still
disconnects in policy implementation.
The key players of the MSME ecosystem are
largely unaware of online portals for accessing
information on government schemes, with 90%
of Medium Enterprises reporting they had not
utilized any such platforms. Only 10% indicated
they use resources like NIVESH MITRA, NCD
India, and GeM.
Reports suggest that while
more than 70% of MSMEs
40
are aware that
a variety of government schemes exist,
information about eligibility, application,
type of support under the schemes and
their usage remains significantly low.
MSMEs in
general face the challenge of
gathering information
41
about all the schemes,
policies, and programmes. Medium Enterprises
are often unaware of support available, which limits their ability to take advantage of them.
Reportedly, only 13%
42
of Medium Enterprises utilize the available marketing schemes
which indicates that even when support is available, it remains underutilized due to a lack
of awareness. Furthermore, enterprises are not aware of credit schemes
43
and special
financial privileges given by banks.
The gap analysis of RAMP scheme reveals a notable disparity between the allocated
budget and its utilization. As per a report by Impact and Policy Research Institute, despite
39Sample size is 388 MEs, responses received from 207 entrepreneurs
40 FTCCI Report: CURRENT PRACTICES AND CHALLENGES OF MSMEs
41Press Information Bureau 20 Jul 2023
42 FTCCI Report: CURRENT PRACTICES AND CHALLENGES OF MSMEs
43 A Report on Issues and Challenges in Financing MSME in Pune, Maharashtra
Scheme
25%
A W A RE N E S S O F O N L I N E
P O RT A L S F O R
G O V E RN M E N T S CH E M E S
Y es; 2 0 ;1 0%
N o; 1 8 7 ;9 0%
Figure 3.1: Awareness of portals
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises26
Designing a Policy for Medium Enterprises a substantial total outlay of `6,062.45 crore, less than 40% of the allocated funds have
been utilized
44
, indicating potential inefficiencies in scheme implementation. The under-
utilization highlights that the beneficiaries are unaware of the support available to them and
the potential benefit that they can get from availing it. These issues hinder the scheme’s
effectiveness in achieving its goals of improving credit access, strengthening governance,
and promoting sustainable practices.
Barrier to Competitiveness
The lack of awareness not only restricts access to financial resources but also hinders
the adoption of best practices, technological advancements, and market expansion
opportunities that these schemes are designed to promote. This adversely impacts the
competitiveness and sustainability of medium enterprises.
Ineffective Implementation
Another key issue is ineffective implementation, as medium enterprises struggle with
awareness and navigating application processes for schemes like ZED, MSME Champions,
and RAMP, reflecting systemic shortcomings in government communication and execution.
Potential for Centralized Solutions
Additionally, medium enterprises face challenges in accessing information from a single
source. A centralized platform could bridge this gap, providing a consolidated source
of information and empowering these enterprises to leverage available support more
effectively.
Technological Upgradation
Technological advancement is crucial for Medium Enterprises to remain competitive in
today’s rapidly evolving market. As market demands evolve and new technologies emerge,
MEs must adapt to survive and thrive. However, many enterprises face significant barriers
in accessing modern technologies, often resulting in the continued use of outdated systems
and practices. The major challenges associated with technological upgradation that are
essential for enabling medium enterprises to harness the full benefits of innovation and
improve their overall performance in the marketplace are as follows:
Outdated Technology: Majority of Medium Enterprises use outdated technology that
prevents them from keeping up with the modern world. 82% of Medium Enterprises in
our survey reported that they do not have advanced technologies integrated into their
business operations (Industry 4.0 – AI, IoT, etc.), which hampers competitiveness. Moreover,
60% of these enterprises still rely on outdated machinery, affecting their productivity and
product quality.
High Costs of Implementation: Adoption of new technology and training employees is
difficult and expensive, especially in manufacturing where both physical equipment and
software are involved. Lack of access to IT education contributes to the technological
gap. Unlike larger industries, Medium Enterprises struggle to keep pace with technological
44 Impact and Policy Research Institute https://www.impriindia.com/insights/msme-ramp-performance-
scheme-2022/
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises27
Designing a Policy for Medium Enterprises advancements because they lack access to the latest tools and systems essential for
improving productivity and competitiveness. The time and high costs associated with
acquiring, implementing, and maintaining new technologies are often prohibitive, especially
in the absence of adequate financial support or incentives for acquiring latest technology.
Ineffective Outreach of Schemes: It has been highlighted that the outreach of the
Technology Centres Scheme remains limited, leaving many medium enterprises without
access to the scheme. Further, schemes designed for micro and small enterprises, such as
CGTMSE, do not address the capital needs of medium enterprises for technology
upgradation.
Y es5 6
No
0 5 0 1 00 1 50 2 00
AREY OUB ENEFITTINGFROMTECH NOL OG YCENTRESSCHEM E
DIRECTL YORINDIRECTL Y ?
1 51
Figure 3.2: Access to technology
Although Medium Enterprises are aware of information technology tools such as Customer Relationship Management (CRM), Enterprise Resource Planning (ERP), and Human Resource Management Systems (HRMS), their usage remains critically low at just 14%
45
. Another factor is the lack of
awareness, which reduces willingness to invest in advanced technology solutions
46
.
According to the World Bank’s Ease of
Doing Business Report (2023), India’s overall technology adoption rate is only 42%
47
,
significantly lagging behind high-income countries where 70% of enterprises have embraced automation. India ranks 63rd
48
globally in “Automation and Innovation,” highlighting a substantial gap in technological progress.McKinsey’s research reports that 45 CURRENT PRACTICES AND CHALLENGES OF MSMEs
46 Data.worldbank.org/indicator/GB.XPD.RSDV.GD.Z and forumias.com/blog/msmes-significance-challenges-
and-solutions-explained- pointwise/
47Source: https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS )
48 Source: World Bank’s Ease of Doing Business Report (2023)
Figure 3.3: Technology Adoption Rate
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises28
Designing a Policy for Medium Enterprises Medium Enterprises often lag in technology adoption compared to larger firms, which
affects their productivity and competitiveness
49
.
Competitiveness at Risk
The lack of technology adoption among medium enterprises can be attributed to a
combination of high costs, outdated infrastructure, and insufficient access to necessary skills
and resources. The low adoption of technology among Medium Enterprises significantly
jeopardizes their competitiveness in a rapidly evolving marketplace. Without advanced tools
and systems, Medium Enterprises are less equipped to enhance productivity, 4.0 technologies,
such as automation, IoT, and AI. A key takeaway is the need for a structured support
ecosystem to facilitate technology upgradation. This includes government initiatives to
attract private investment and create a conducive environment for innovation. For example,
programs that provide access to capital, technology transfers, and skill development can
help medium enterprises leverage new technologies effectively. Targeted support and
handholding may be essential for Medium Enterprises, helping them integrate advanced
technologies like AI, IoT, and automation into their business operations. This support
can include regional hubs or specialized facilities offering consultancy, hands-on training,
and access to digital tools.
Skilled Manpower
Skilled manpower is essential for any enterprise as it enhances productivity, ensuring
efficient use of resources and minimizing operational errors. It drives innovation and adapts
to technological advancements, improving the quality of products and services. However,
medium enterprises face the following challenges concerning manpower:
Low Utilization of Skill Development Schemes: Survey data reveals that a staggering 88%
of Medium Enterprises are not availing themselves of any government skill development
or training schemes. The reasons for this low uptake may include:
Perceived irrelevance: 31% of Medium Enterprises find the available training programs
irrelevant to their business needs, while another 59% consider them only moderately
relevant. Many feel that these programs are geared more toward micro and small
enterprises, rather than addressing the advanced skills needed for medium enterprises.
Lack of awareness: Stakeholder consultations revealed that 40% of participants could not
name a single government scheme focused on skill development. Of the remaining 60%,
most cited schemes like:
Pradhan Mantri Kaushal Vikas Yojana (PMKVY) (Ministry of Skill Development
and Entrepreneurship)
Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) (Ministry of
Rural Development)
Entrepreneurship and Skill Development Programme (ESDP) (Ministry of MSME)
49McKinsey Digital: How medium-size manufacturers can boost their digital capabilities innovate, and maintain
product quality. This situation leaves them vulnerable to being outpaced by larger firms or international
competitors who have already integrated Industry
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises29
Designing a Policy for Medium Enterprises However, these schemes, particularly the ESDP, focus on basic entrepreneurial skills for
micro and small enterprises and lack the advanced, specialized training that medium
enterprises require, especially in technological fields.
H ow relevant are the training programs offe?ed by
M oM SM E?
Not Relevant8 2
M oderately Relevant1 01
Extremely Relevant2 4
Figure 3.4: Access to training program and their relevance
Need for Industry-Relevant, Specialized Skill Development: There is a gap between the
skills required by Medium Industries and the workforce available in the country. It is
reasoned that medium enterprises require specialized training programs to enhance the
capabilities of their workforce, particularly in areas like technology adoption and advanced
manufacturing processes. Majority of the workforce is unskilled or low-skilled with little to
no knowledge of factory operations. Medium enterprises are increasingly reliant on
advanced manufacturing processes and technologies such as Industry 4.0 tools (e.g.,
automation, AI, IoT), but the workforce is largely unprepared to meet these demands.
Several key issues have been identified in this context:
Limited specialized training: Current training programs do not sufficiently address the
advanced technical skills required by Medium Enterprises. There is a significant gap in
training for cutting-edge technologies that could boost productivity and innovation.
Brain drain:Many skilled young workers
are migrating overseas in search of
better job opportunities and higher
wages, contributing to a “brain drain”.
This loss of talent is particularly harmful
to Medium Enterprises, which struggle
to compete with large enterprises or
multinational corporations in offering
attractive compensation packages.
High attrition rates: Medium
Enterprises also face difficulty retaining
skilled employees, who often leave for
better-paying opportunities in larger
organizations. This adds pressure on
Medium Enterprises to offer competitive
wages, which they are often financially
unable to do.In sectors like automation,
AI, and IoT, the lack of appropriately
skilled workers further exacerbates the
Figure 3.5: Availability of skilled labour (%)
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises30
Designing a Policy for Medium Enterprises challenges Medium Enterprises face in implementing technology-driven solutions, thereby
reducing their productivity and global competitiveness.
Medium Enterprises face critical challenges in accessing skilled labour due to a lack of
awareness
50
about the benefits of technological advancement and skill development. While
training and skill development programs could bridge this gap, a coordinated approach is
missing, leaving Medium Enterprises unable to fully leverage their potential
51
. World Bank
Reports suggest that 65% of India’s fast-growing population many lack skills needed
by a modern economy
52
.
Key obstacles include:
Absenteeism and high wage rates: Medium Enterprises report difficulties in retaining
employees due to frequent absenteeism and the need to offer competitive wages that
are often beyond their financial capabilities.
Unionization and work stoppages:Industrial relations challenges, such as union demands
and work stoppages, continue to disrupt smooth operations, further complicating labour
management.
Training costs and relevance:The cost of upskilling employees is high, with many employers
viewing existing training programs as irrelevant to their specific needs. The unavailability
of industry-aligned training exacerbates the issue.
Despite the growing need for technologically proficient employees, the availability of work-
ready, skilled manpower remains alarmingly low, with only 55% of the workforce having
adequate skills. This shortage is particularly pronounced in technical fields such as automation,
artificial intelligence (AI), machine learning (ML), and advanced manufacturing. Notably,
the NSDC Annual Report 2019-20 emphasizes the need for enhancing skill development
initiatives to meet industry requirements for medium enterprises that often struggle to
find adequately skilled labour.
Bridging the Skill Gap: Industries face a significant gap in technically skilled labour, with
only 51% employability
53
suggesting a gap between what is produced by educational
institutions and what is required by industries. This gap severely limits Medium Enterprises’
ability to adopt advanced technologies, impeding productivity improvements and
competitiveness. Medium Enterprises are facing challenges due to a significant gap between
the skills needed in the industry and those available in the workforce. To mitigate this, a
thorough skill gaps analysis may be conducted to identify the precise areas where skills
are deficient.
Focus on Specialized Training: Further, the emphasis on specialized training in technology
adoption and advanced manufacturing processes is vital. Medium Enterprises should be
50 Naveen Negi, Arvind Mohan, Musliadi Bin Usman, Almighty C. Tabuena. (2023). Challenges of Skill
Development of Workers in MSME Sector: An Empirical Study of Training Organisations. European Economic Letters (EEL), 13(3), 89–94. https://doi.org/10.52783/eel.v13i3.214
51 ADBI Working Paper Series–Major Challenges Facing Small and Medium-sized Enterprises in Asia and
Solutions for Mitigating Them
52Helping India Build a Skilled, Inclusive Workforce for the Future https://www.worldbank.org/en/results/2023/11/03/
helping-india-build-skilled-inclusive-workforce
53India Skill Report 2024 https://wheebox.com/assets/pdf/ISR_Report_2024.pdf
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises31
Designing a Policy for Medium Enterprises supported in developing partnerships with training providers that offer industry-relevant,
specialized programs, thereby enhancing their workforce’s capabilities and competitiveness.
Compliance
Compliance poses a significant challenge for medium enterprises, often creating barriers
that hinder their operational efficiency and growth potential. While regulations are designed
to ensure accountability and standardization, Medium Enterprises frequently find themselves
navigating a complex web of compliance requirements that can be disproportionately
burdensome compared to their micro and small counterparts. The demands of adhering
to various regulatory frameworks can lead to increased administrative costs and divert
valuable resources away from core business activities. The major challenges related to
compliance are:
Ease of Doing Business: Medium Enterprises strongly opine that there is scope of
improvement in ease of doing business which includes ease in fund disbursement, ease
of application, process of availing the scheme, processing speed, etc. The burden of
compliance increases significantly for Medium Enterprises compared to Micro and Small
Enterprises, leading to a perception of overwhelming administrative demands without
corresponding benefits. Entrepreneurs express that compliance requirements for Medium
Enterprises are more than MSEs. Medium Enterprises who have recently migrated from
small to medium because of a slight increase in turnover feel that compliance is a burden
2 001 501 005 00
7 8Awareness M echanism
8 0H andholding by ob8cials
1 22Processing Speed
1 75Ease ofApplication
Disbursement Ease1 82
I M P RO V I N G E A S E O F D O I N G BU SI N E S S
Figure 3.6: Inputs from stakeholders – on – improving ease of doing business
Inspector Visits and Compliance Burden
Medium Enterprises face a significant compliance burden due to the numerous inspections from various authorities, including labour inspectors, health inspectors, safety and
environmental inspectors, often leading to overlapping and frequent visits that disrupt business operations. They are subjected to extensive auditing processes, such as internal, statutory, and secretarial audits, with requirements often mirroring those for large corporations, adding to the administrative load. Compliance with multiple regulations, including company laws, tax laws (such as income tax and GST), environmental standards, and workplace safety, demands meticulous record-keeping and documentation. Medium
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises32
Designing a Policy for Medium Enterprises Enterprises also encounter challenges with reconciliation issues and receive notices from
different tax authorities, complicating their tax compliance. Sector-specific regulations
and the complexity of compliance procedures necessitate significant resources for legal
and compliance support.
Multiplicity of Notices
Entrepreneurs often receive multiple notices from different GST sectors—CGST, GST, IGST—
which adds to the administrative burden. The process becomes even more cumbersome
when audit notices are issued separately, requiring additional responses from enterprises.
Further, there are variations in compliance across states that add another layer of
complexity for companies operating in multiple locations. The experts identified that GST
filing for MSMEs should not be necessary since all the purchase and sales transactions are
recorded in GST server. This issue could potentially be addressed through automation and
digitalization of GST filing. According to the FGD at FTCCI, 78% of Medium Enterprises face
challenges in complying with GST regulations and 65% report delays due to cumbersome
audit requirements.
Lack of Centralized Information and Guidance
There is a significant gap in accessible information regarding statutory compliance,
especially for Medium Enterprises transitioning from small to medium enterprises, leading
to confusion and potential non-compliance. A large proportion of Medium Enterprises
(75%) emphasize the need for a centralized source of information on statutory compliance
to ease the burden associated with transitioning.
Complexity and Volume of Compliance Requirements for Medium Enterprises
Research reports have highlighted that even understanding the compliance needs is difficult
for most MSMEs. Lack of training and skilled manpower makes it more challenging for the
units to comply. It has been established in the Economic Survey Report that for growth of
India’s Mittelsand, a German term referring to small and medium-sized enterprises (SMEs)
and family-owned businesses, “deregulation” is a vital contributor
54
. However, the present
situation of Indian MSMEs is marred with regulatory compliances. For instance, each unit
in the chemical sector must adhere to approximately 635 compliance requirements
55
per
month across various areas, including factory operations, health, explosives, hazardous
materials, and food safety regulations. While larger companies can utilize dedicated in-
house teams, Medium Enterprises face immense difficulty staying compliant.
The World Bank’s report
56
on Ease of Doing Business discusses the regulatory environment
for businesses in India, with a focus on the challenges faced by small and medium
enterprises. It identifies specific compliance burdens, including labour laws, tax regulations,
54 Anil Bhardwaj, secretary general, Federation of Indian Micro and Small & Medium Enterprises (FISME) for
Economic Survey Report
55 Compliance Burden Hampers India’s $220 Billion Chemical Industry https://www.businesswise.in/compliance/
details/2386/Compliance- Burden-Hampers-Indias—Billion-Chemical-Industry
56https://documents1.worldbank.org/curated/fr/688761571934946384/pdf/Doing-Business-2020-Comparing-
Business-Regulation-in-190- Economies.pdf
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises33
Designing a Policy for Medium Enterprises and environmental regulations, which are particularly challenging for medium enterprises.
The report emphasizes that simplifying these regulations is crucial for improving the ease
of doing business in India.
Disincentives for Upgrading
The fact that transitioning from micro or small to medium status brings more regulatory
burdens without significant benefits can discourage enterprises from scaling up. This
creates a stagnation in growth and limits the broader economic contributions of Medium
Enterprises.
Knowledge Gap
The lack of centralized information and guidance contributes to a knowledge gap regarding
compliance obligations. This can lead to unintentional non-compliance, further resulting in
penalties or additional scrutiny.
Innovation Barrier
Innovation is vital for the growth and competitiveness of medium enterprises, yet many face
significant barriers that impede their ability to innovate effectively. The main challenges are:
Inadequate Support for Innovation: For Medium Enterprises, innovation is key to sustaining
growth and competitiveness and their ability to innovate is hindered by a lack of adequate
policies that foster innovation. Innovation not only means product innovation, it includes
method, and process. Without innovation, it becomes extremely difficult for Medium
Enterprises to scale up to large enterprises. Therefore, it is essential for the government to
actively encourage and support R&D efforts in Medium Enterprises. They need government
support for Innovation in more ways than the present. In our study, 78% of respondents feel
that existing support is inadequate, and there is a pressing need for additional measures
to promote innovation. These measures should either strengthen innovation where it is
already present or cultivate an innovative mindset where it is lacking. Further, 76% of
Medium Enterprises expressed that they would benefit from cluster-based testing facilities,
which would help them improve their products and processes. A dedicated fund for R&D
is also seen as a potential game-changer for fostering innovation in Medium Enterprises.
Financial Risk of Innovation: Innovation carries a significant financial risk for Medium
Enterprises. If an innovation effort fails, Medium Enterprises often lack the financial cushion
that large firms have, making such risks particularly daunting. This poses a fundamental
question: what incentive do Medium Enterprises have to be competitive if innovation
puts them at financial risk? To encourage innovation, there should be some kind of
de-risking mechanism. One possible approach could be lowering corporate taxes for
Medium Enterprises that invest in R&D or product and process innovations. This would
act as a direct incentive, signalling that the government is sharing the risk and supporting
Medium Enterprises in their pursuit of innovation. Additionally, creating government-backed
innovation funds or grants, offering low-interest innovation loans, and simplifying access
to public-private partnerships could further mitigate risks and stimulate innovation among
firms.
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises34
Designing a Policy for Medium Enterprises An economy’s R&D is generally concentrated in a limited number of large firms. In
some economies, however, small and medium-sized firms account for a significant share
of the total business R&D effort. ADBI Working Paper Series have highlighted that
Medium Enterprises cannot compete against larger firms in terms of R&D expenditure
and innovation (product, process, and organization)
57
. It is argued that Medium Enterprises
are more Innovative as compared to Small Enterprises and they spend more on R&D as
well
58
. While it is feasible for Medium Enterprises to make limited investments towards
innovation, concerted efforts are also necessary at a policy level to create institutional
support
59
. The Organisation for Economic Co-operation and Development (OECD) also
supports these findings, noting that Medium Enterprises are critical drivers of innovation
but often struggle with inadequate access to financing and infrastructure
60
.
Only 22% of Medium Enterprises engage in R&D activities
61
, which is much higher
than MSEs. In contrast, 60% of large enterprises invest in R&D
62
. India’s Innovation
Index or spending on R&D is on the lower side at 0.68%
63
against the target of
2% highlighted in the Science and Technology Innovation Policy 2013. A NITI
Aayog report points out that India’s innovation ecosystem is growing but remains
underdeveloped compared to other large economies
64
. They struggle particularly
due to the lack of accessible financing for R&D, limited collaboration opportunities
with research institutions, and insufficient government incentives. While India has
launched various initiatives such as the ‘Startup India’ and ‘Make in India’ campaigns,
these efforts primarily target start-ups and large industries, leaving a significant
gap in support for Medium Enterprises.
Global Best Practices could serve as models
Countries such as South Korea, Israel, and Sweden, where R&D spending exceeds 4% of
GDP, provide examples of how effective government intervention and policy support can
enhance innovation. By providing incentives for private sector participation and ensuring
continuous public investment in R&D, these countries have successfully boosted their
competitiveness globally. India’s R&D expenditure requires focused efforts to reach the
2% target.
57ADBI Working Paper Series–Major Challenges Facing Small and Medium-sized Enterprises in Asia and Solutions for Mitigating Them
58 Barriers to Innovation in Indian Small and Medium-Sized Enterprises
59CURRENT PRACTICES AND CHALLENGES OF MSMEs
60 OECD (2008), Enhancing the Role of SMEs in Global Value Chains, OECD Publishing, Paris, https://doi.
org/10.1787/9789264051034-en.
61Source: OECD R&D Tax Incentives database https://data-explorer.oecd.org/, World Bank’s Ease of Doing
Business Report (2023)
62 Source: OECD R&D Tax Incentives database https://data-explorer.oecd.org/, World Bank’s Ease of Doing
Business Report (2023)
63Source: https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS
64Source:India Innovation Index https://www.niti.gov.in/sites/default/files/2021-01/IndiaInnovationReport2020Book.
pdf
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises35
Designing a Policy for Medium Enterprises Structured Mechanism for R&D
The absence of adequate support for innovation,
financial risks associated with R&D, and limited
testing facilities are key barriers for Medium
Enterprises. By establishing a structured
mechanism, the government can mitigate
financial risks for these firms, offer de-risking
incentives such as tax benefits, and ultimately
drive innovation and competitiveness within the
medium enterprise sector.
Funding
Despite their importance in the economy, many
Medium Enterprises struggle to secure the
necessary financial resources due to a variety of
challenges, including stringent lending criteria,
limited access to capital markets, and a lack of
collateral. These funding gaps can hinder their ability to scale and compete effectively
against larger firms that have more established financial networks. Some of the main
funding challenges faced by medium enterprises are:
Banks’ Hesitance to Fund Medium Enterprises:
Collateral Requirements: Banks often require collateral for loans, which is a
significant barrier for Medium Enterprises. Many banks do not offer collateral-
free loans to Medium Enterprises, citing higher turnover compared to micro and
small enterprises as a reason for their hesitance compounded by high-interest
rates averaging around 10%, which are not competitive when compared to the
lower rates offered to micro and small enterprises.
Limited availability of Working Capital Loans: There is a notable scarcity of
schemes aimed at helping Medium Enterprises secure working capital loans. This
lack of financial support limits their operational flexibility and growth potential.
72% of the respondents believe that medium enterprises need more support in
terms of Working Capital.
Shift Towards Alternative Financing: As traditional banking loans become harder to
access, there is a gradual shift towards digital lending platforms and alternative finance
methods such as factoring and supply chain finance. However, most Medium Enterprises
still primarily rely on bank loans. The reluctance of banks to fund medium enterprises
means that even as they look for alternatives, these may not always be sufficient or as
accessible as traditional loans.
Interest Rates and Loan Amounts: FGDs with bankers indicate that the interest rates for
Medium Enterprises are often 4% higher than those for larger firms, making financing
considerably more expensive.
Figure 3.7: Innovation Index
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises36
Designing a Policy for Medium Enterprises Trade Receivables Discounting
System (TReDS)
Self-Funded
Indigenous L endors
B ank L oan against Collateral
Supply Chain Financing
Non-B anking Financial
Companies (NB FCs)
1 2% 1 3%
7 %
1 0%
1 9%
3 9%
M ed ium E nterp rise Funding P a?ern
Figure 3.8: Funding Pattern of Medium Enterprises
Limited access to affordable finance has been cited as one of the most cited challenges
faced by Medium Enterprises world-wide. Medium Enterprises receive much lesser priority
sector loans, compared to micro enterprises
65
. Additionally, the interest rates for Medium
Enterprises are on average 4% higher than for larger firms, making capital more expensive
66
.
World Bank Indian MSME Financing Report indicates that, In India, only 37% of Medium
Enterprises
67
are able to secure these loans, which can be attributed to the lack of
specialized MSME branches within public sector banks across various districts
68
. A study
report by NABARD confirms the same. Interestingly, in 2023, the amount of loans given
to small and medium businesses increased by 20% compared to last year. 7% YoY growth
is seen in borrowers who availed sub-INR 1 Crore loans (Micro segment) but growth of
borrowers seeking greater than INR 10 Crores (Medium) decreased by value. From the
banker’s perspective, the poor financial health of many Medium Enterprises is a significant
barrier to securing loans
69
.
Banks often require extensive financial documentation and may view insufficient credit
histories as risky. To ensure sufficient liquidity for operations, Medium Enterprises require
substantial financial support from government initiatives and financial institutions in the
form of favourable working capital loans. The India Digital SME Credit Report 2023
underscores the critical gap between the demand for and supply of credit for Medium
Enterprises, emphasizing the urgent need for tailored financing solutions
70
.
65 Source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=9688&Mode=0
66 Source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=9688&Mode=0
67Source: World Bank Indian MSME Financing Report
68 Source: https://www.nabard.org/auth/writereaddata/careernotices/0905220212msme.pdf
69Source: Issues in SME Financing https://www.iibf.org.in/documents/reseach-report/report-30.pdf
70Source: India Digital SME Credit Report 2023 https://www.iamai.in/sites/default/files/research/India%20
SME%20Credit%20Report%202023_%20Getvantage-Redseer_compressed.pdf
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises37
Designing a Policy for Medium Enterprises Figure 3.9: Credit Demand Vs Supply in Medium Enterprises
Necessity for Financial Literacy
Many Medium Enterprises lack the financial acumen necessary to navigate the complexities
of loan applications and funding options. Initiatives aimed at enhancing financial literacy
could empower these enterprises to better present their cases to banks and access the
necessary funding.
Access to Working Capital Loans
A notable scarcity of schemes aimed at helping Medium Enterprises secure working capital
loans limits their operational flexibility and growth potential. Banks and financial institutions
may introduce simplified application processes, reduced collateral requirements, and
favourable interest rates. Government-backed initiatives that incentivize banks to provide
working capital loans can also enhance availability.
Land & Infrastructure
Access to adequate land and infrastructure is a fundamental requirement for the growth
and operational efficiency of medium enterprises. These businesses often face challenges
related to securing suitable locations that offer the necessary facilities and resources for
their operations. In many regions, the availability of affordable land is limited, and the
regulatory hurdles associated with land acquisition can further complicate the process.
Additionally, insufficient infrastructure—such as reliable transportation, power supply, and
communication networks—can hinder productivity and increase operational costs. The
main land-related challenges faced by Medium Enterprises are:
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises38
Designing a Policy for Medium Enterprises 1.High Land Costs: The escalating cost of industrial land restricts the ability of
Medium Enterprises to establish and expand operations. This issue is compounded
by the lack of adequate financing options specifically tailored for real estate
purchases by Medium Enterprises. Our survey found that high land costs are the
primary barrier to expansion, particularly in urban areas.
2.Bureaucratic Delays: Lengthy and complex processes involved in obtaining
construction permits hinder timely project execution. According to the Doing
Business Report, the average time taken to secure all necessary permits can
stretch into several months, deterring potential investments in infrastructure.
3.Infrastructure Development: Many regions, especially rural areas, still lack basic
infrastructure such as reliable roads, power supply, and water facilities. This lack
of essential services makes it challenging for Medium Enterprises to operate
efficiently and competitively.
4. Additionally, inadequate support from District Industries Centres (DIC) for
acquiring industrial land and facilities. Medium Enterprises stress the need for
targeted investments in industrial parks and export hubs that address the specific
requirements of these enterprises.
8 0
1 6 0
1 9 6
0 5 0 1 0 0 1 5 0 2 00
Obtaining Construction Permits
Inadequate Support from DICs
H igh L and Cost
W hat are the most pressing land related issues
faced by M edium Enterprises?
Figure 3.10: Stakeholders input on land related issues
Access to affordable land and infrastructure is a critical issue for Medium Enterprises
in India. Over the past decade, industrial land costs have surged by approximately
150% in Maharashtra alone
71
, significantly impacting the viability of new and expanding
businesses. This sharp increase in land prices can be attributed to various factors, including
urbanization, regulatory constraints, and increasing demand for industrial spaces.
Global data from the World Bank highlights that India’s performance in dealing with
71Source: MIDC Annual Report 2022
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises39
Designing a Policy for Medium Enterprises construction permits remains subpar. India is currently ranked 27th in the world
72
, which,
although an improvement, still places it behind several other countries in the ease of
obtaining construction permits. This bureaucratic lag results in delays and increased costs
for Medium Enterprises, further complicating their ability to secure necessary facilities for
operations.
State Subject Implications
Since land is a state subject in India, the varied approaches and policies adopted by
different states can significantly impact the availability and affordability of industrial land
for Medium Enterprises. This necessitates a coordinated effort between central and
state governments to create a unified strategy that ensures access to affordable land and
streamlined processes across all regions.
Need for Streamlined Regulatory Processes
The bureaucratic delays in obtaining construction permits reveal an urgent need for reform
in state-level regulatory processes. Lengthy timelines for approval can stall projects, leading
to increased costs and deterring potential investments. Simplifying these regulations and
expediting permit issuance would facilitate quicker project initiation, aligning with insights
from the Doing Business Report.
What does the government need to do to? Should it restrict some
items for Medium Enterprises? The answer is No. Any forward-looking
government will not take such a step, they will rather create a culture
of competition and growth. The government needs to connect
Medium Enterprises with the ecosystem of R&D, Export, Skill,
Technology, Infrastructure, and Finance. Once this is done, the they
shall figure out the rest.”
While various support mechanisms exist for these identified challenges, they are either
underutilized or poorly aligned with the specific needs of medium enterprises. This
disconnect not only hinders their current operations but also stifles their future growth
potential. As we move into the next chapter, we will analyse existing government initiatives
to identify gaps for medium enterprises and present a set of focused recommendations to
address these gaps, offering practical solutions to encourage competitiveness and facilitate
the integration of medium enterprises into the broader value chain.
72Source: World Bank’s Ease of Doing Business Report (2023) and MIDC
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises40
Designing a Policy for Medium Enterprises MSME Policy Landscape 41
MSME POLICY
LANDSCAPE
4 CHAPTER 4
MSME POLICY LANDSCAPE
4.1 MINISTRY OF MICRO, SMALL AND MEDIUM
ENTERPRISES (MOMSME)
A. EXISTING GOVERNMENT INITIATIVES
The primary responsibility of promotion and development of MSMEs is of the State
Governments
73
. However, the Government of India, supplements efforts of the State
Governments through various initiatives. As outlined in Chapter 1, eight (8) schemes
specifically target the needs of Medium Enterprises, offering financial support, technology
upgrades, skill development, and marketing assistance. Key initiatives of the MoMSME
include PMEGP, PM Vishwakarma scheme, RAMP, CGTMSE all aimed at fostering
entrepreneurship, enhancing employment, and integrating informal sectors into the formal
economy. PMEGP and PM Vishwakarma are two schemes that alone account for 68%
74
of
the funds allocated by MoMSME for various schemes, however they are not meant for
Medium Enterprises.
PM V ishwakarma
1 8.1 8 %
Promotion of
M SM E inNER
0 .9 2 %
SRI Fund…
PM EG P5 0.2 2 %Coir V ikas Y oj ana
1 .6 0 %
Technology
Centres 1 .8 4 %
National SC-ST
H ub 2 .4 8%
K hadi G ramodyog
V ikas Y oj ana
6 .3 2 %
Champions 0 .8 1 %
M SE-CDP 2 .7 6 %
SFU RTI 0 .0 4 %
ATI 0 .4 0 %
International
Cooperation
0 .2 1 %Procurement and…
ESDP 1 .4 7 %
ASPIRE 0 .0 7 %
Figure 4.1: Percentage Distribution of Funds Allocated Under Each Scheme
73Draft MSME Policy 2024
74Source: Ministry of Finance Expenditure Budget 2024. Data for the year 2022-23 is used for this analysis. Approved corpus of Rs. 7,500 crores has been achieved for CGMTSE so it has not been included in the chart. Budget Estimates used for ESDP, MSE-CDP, Technology Centre, Promotion of MSME in NER and PM Vishwakarma.
42MSME Policy Landscape A detailed analysis of all the MoMSME schemes and their sub-components – including
where support is not being provided to Medium Enterprises is illustrated below:
Prime Minister’s Employment Generation Programme (PMEGP) is a credit-linked subsidy
scheme for providing employment opportunities through establishment of micro-
enterprises in the non-farm sector. Under the Scheme, Margin Money (Subsidy) is provided
to beneficiaries availing loans from banks for setting up new enterprises. The Government
subsidy under the scheme is routed by KVIC through the identified Banks for eventual
distribution to the beneficiaries/entrepreneurs in their Bank accounts. Beneficiaries are
required to contribute 5-10% of the project cost, based on their category. For General
Category: 15% (Urban), 25% (Rural). For Special Category: 25% (Urban), 35% (Rural).
Financial support is provided as a combination of beneficiary contribution, bank credit,
and government subsidy. Reputed NGOs, SHGs, and institutions provide entrepreneurship
development training to beneficiaries.
1
Provide
Employment
Opportunity
Obj ective
2
Financial
Support, Skill
Development
3
M icro
Enterprises
Eligibility
Area of
Support
PMEGP is applicable to all new viable micro enterprises, including Village Industries
projects except activities indicated in the negative list of Village Industries. Existing/
old units are not eligible. The scheme’s primary focus is on creation of micro-
enterprises, with specific categories like Self-Help Groups (SHGs), Production
Cooperative Societies, and Charitable Trusts being eligible. The scheme provides
margin money (subsidy) for setting up new micro- enterprises in the non-farm
sector. The incentives are heavily skewed towards micro-level operations
Credit Guarantee Trust Fund for MSEs (CGTMSE) is managed by the Credit Guarantee Fund
Trust for Micro and Small Enterprises (CGTMSE), a joint venture between the Government
of India and SIDBI. The scheme aims to provide collateral-free credit support to Micro
and Small Enterprises (MSEs) through a credit guarantee for loans extended by Member
Lending Institutions like banks, financial institutions, and Non-Banking Financial Companies
(NBFCs). The Scheme covers collateral free credit facility (term loan and/ or working
capital) extended by eligible lending institutions to new and existing micro and small
enterprises up to Rs. 200 lakh per borrowing unit. The cap of `200 lakh is the maximum
guarantee coverage limit (irrespective of the unit activity including Trading) per borrower
MSME Policy Landscape43
Designing a Policy for Medium Enterprises based on the outstanding credit facilities. The initial corpus fund of `2,500 crore of the
Trust was contributed by the Government of India (GoI) and Small Industries Development
Bank of India (SIDBI) in the ratio of 4:1. The Corpus of the Trust was gradually enhanced
to `9,000 crore (share of MoMSME, GoI–`8,500 crore and share of SIDBI–`500 crore).
Additional corpus of `8,000 crore was received from GoI out of its share of `8,500 crore
in the month of March 2023. The balance of `1,000 crore (` 500 crore each from GoI and
SIDBI) was expected to be received during FY 2024.
1
Obj ective
23
M icro &
Small
Enterprises
Provide
Collateral-Free
Credit Support
to M SEs
Financial
Support
Eligibility
Area of
Support
Micro and Small Enterprises benefit greatly from the scheme as it offers collateral-
free credit for loans up to `200 lakh. However, once an enterprise crosses the
threshold and becomes a medium enterprise, it is no longer eligible for this credit
guarantee support. The scheme is applicable to new and existing MSEs only.
Self-Reliant India (SRI) Fund is a key initiative under the Atmanirbhar Bharat package,
designed to support MSMEs through equity funding rather than loans. Managed by
NSIC Venture Capital Fund Ltd. (NVCFL), a subsidiary of the National Small Industries
Corporation (NSIC), this Fund of Funds (FoF) structure operates with a “Mother Fund”
and “Daughter Funds” setup. The SRI Fund, which has a total corpus of Rs. 50,000 crores,
aims to inject equity into MSMEs to foster growth, innovation, and competitiveness. The
Government of India contributes Rs. 10,000 crores, while the remaining Rs. 40,000 crores
is sourced from private equity and venture capital funds. The daughter funds, managed
by professional investment firms, identify high-potential MSMEs and provide them with
the necessary capital for expansion and transformation into larger enterprises.
MSME Policy Landscape44
Designing a Policy for Medium Enterprises 1
Obj ective
23
M icro, Small,
M edium
Enterprises
Fund M SM Es
through
equity
Financial
Support
Eligibility
Area of
Support
This scheme is designed to address the capital needs of all MSMEs, without a
stated skewness towards micro or small enterprises.
National SC-ST Hub provides financial assistance, capacity building, and support to SC/
ST entrepreneurs in collaboration with industry associations. It is open to SC/ST MSMEs
with at least 51% ownership. Under NSSH, various components/interventions have been
introduced to cater the needs of SC-ST MSEs in the areas of finance, technology, market
linkages, capacity building etc. with a view to provide a conducive ecosystem. These
components are
a. Special Credit Linked Capital Subsidy for technology enablement
b.Capacity building of existing & aspiring SC/ST entrepreneurs
c. Support for enhancing competitiveness through various reimbursement sub-
schemes/interventions
d. Special Marketing Assistance Scheme (SMAS) for SC/ST entrepreneurs
1
Obj ective
23
M icro, Small,
M edium
Enterprises
Financial
Support,
D?letivPU
Support, Skill
Development
Promote
SC/ST
Entrepreneurs
Eligibility
Area of
Support
MSME Policy Landscape45
Designing a Policy for Medium Enterprises Several key benefits are not available to medium enterprises unless they have
recently transitioned from small to medium scale. These include - Capital
Subsidy for technology enablement, Reimbursement of Bank Loan Processing
Fee, Reimbursement of Bank charges for Performance Bank Guarantee, Testing
Fee Reimbursement, Reimbursement of membership /subscription/entry fee
of Export Promotion Council, Reimbursement of Course Fees to Top 50 NIRF
Rated Management Institutions for short term training of SC/ST entrepreneurs,
Reimbursement of membership in Government promoted E-Commerce Portals,
Reimbursement of Single Point Registration Scheme is available for micro and
small units only.
Procurement and Marketing Support (PMS) Scheme provides domestic & international
market access for MSEs. The scheme objective is to create awareness and educate the
MSMEs about importance / methods/ process of packaging in marketing, latest packaging
technology, import-export policy and procedure, GeM portal, MSME Conclave, latest
developments in international / national trade and other subjects / topics relevant for
market access developments. Support provided includes reimbursement of expenses for
participation in international and domestic trade fairs and supports organizing vendor
development programs (VDP) and buyer-seller meets to connect MSMEs with government
departments and large enterprises. The quantum of assistance for market access initiative
is 80% of space rent charges for general category MSEs and 100% for Special Category.
Capacity Building: 80% reimbursement for adoption of bar code, Adoption of Modern
Packaging Techniques, Financial assistance on annual membership fee for adoption of
E-Commerce Platform. Development of Retail Outlet: Rs. 30 lakh max per outlet in Metro
& A class cities and Rs. 20 lakh max per outlets for other cities.
1
Obj ective
23
M icro &
Small
Enterprises
D?letivPU
Support, Skill
Development
Provide
ouestic ?
]v?e?vtiovo
market access
to M SEs
Eligibility
Area of
Support
MSME Policy Landscape46
Designing a Policy for Medium Enterprises Medium enterprises face several limitations in accessing critical support under the
Procurement and Marketing Support (PMS) Scheme, which is primarily designed
for micro and small enterprises. Subsidies for built-up space rent are exclusively
available to micro and small entities. Financial support for barcode registration and
annual membership fees for e- commerce platforms is similarly restricted. Training
programs aimed at enhancing e- commerce capabilities are also limited to micro
enterprises.
The International Cooperation Scheme aims to build capacity of MSMEs for entering
the export market by facilitating their participation in international exhibitions/ fairs/
conferences/ seminars/ buyer-seller meets abroad as well as providing them with actionable
market intelligence and reimbursement of various costs involved in the export of goods and
services. The Scheme provides opportunities to MSMEs to continuously update themselves
to meet the challenges emerging out of changes in technology, changes in demand, the
emergence of new markets, etc. Thus, in totality, all components of the scheme aim at
various aspects required to advance MSMEs’ position as an emerging export player.
The Scheme covers the following sub-components:
Market Development Assistance of MSMEs (MDA)
Capacity Building of First Time MSE Exporters (CBFTE)
Framework for International Market Intelligence Dissemination (IMID)
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Financial
Support,
D?letivPU
Support, Skill
Development
Provide
]v?e?vtiovo
market access
to M SM Es
Eligibility
Area of
Support
Although the eligibility criteria mention that all MSMEs are eligible for the scheme,
some sub-components such as - Capacity Building of First Time MSE Exporters
(CBFTE) which includes Registration-cum-Membership Certificate (RCMC) paid by
the first-time exporters, Export insurance premium paid by MSEs and Fee paid on
Testing & Quality Certification is exclusively available for micro and small enterprises
only.
MSME Policy Landscape47
Designing a Policy for Medium Enterprises Newly launched PM Vishwakarma scheme launched on September 17, 2023, aims to provide
comprehensive support for artisans and craftspeople working with their hands and tools.
This scheme, with a budget outlay of `13,000 crore for 2023-2024 to 2027-2028, includes
various components designed to enhance the skills and business opportunities of these
individuals.
Support offered under the scheme:
Recognition: Beneficiaries receive a PM Vishwakarma Certificate and ID Card.
Skill Upgradation: The scheme facilitates skill development programs tailored to artisans.
Toolkit Incentive: Financial support is provided for purchasing tools and equipment.
Credit Support: Access to loans and financial assistance to help artisans grow their
businesses.
Incentives for Digital Transactions: Encouragement for using digital payment methods.
Marketing Support: Assistance in promoting and marketing their products effectively
1
Obj ective
23
?tisvs
Financial
Support, Skill
Development
Provide
support
(o? ?tisvs v
c?fts?eo?oe
Eligibility
Area of
Support
The scheme is primarily targeted at artisans and craftspeople rather than being
limited to micro or small enterprises; however, it significantly focuses on micro-level
support for individuals involved in traditional crafts and trades. Therefore, while it
aligns with the goals of MSMEs, its specific support structure primarily benefits
artisans rather than encompassing all types of MSME.
MSME Champions has been formulated by merging all 6 components of erstwhile
Technology Upgradation Scheme (TUS) for a period of 5 years i.e. 2021-22 to 2025-26. It
is a holistic approach to pick up clusters and enterprises and modernize their processes,
reduce wastages, sharpen business competitiveness. There are 3 components under the
new MSME Champions scheme:
1. MSME-Sustainable (ZED)
2. MSME-Competitive (Lean)
MSME Policy Landscape48
Designing a Policy for Medium Enterprises 3. MSME-Innovative (for Incubation, IPR, Design)
The 4
th
component MSME Digital MSME will be interlinked with all the other components.
Financial Support is provided to MSMEs in Zero Defect Zero Effect (ZED) Certification
Scheme to create awareness about ZED manufacturing and motivate them for assessment
of their enterprise for ZED. The MSME (Competitive) Lean aims to optimize production
processes in MSMEs by minimizing waste and enhancing operational efficiency. Under this
initiative,
MSMEs receive consultancy services to analyze their current operations and identify
technological improvements that can streamline processes. Financial assistance is available
for acquiring tools and technologies that support lean practices, such as automation
systems and process optimization software. MSME Innovativeis a new concept for MSMEs
with a combination of innovation in incubation, design intervention and by protecting IPR
in a single mode approach to create awareness amongst MSMEs about India’s innovation
and motivate them to become MSME Champions. This will act as a hub for innovation
activities facilitating and guiding development of ideas into viable business proposition
that can benefit society directly and can be marketed successfully. The scheme has 4
sub-components: Incubation, Design, IPR and Digital. MSME Digitalinitiative encourages
MSMEs to embrace digital technologies to enhance their operational capabilities and
market reach. It provides funding for the procurement of essential digital tools, including
enterprise resource planning (ERP) systems, customer relationship management (CRM)
software, and e-commerce platforms.
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Technology &
Q uality
h?P?tiov
M odernize
Process,
Reduce
W astage,
Sharpen
B usiness
ou?etiti?evess
Eligibility
Area of
Support
Under ZED, the subsidy on the cost of certification for Micro Enterprises is 80%,
for Small Enterprises is 60% and for Medium Enterprises is 50%. By and large, all
MSME units can avail the benefits under each component of the MSME Champions.
MoMSME with World Bank’s loan assistance is implementing Technology Centre Systems
Programme (TCSP) to establish 15 new Tool Rooms and Technology Development Centres
(TCs) and upgrading the existing 18 TCs across the country. Its aim is to provide high
MSME Policy Landscape49
Designing a Policy for Medium Enterprises end skilling and technical support to MSMEs. It focuses on establishing a network of
Technology Centres that provide essential support services such as advanced training,
technology transfer, and R&D.
The key components of the scheme involve:
Setting Up Technology Centres: The scheme involves the establishment of technology
centers in various regions to cater to the needs of MSMEs, particularly in technology
upgradation, skill development, and research.
Support Services: These centers offer a wide range of services, including training programs,
access to state-of-the-art equipment, and consultancy services to help MSMEs adopt
modern technologies and improve their processes.
Focus on Clusters: The TCS particularly emphasizes the development of technology
clusters, which aim to bring together MSMEs in specific industries or regions to foster
collaboration and share resources.
Funding and Subsidies: The scheme provides financial assistance in the form of grants
and subsidies to help MSMEs invest in new technologies and improve their operational
capabilities.
Monitoring and Evaluation: Continuous monitoring and evaluation processes are
implemented to assess the effectiveness of the services provided and to ensure that the
centres meet the evolving needs of MSMEs
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Technology
h?P?tiovU
Training
Technical
Support to
M SM Es
Eligibility
Area of
Support
The Technology Centre Scheme aims to support all categories of MSMEs.
RAMP (Raising and Accelerating MSME Performance) is a World Bank supported Central
Sector Scheme aimed at improving access of MSMEs to market, finance and technology
upgradation by enhancing the outreach of existing MoMSME schemes. The programme also
aims at strengthening institutions at the Central and State level, and enhancing Centre-
State collaboration offers financial assistance to MSMEs for investing in new technologies,
modern machinery, and equipment, which enhances productivity and efficiency. The scheme
includes subsidies on the costs associated with upgrading technology. It encourages the
adoption of innovative solutions that improve product quality and operational efficiency.
MSME Policy Landscape50
Designing a Policy for Medium Enterprises This initiative is backed by a significant investment of `6,062.45 crore (approximately USD
808 million), comprising a loan of `3,750 crore from the World Bank and the remaining
`2,312.45 crore funded by the Government of India. The scheme will be implemented over
five years and aims to address various challenges faced by MSMEs.
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Technology
h?P?tiovU
Training
Centre-State
oooo?tiov
to enhance
the outreach
of M SM E
Schemes
Eligibility
Area of
Support
The scheme aims to benefit over 5.5 lakh MSMEs from FY 2022-23 to FY 2026-27.
It specifically targets MSMEs that are already operational and looking to upgrade
their technology, innovate, or improve their market access. Both small and medium
enterprises are eligible to apply for the benefits provided by the scheme.
Micro & Small Enterprises Cluster Development Programme (MSE-CDP) is launched to
enhance the productivity and competitiveness of micro and small enterprises through a
cluster development approach. This program provides financial assistance for establishing
Common Facility Centres (CFCs) and upgrading essential infrastructure in industrial areas.
For preparation of Diagnostic Study Report (DSR) GoI grant is limited to Rs. 2.50 lakhs
and for field organisation of Ministry of MSME its upto Rs. 1.00 lakh. For Soft Intervention,
GoI will grant 75% of sanctioned amount, with maximum project cost of Rs. 25 lakh per
cluster and for NE / Hill states / 50% of micro, village, women owned, SC, ST units, the
GOI grants will be 90%. Hard Interventions include creation or upgrading of Common
Facility Centres (CFCs), which provide shared services such as testing, training centers,
raw material depots, and other support critical to improving competitiveness. MSE-CDP
also encourages the formation of self-help groups, consortia, and associations to build
collective capacity among MSEs.
MSME Policy Landscape 51
Designing a Policy for Medium Enterprises 1
Obj ective
23
M icro &
Small
Enterprises
Infrastructure
Development
Enhance
??o?cti?]??
of M SEs
through
cluster
development
Eligibility
Area of
Support
The scheme is primarily targeted at Micro and Small Enterprises only aiming to
support their sustainability, growth, and ability to overcome common challenges,
such as technology improvement, skills, market access, and capital availability. It is
applicable to Existing Entrepreneurs in form of a Special Purpose Vehicles (SPVs).
SFURTI (Scheme of Fund for Regeneration of Traditional Industries) focuses on the
development of traditional industries, promoting both financial assistance and capacity
building. Both MSE-CDP and SFURTI involve tangible investments in infrastructure, such
as setting up CFCs and upgrading industrial estates. Traditional industries include Khadi
Industries, Village Industries, and Coir Industries.
The scheme covers three types of interventions
1.Soft interventions: Activities to build general awareness, counseling, skill
development and capacity building, exposure visits, market development initiatives,
design and product development, etc.
2.Hard interventions: Creation of common facility centres, raw material banks,
upgradation of production infrastructure, warehousing facility, tools and
technological upgradation, etc.
3.Thematic interventions: Interventions on a cross-cutting basis for brand building,
new media marketing, e-commerce initiatives, research and development, etc.
The financial assistance provided for any specific project shall be subject to a
maximum of Rs. 5 (five) crore to support Soft, Hard and Thematic interventions.
MSME Policy Landscape52
Designing a Policy for Medium Enterprises 1
Obj ective
23
/vsti??tiovs
with
e??e?tise o(
cluster
development
Infrastructure
Development,
Financial
Support
Development
of
d?]tiovo
Industries
Eligibility
Area of
Support
Since the scheme is specifically designed for regeneration of traditional industries, it
is not available for Medium Enterprises. Eligibility criteria includes Non-Government
organizations (NGOs), institutions of the Central and State Governments and semi-
Government institutions, field functionaries of State and Central Govt., Panchayati
Raj institutions (PRIs), Private sector by forming cluster specific SPVs, Corporates
and Corporate Social Responsibility (CSR) foundations with expertise to undertake
cluster development.
Promotion of MSMEs in North Eastern Region and Sikkim provides financial assistance
for the establishment and modernization of Mini Technology Centres, which offer
vital facilities for manufacturing, testing, R&D, and training on local natural resources.
Additionally, the scheme supports the development of new and existing industrial estates,
and enhance the tourism sector by funding the creation of common services such as
kitchens, cold storage, and cultural activity centres in tourism clusters. The government
contributes up to 90% of the project costs, making it a significant support mechanism
for MSMEs in the region.
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Infrastructure
Development,
Technology
h?P?tiov
Establishing
mini
Technology
Centers in
NER
Eligibility
Area of
Support
MSME Policy Landscape 53
Designing a Policy for Medium Enterprises Micro, Small, and Medium Enterprises (MSMEs) located in any of the eight North
Eastern states (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland,
Sikkim, and Tripura) can apply for the benefits under this scheme. The sub-
components of the scheme, such as technology upgradation, the development of
industrial estates, and support for the tourism sector, all apply to all MSMEs.
The Assistance to Training Institutions (ATI) Schemeis designed to enhance the capabilities
of national-level training institutions under the Ministry of MSME. Its primary goal is to
provide support for the creation, strengthening, and expansion of infrastructure, including
establishing new branches or centers. Financial assistance is available for infrastructure
development and capacity building for training programs focused on skill development
and entrepreneurship.
Assistance to Training Institutions of the Ministry of MSME: This assistance focuses on
creating or strengthening the infrastructure of training institutions, including new branches
or centers. It also provides support for covering any revenue deficits, specifically for
institutions like the National Institute for Micro, Small, and Medium Enterprises (ni-msme).
Assistance to State-Level Entrepreneurship Development Institutes (EDIs): Maximum
assistance of up to `250 lakh can be provided to State-level EDIs for developing
infrastructure, equipment, and faculty training. The grant is limited to building infrastructure
related to training but excludes staff quarters or land costs.
Assistance for Training Programs: Financial support for skill development training is given
based on the type of program (aligned with the National Skills Qualifications Framework–
NSQF).
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Training
Enhance the
c?]o]ties o(
vtiovoroe?eo
training
]vsti??tiovs
Eligibility
Area of
Support
Financial support is available for existing institutions under the Ministry of MSME,
including ni-msme, National Small Industries Corporation (NSIC), Khadi and Village
Industries Commission (KVIC), Coir Board, and others. Assistance is limited to State
Government or Union Territory-controlled EDIs. All MSME units can avail the training
through training institutions.
MSME Policy Landscape54
Designing a Policy for Medium Enterprises Entrepreneurship and Skill Development Programme (ESDP) aims to promote
entrepreneurship among youth by conducting various training sessions that cover essential
aspects of starting and managing small businesses. Activities include workshops, awareness
programs, and skill development sessions, primarily targeting youth interested in self-
employment. The scheme provides basic entrepreneurship training aimed at helping
entrepreneurs to put their ideas into action, bring an attitudinal & behavioral change in the
target group and build their personal entrepreneurial skills and advance entrepreneurship
and advance management training aimed at helping entrepreneurs by providing high
end I advance training in the domain of e- commerce, BPO, Soft Ware, Biotech, Modern
Agricultural & Animal Husbandry and processing, etc.
The programme includes the following modules:
Entrepreneurship Awareness Programme (EAP)
Entrepreneurship-cum-Skill Development Programme (E-SDP): Existing E-SDP
and Advanced E-SDP
Management Development Programme (MDP): Existing MDP and Advanced MOP
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Training &
Skill
Development
Promote
Entrepreneur-
ship among
youth
Eligibility
Area of
Support
Although the scheme guidelines mention that the scheme is applicable to all MSMEs,
the sub- components such as one day entrepreneurship awareness programme
is only meant for setting up MSEs and MDPs are not also available for Medium
Enterprises.
ASPIRE (A Scheme for Promotion of Innovation, Rural Industries, and Entrepreneurship)
scheme, aims to foster innovation and entrepreneurship primarily in rural areas. ASPIRE
has several key components, including the establishment of Livelihood Business Incubators
(LBI) and Technology Business Incubators (TBI). LBIs aim to provide entrepreneurship
training and support to help individuals launch their businesses, while TBIs focus on
commercializing innovative technologies developed in academic or research institutions.
Two main components of the scheme:
MSME Policy Landscape 55
Designing a Policy for Medium Enterprises Livelihood Business Incubator (LBI): These incubators focus on imparting skill development
and running incubation programs to promote entrepreneurship in the agro-rural sector,
with special attention to rural and underserved regions. LBIs aim to create employment
and livelihood opportunities by encouraging the setup of small businesses.
ASPIRE Fund of Funds (FoF) Managed by SIDBI: This Fund of Funds (FoF) was created
to invest in early-stage startups through Alternate Investment Funds (AIFs), specifically in
the agro- based sector. The focus is on nurturing innovation and business development,
creating forward and backward linkages with the value chain of manufacturing and service
delivery.
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Training &
Skill
Development
Foster
/vvo?tiov
and
Entrepreneurs
hip in rural
areas
Eligibility
Area of
Support
The scheme is primarily designed to support micro and small enterprises and
promote entrepreneurship in rural areas. Mentor Institutes focus on Micro Enterprise
creation. Role of Mentor Institutes is to create and engage an ecosystem for the
LBIs enabling Micro-Enterprise creation and creating a platform for converging
with various GoI/State Government schemes to facilitate the creation of micro-
enterprises and employment generation, among other functions.
Coir Vikas Yojana (CVY)aims to promote the growth and development of the coir
industry in India, focusing on various aspects such as technology, skill development, market
promotion, and welfare measures for workers in the sector. This scheme aims to enhance
the socio- economic conditions of those involved in the coir industry by improving their
skills, providing financial assistance, and promoting coir products in both domestic and
international markets.
Components of Coir Vikas Yojana
1.Coir Industry Technology Upgradation Scheme (CITUS): Focuses on technology
and quality upgradation as well as infrastructure development for the coir industry.
2.Science and Technology (S&T): Aims at upgrading technology and quality for
coir entrepreneurs and exporters.
MSME Policy Landscape56
Designing a Policy for Medium Enterprises 3.Skill Upgradation and Mahila Coir Yojana: Focuses on training and skill
development, particularly targeting women artisans.
4.Export Market Promotion (EMP): Provides marketing assistance to coir
entrepreneurs and exporters.
5.Domestic Market Promotion (DMP): Offers marketing assistance specifically to
small- scale coir entrepreneurs.
6.Trade and Industry Related Functional Support Services (TIRFSS): Encompasses
training and skill development, as well as infrastructure development for the coir
industry.
7.Welfare Measures: Includes insurance and other welfare measures aimed at coir
workers.
1
Obj ective
23
Coir
Entrepreneurs
Technology
h?P?tiovU
Training & Skill
Development,
D?letivP v
Infrastructure
Support
Development
of
the Coir
Industry
Eligibility
Area of
Support
Medium enterprises can primarily benefit from the Technology Upgradation
component of the Coir Vikas Yojana, while the other components cater mostly
to individuals, small enterprises, or women artisans. For instance, the Domestic
Market Promotion (DMP) is only available for small-scale coir workers. Similarly, the
other sub-components are applicable to individual coir workers or entrepreneurs
or women artisans.
Khadi Gramoday Vikas Yojana (KGVY) is an initiative by the Government of India aimed
at promoting the production and marketing of khadi and village industries. It has two
major components: (i) Khadi Vikas Yojana and (ii) Gramoday Vikas Yojana. It seeks to
provide comprehensive support to artisans and entrepreneurs involved in the khadi sector
and other traditional crafts, fostering rural development and self-sufficiency. The main
objective of the scheme includes Promotion of Khadi Production, Skill Development, Market
Development, and Sustainability. Under this scheme, financial assistance can cover up to
50% of the project cost for establishing new production units or upgrading existing ones.
For specific projects, support can reach up to Rs. 25 lakhs per unit, depending on the
MSME Policy Landscape 57
Designing a Policy for Medium Enterprises nature of the intervention. Marketing Assistance provides subsidy on cost of raw material.
Interest subsidy is also given to Khadi Institutions (4%).
1
Obj ective
23
M icro and
Small
Enterprises
Technology
U pgradation,
M arketing and
Infrastructure
Support
W?ouotivP ?Ze
??o?ctiov
v u?letivP
of khadi and
village
industries
Eligibility
Area of
Support
The scheme primarily targets micro and small enterprises, specifically those
engaged in khadi production and related activities. The scheme is designed to
support artisans and small-scale producers, including self-help groups (SHGs) and
cooperatives involved in the khadi sector.
B. COMMENTARY ON M oMSME INITIATIVES
The current documentation of schemes
75
implemented by the Ministry of MSME presents
an opportunity for greater standardization and transparency. A unified approach to naming
conventions and scheme listings across sources would enhance clarity and accessibility.
Creating a comprehensive document that consolidates all schemes, along with details on
fund allocation and disbursement, could help address existing discrepancies. Additionally,
ensuring timely updates on the operational status of schemes and making all relevant
documents publicly available would further strengthen transparency and support informed
decision-making.
75Such as the MSME Booklet published by MoMSME, the Annual Reports, Invest India Portal, MSME Website.
MSME Policy Landscape58
Designing a Policy for Medium Enterprises Table 4.1: Snapshot of support not provided to Medium Enterprises
Type of SupportMicro Small Medium
MSME SAMADHAAN- Delayed Payments
Management Development Programs
76
Training on Modern Packaging
Techniques
77
Training on Adoption of Bar Code
78
Adoption of e-Commerce Platform
Participation of Individual Enterprises in Trade Fairs / Exhibition
79
80% subsidy on
built-up space
rent paid
80% subsidy on
built-up space
rent paid
Subsidy on Technology Upgradation for ZED Effect Solutions
80% subsidy 60% subsidy 50% subsidy
Facilitation Council
Capacity Building of First Time MSE Exporters
80
Special Credit Linked Capital Subsidy for technology enablement
81
In conclusion, the analysis of the 18 MoMSME schemes outlined above, reveals a significant
disparity in support for medium enterprises, with only 8 schemes accessible to them.
Furthermore, within these schemes, several sub-components are restricted for Micro and
Small Enterprises, limiting the benefits that medium enterprises can derive. It should be
noted that the provision for credit is alarmingly sparse, with only a single scheme catering
to this crucial need. This skewed distribution of resources highlights the inadequacy of
support mechanisms for medium enterprises, ultimately hindering their growth potential
and competitiveness in the market.
If these issues are addressed, medium enterprises can significantly enhance their growth
potential and competitiveness in the market. By gaining better access to financial resources,
they will be able to invest in expanding operations, upgrading technology, and enhancing
productivity. Improved access to government schemes and incentives will allow medium
enterprises to innovate, enter new markets, and scale up more effectively.
76Sub-Component of Entrepreneurship and Skill Development Programme (ESDP) Scheme
77 Sub-Component of Procurement and Marketing (PMS) Scheme
78Sub-Component of Procurement and Marketing (PMS) Scheme
79Sub-Component of Procurement and Marketing (PMS) Scheme
80 Sub-Component of International Cooperation (IC) Scheme
81 Sub-Component of National SC-ST Hub Scheme
MSME Policy Landscape59
Designing a Policy for Medium Enterprises 4.2 STATE GOVERNMENT INITIATIVES
A. Overview of Existing State Government Initiatives
The proposed 6 states (Maharashtra, Tamil Nadu, Uttar Pradesh, Gujarat, West Bengal
and Telangana) account for 54% of the total MSMEs in India. Each state has distinct
sectors of concentration, and these sectors vary from one state to another. For example,
Maharashtra’s most concentrated sectors include textiles, pharmaceuticals, chemicals,
automobiles, engineering, and leather, reflecting the state’s diverse industrial base. Similarly,
West Bengal’s
prominent sectors include textiles and engineering (mainly leather), Foundry and Forging
industry, Food and agro processing, Gems and Jewellery, textiles and engineering.
B. Commentary on Existing State Government Initiatives
Maharashtra has 8 MSME-related schemes, all of which are extended to medium enterprises,
offering a variety of incentives like Capital subsidy, Investment Subsidy, Assistance in
Marketing, Reimbursement for stamp duty, Subsidy on power tariffs, etc. Some of the
flagship schemes Intellectual Property Rights (IPR) scheme, Industrial Promotion Subsidy
(IPS), Interest subsidy, etc.
For instance, IPR Scheme provides financial assistance up to Rs. 2 lacks will for domestic
patent applications, and up to Rs. 10 lacs for international patent applications.
BOX 4.1: STAKEHOLDERS STATEMENT
Maharashtra’s Women Policy 2024 is a unique initiative focused on promoting entrepreneurship and innovation among women, especially marginalized groups. It emphasizes skill development, access to financial services, and rebranding Self-Help Groups (SHGs) as engines of economic growth. The policy offers institutional and funding support for women-led producer associations, promotes SHGs in government schemes, and provides training in branding and marketing, empowering women entrepreneurs and strengthening their economic role.
-Director Maharashtra Chamber of Commerce, Industries and Agriculture
Major challenge for the MSMEs is the availability of skilled labor, mainly due to a
mismatch between the skills needed and those possessed by the workforce. Many
companies struggle to find the right talent that aligns with their requirements.
-Survey by the Federation of Indian Chambers of Commerce and Industry
(FICCI), 2023
Medium enterprises face several key challenges, including limited access to credit
due to collateral issues, low adoption of technology, inadequate infrastructure
etc.
-Maharashtra Economic Advisory Council 2023
MSME Policy Landscape60
Designing a Policy for Medium Enterprises Tamil Nadu has 15 MSME-related schemes, but only 46% cater specifically to medium
enterprises, providing a variety of incentives such as reimbursements for quality certification
costs and infrastructure development support etc. Some of the flagship schemes include
the Back-ended Interest Subsidy for MSMEs, offering 3% interest subvention on term loans
for technology up-gradation and modernization, as well as the Credit Guarantee Fund
Trust Scheme and 25% of the cost under generator subsidy scheme.
BOX 4.2: BEST PRACTICES – TAMIL NADU – SAP 2016
Tamil Nadu Plots/ Sheds Allotment Policy, 2016
Developed plots/shed in the Industrial Estates are being allotted on outright sale basis / lease / rental basis to MSMEs by advertising the details of vacant plots / sheds in the official website of TANSIDCO. On receipt of application requesting allotment of plots / sheds, Screening Committee meeting is convened to select eligible applicants after an interview. In case of a greater number of eligible applicants are found in places where the number of plots is limited, then the allotment is done through drawing of lot in the presence of applicants.
Uttar Pradesh has 19 schemes related to MSMEs and about 84% of these schemes are applicable to medium enterprises, offering a wide range of incentives such as Interest subsidy, Land Use Conversion Fee Waiver, Reimbursements for industrial parks, Subsidy for Standard QualityCompliance etc. Some of the flagship schemes are One District One Product (ODOP), Marketing Development Assistance Scheme, Promoting Leadership and Enterprise for Development of Growth Engines (PLEDGE) etc.
For example, ODOP scheme provides different trainings across the value chain of ODOP
product for that respective district and it targets skilled and unskilled artisans for training
under different modules and certification and provides for a free advanced toolkit free to
trained artisans.
BOX 4.3: BEST PRACTICES – UTTAR PRADESH – PLEDGE
SCHEME
Promoting Leadership and Enterprise for Development of Growth Engines (PLEDGE), scheme by Uttar Pradesh government aims to promote the development of private industrial parks across the state. Under this scheme, private developers can establish parks on 10-50 acres of land, with 75% of the area reserved for MSMEs. Developers are responsible for land allocation, infrastructure development, and maintenance. The scheme offers 100% stamp duty exemption for private developers and women entrepreneurs acquiring industrial land in these parks. SIDBI will provide financial assistance to address funding gaps for setting up these parks.
MSME Policy Landscape 61
Designing a Policy for Medium Enterprises Gujarat has 16 MSME related schemes and all these are applicable to medium enterprises.
These schemes offer a wide range of incentives like Interest subsidy on Term Loan, Subsidy
on technology up-gradation, Subsidy on patent registration, Subsidy on consumption of
Energy and Water, Assistance for sick enterprises etc. Some of the flagships schemes are
Rehabilitation of sick enterprises, Gujarat MSME Export Promotion Scheme, Assistance for
Technology Acquisition etc.
For instance, Assistance for Common Environment Infrastructure scheme offers 75%
assistance maximum amount of 80 lakhs for infrastructural development.
BOX 4.4: BEST PRACTICES – GUJARAT – REHABILITATION
OF SICK ENTERPRISES
Rehabilitation of sick enterprises is one of the unique schemes by government of Gujarat and it is applicable to all categories. Reimbursement of rent is again for all categories adding to motivate the industries to move from micro to small to medium.
West Bengal has around 11 schemes related to MSMEs and only 50%of these schemes are applicable to medium enterprises, offering a range of incentives such as Capital Investment Subsidy, Interest subsidy on Term Loan, Subsidy for Energy Efficiency, Subsidy on Stamp Duty and Registration Fee, Subsidy for Water Conservation/ Environment Compliance etc. Some of the flagship schemes are Banglashree, Incentive scheme for Industrial parks etc.
For instance, Banglashree scheme offers various incentives to medium enterprises such
as interest subsidy of 25% on term loans, 100% waiver of electricity duty, 75% subsidy on
stamp duty, 30% subsidy on SGST, welfare workforce assistance, 50% subsidy for patent
registration.
Telangana has implemented 10 MSME related schemes, with 80% of them designed for
medium enterprises. These schemes provide incentives such as land conversion subsidy,
seed capital assistance, subsidy on quality certification etc. Some of the flagship initiatives
are T- Pride, T-Idea.
For instance, T-Pride for SC/ST entrepreneurs provides a variety of incentives for medium
enterprises, including 100% reimbursement of stamp duty and transfer duty on land
purchases, among others. In contrast, T-Idea provides a reimbursement of interest subsidy
of 4% for spinning activity and 6% for industries involved in composite activities i.e.,
spinning, and weaving/knitting, specifically for technology up-gradation.
MSME Policy Landscape62
Designing a Policy for Medium Enterprises BOX 4.5: BEST PRACTICES – TELANGANA – STATE SCHEMES
TG–iPASS (Telangana State Industrial Project Approval and Self-Certification System)
is a single window clearance system that reduces the complexity for businesses.
The portal enables self-certification of compliance with statutory requirements,
minimizing the need for frequent inspections and manual checks. It also guarantees
clearances within a specified timeframe, typically 15 days, ensuring that businesses
can start their operations or expand their ventures without unnecessary delays.
Revenue-based financing for MSMEs: The Government of Telangana will run a
pilot program for revenue-based financing for MSMEs. As per the model, MSMEs
can access credit based on future sales, reducing upfront burdens and making
funding more accessible, especially for women-led ventures. The pilot project will
help the Government assess if MSMEs in the state are interested in such routes
for finance. The pilot will also help the Government identify interventions that the
Government can make to encourage more revenue-based financing.
The government will offer technical support and guidance to help MSMEs enhance
their financial planning and adopt standard book-keeping practices. To achieve this,
state will engage third party experts to provide practical and accessible assistance
to MSMEs across the state. It will also produce training videos in Telugu to teach
basic-book keeping skills, helping MSMEs better manage working capital and access
formal credit.
Creation of raw materials directory: government plans to develop a
comprehensive directory of raw materials needed across the state, along with a
list of verified suppliers who meet quality control standards.
Details of all the schemes, as stated above are given in the Annexure II.
4.3 GAPS IN THE POLICY ECOSYSTEM
1.Limited support for Medium Enterprises: Most of these schemes and other
support mechanisms are geared more towards micro and small categories. There
are very few schemes that are applicable to ME. Even where the support and
incentives are applicable for all the categories – micro, small and medium there
is no focus specific to medium enterprises.
2.Concerns of Small Enterprises Regarding Transition to Medium Enterprises:
Mature and larger small enterprises often perceive that transitioning to medium
enterprise status will result in increased taxes, higher electricity costs, and greater
complexities in GST and other compliance requirements. To navigate these
challenges, some entrepreneurs opt to establish additional units, potentially
registered under the names of family members.
3.Lack of Interest subsidy scheme for medium enterprises: Most schemes related
to interest subvention primarily target micro and small enterprises, with few
MSME Policy Landscape63
Designing a Policy for Medium Enterprises providing similar support for medium enterprises. Currently, there are no policies
or government initiatives in place that offer interest subsidies specifically for
medium enterprises across the country. For instance, Telangana’s Pavala Vaddi,
a sub-component of the T-IDEA scheme, is designed for MSMEs but it applies
only to micro and small but not medium enterprises.
4.Lack of Facilitation Councils (FCs) to medium enterprises: The scope of FCs
is limited to micro and small enterprises, leaving medium enterprises aside. And
most states have only one FC which is insufficient to handle the high volume of
cases, leading to delays and backlogs.
As has been enumerated in Chapter 3, there are a few factors inhibiting the growth
of MEs. This chapter further identifies gaps in current policy initiatives. It can also be
deduced that very few schemes exist that specifically cater to the needs of Medium
Enterprises. With a targeted push, Medium Enterprises can increase their already significant
contribution to Innovation, Export, and Employment. In the following chapter we identify
some International Best Practices, that can be aligned with the Indian perspective to
strengthen the role of Medium Enterprises in the country’s economic landscape.
MSME Policy Landscape64
Designing a Policy for Medium Enterprises International Best Practices65
5
INTERNATIONAL
BEST PRACTICES CHAPTER 5
INTERNATIONAL BEST
PRACTICES
In this chapter, we explored international best practices and examples from countries such
as Canada, Singapore, Germany, and Japan. We highlighted how these nations support
Medium Enterprises (MEs) in areas like innovation, access to skilled labour, access to
technology, awareness of various schemes, and access to working capital.
Example 1: Awareness of Schemes/Compliance: Canada’s BizPaL and Singapore’s GoBusiness Licensing Portal
Canada’s BizPaL centralized the permit application process across all government levels, significantly reducing time spent on regulatory tasks. Singapore’s GoBusiness Licensing Portal integrated over 20 government agencies, offering AI-driven recommendations for licenses and compliance requirements
82
.
1.Canada’s Innovation, Science, and Economic Development (ISED) – BizPaL:
URL: https://www.bizpal.ca
USPs:
®Cross-Government Integration: Centralized access to permits and licenses
from federal, provincial, and municipal levels.
®Personalized Application: Tailored recommendations based on business
type, location, and needs.
®Simplified Navigation: A step-by-step guide for businesses to ensure they
apply for the relevant permits and licenses.
82 https://licence1.business.gov.sg/feportal/web/frontier/home
66International Best Practices 2.Singapore’s GoBusiness Licensing Portal URL: https://www.gobusiness.gov.sg
USPs:
®Integration of 20+ Government Agencies: A single platform for applying to
multiple agencies for licenses and government schemes.
®AI-Driven Recommendations: Personalized recommendations for schemes,
licenses, and compliance based on business details.
®Compliance Reminders: Automated reminders for license renewals and
regulatory updates, ensuring businesses remain compliant.
Example 2: Access to Advance Technologies: Germany’s Industry 4.0, Japan’s
Connected Industries, South Korea’s Manufacturing Innovation 3.0, and China’s
Made in China 2025
International Best Practices67
Designing a Policy for Medium Enterprises Germany’s Industry 4.0 initiative launched SME 4.0 Competence Centers, offering small and
medium-sized enterprises (SMEs) access to resources and expertise. This support led to
a 40% increase in the adoption of digital tools
83
. Japan’s Connected Industries promoted
collaboration through the IoT Acceleration Consortium, resulting in wider use of IoT. China’s
initiatives promoted the adoption of robotics and AI by offering tax incentives, thereby
enhancing industrial competitiveness.
Some more country-specific example:
Table 5.1: International Best Practices for Technology Adoption
Country
Name of the
Scheme
Key Features/Support Provided to
Medium Enterprises
Germany
Industry 4.0
Initiative
SME 4.0 Competence Centers: These centers provide
medium enterprises with access to experts, resources,
and best practices for adopting digital tools and smart
manufacturing. They offer training, workshops, and consulting
services on implementing Industry 4.0 technologies.
Innovation Grants: Financial assistance to medium enterprises
for R&D, technology integration, and process digitization.
Public-Private Partnerships: Government encourages
collaboration between academia, industry, and government
institutions for sharing knowledge and fostering innovation.
European
Union
Horizon Europe &
Digital Europe
Innovation and R&D Funding: Under Horizon Europe,
medium enterprises can receive grants to fund digital
transformation projects, including integrating Industry 4.0
technologies like AI, big data, and automation.
Skills Development Programs: Training programs for workers
in medium enterprises to enhance their understanding of AI,
IoT, and big data usage in manufacturing.
Digital Innovation Hubs (DIHs): DIHs act as local support
networks to help medium enterprises with innovation
testing, access to advanced technology infrastructure, and
expert consultancy.
83 i. https://www.aws-institut.de/en/research/mittelstand-4-0-kompetenzzentrum/
ii. https://www.imw.fraunhofer.de/en/press/press-releases/press-release--medium-sized-businesses-4-0---
competence-center-e.html
International Best Practices68
Designing a Policy for Medium Enterprises Country
Name of the
Scheme
Key Features/Support Provided to
Medium Enterprises
United
States
Advanced
Manufacturing
Partnership (AMP)
& Manufacturing
USA
- Manufacturing USA Institutes: Medium enterprises gain
access to 14 specialized institutes that focus on different
cutting-edge technologies like additive manufacturing,
robotics, and smart materials. These institutes provide shared
R&D facilities, knowledge transfer, and workforce training
opportunities. Small Business Innovation Research (SBIR):
This program offers funding specifically for medium and
small enterprises to develop and commercialize innovative
technologies. It provides financial support for research,
prototyping, and market readiness of smart manufacturing
tools. Workforce Training: Programs that offer skills training
for employees on advanced manufacturing and digitalization
to better prepare for Industry 4.0 environments.
Japan
Connected
Industries
SME-Specific Support: The government provides funding,
consultation services, and resources tailored to help medium
enterprises integrate advanced technologies such as IoT, AI,
and cloud computing into their manufacturing processes.
IoT Acceleration Consortium: A public-private initiative
to promote shared IoT infrastructure and R&D to benefit
SMEs in their digital transformation. Medium enterprises
can collaborate with large corporations to accelerate tech
adoption.
Public-Private Collaboration: Collaboration between SMEs,
universities, and large corporations is encouraged for
fostering innovative industrial applications and improving
smart manufacturing solutions.
China Made in China 2025
- Tax Incentives and Subsidies: The Chinese government
provides tax reductions and subsidies to medium enterprises
that adopt Industry 4.0 technologies, including robotics, IoT,
and smart manufacturing systems.
Robust R&D Funding: The strategy includes significant
investments in research and development for advanced
technologies such as AI, automation, and industrial robotics,
helping medium enterprises upgrade their manufacturing
capabilities.
Specialized Industrial Zones: The creation of specific
industrial zones that provide infrastructure, technical
support, and tax benefits for medium enterprises aiming
to implement smart manufacturing and digital solutions.
International Best Practices69
Designing a Policy for Medium Enterprises Country
Name of the
Scheme
Key Features/Support Provided to
Medium Enterprises
Singapore
Smart Industry
Readiness Index
(SIRI)
SIRI Tool: A free assessment tool that helps medium
enterprises evaluate their Industry 4.0 readiness. The
tool offers an analysis of current processes and provides
recommendations for improving digital
integration and operational efficiency.
Industry Transformation Maps (ITMs): These sector- specific
blueprints outline strategies for integrating Industry 4.0
technologies in key industries, providing medium enterprises
with a roadmap for digital transformation.
Government Grants: Several grant schemes are available
to medium enterprises to support technology adoption,
including the Enterprise Development Grant
(EDG) and Productivity Solutions Grant (PSG). These
grants help businesses invest in digital solutions and smart
manufacturing systems.
South
Korea
Manufacturing
Innovation 3.0
Subsidies for SMEs: The South Korean government offers
financial support to medium enterprises that adopt smart
manufacturing systems, particularly in integrating robotics,
AI, and IoT.
Workforce Training Programs: Government-backed
programs offer training to employees in medium enterprises
to upgrade their skills in using advanced technologies like
robotics, AI, and data analytics for smart manufacturing.
Public-Private Partnerships: Encouragement of collaboration
between the government, private industries, and academic
institutions to foster innovation in manufacturing processes
and to promote smart manufacturing technology adoption
across the sector.
Example 3: Access to Skilled Manpower: Australia’s Industry Skills Fund, Singapore’s
SkillsFuture, and Canada’s Job Grant (CJG)
Australia’s Industry Skills Fund provided $476 million to support upskilling, leading to an
improvement in worker retention
84
. Singapore’s SkillsFuture program enabled continuous
91 International entrepreneurial capabilities: The role of networks in the small multinational
enterprise, http://shura.shu.ac.uk/24195/learning, while Canada’s Job Grant covered 50-
84https://opea.net.au/industry-skills-fund-isf/#:~:text=The%20Government%20will%20provide%20$476.0,Australian%20Apprenticeships%20Mentoring%20Programme;
https://www.aph.gov.au/~/media/Committees/eet_ctte/estimates/add_1617/Education/Answers/SQ17-
000196-Att-1.pdf
International Best Practices70
Designing a Policy for Medium Enterprises 100% of training costs, leading to greater engagement in training programs
85
.
Key features of the program
Table 5.2: International Best Practices for Addressing Skill Gap
Country
Scheme/
Programme
FundingKey Features
Australia
Industry
Skills Fund
(ISF)
The Government will provide
$476.0mn over four years to
establish the Industry Skills
Fund (ISF) to support the
training needs of small to
medium enterprises which
the national training system
cannot readily meet.
Industries targeted include health
and biomedical products; mining,
oil and gas equipment technology
and services; and advanced
manufacturing, including defence
and aerospace. Delivered through
a co-contribution model.
SingaporeSkillsFutu re
The government provides
Skills-Future Credit (new and
top- up) to all Singaporeans
that does not expire. Course
fee funding and absentee
payroll for employers who
sponsor employee training.
For Individuals (Early-Career)
For Individuals (Mid-Career) For
Students For Employers For
Training Providers
Canada
Canada Job
Grant (CJG)
Canadian government funding
program -Receive up to 50-
100% in Grants for Employee
Training.
Designed to reduce the costs
of providing third-party skills
training to new and existing
employees. Launched in 2014, the
CJG allocates upwards of $194M
annually to support the upskilling
of new and existing employees so
that they can perform learn new
skills and become more valuable to
their organization.CJG maintains a
provincial stream for each province
and territory,
E-
Academy
Turkey—
KOSGEB provides distance training
on entrepreneurship; an effective,
easy and flexible entrepreneurship
training without time and space
constraints by E- Akademi
Programme. Entrepreneurship
Support Programme, with
preferential treatment for
women, youth and handicapped
entrepreneurs
85https://www.bmeaningful.com/blog/2019/02/use-the-canada-job-grant-to-cover-50-100-of-employee-
training-costs/
International Best Practices71
Designing a Policy for Medium Enterprises Example 4: Support for R&D/Innovation: Israel’s Magnet Program, South Korea’s
SME Technology Innovation Program, and China’s Spark Program
Israel’s Magnet Program provided grants covering up to 66% of R&D costs, driving a
50% increase in innovation projects
86
. South Korea’s SME Technology Innovation Program
covered a significant portion of R&D costs, leading to a substantial increase in patent
filings, while China’s Spark Program supported rural innovation by providing customized
funding for enterprises.
Key features of some country-specific programs:
Table 5.3: International Best Practices for Promoting InnovationKey
Features
Scheme/ProgrammeFundingKey Features
South
Korea
SME Technology
Innovation Program
The central government
funds 50% of the program,
and local governments
fund 25%.
If the program is successful,
the government receives
30% of its contribution
back as a technology fee
over five years.
UK Future Fund
High-growth UK-based
companies with between
GBP 125 000 and GBP
5 million and matching
funding from private
investors
Targeted support is
channelled to the most
R&D-intensive SMEs in the
form of grants and loans.
Malaysia InnoCERT
SMEs that demonstrate
strong innovation practices
receive the InnoCERT
certification, which
enhances their credibility
and visibility in both
domestic and international
markets.
The program motivates
Malaysian SMEs to innovate
continuously and leverage
new technologies
China Spark
Supports R&D efforts
by providing financial
assistance to companies
engaged in developing new
technologies, patents, and
innovative products.
Various technical projects
were supported depending
on criteria like small
investment, use of rural
resources, quick benefits
and appropriateness of the
technology for the rural
areas etc.
86 https://innovationisrael.org.il/en/programs/magnet-consortiums/#about_route Government Support for
Commercial R&D: Lessons from the Israeli Experience
https://www.nber.org/system/files/chapters/c10786/c10786.pdf
International Best Practices72
Designing a Policy for Medium Enterprises Key
Features
Scheme/ProgrammeFundingKey Features
Magnet Israel
Grants covering up to 66%
of the total R&D costs for
approved projects
The program encourages
the formation of R&D
consortia, where companies
from various sectors, along
with research institutions
and universities, collaborate
to develop cutting-edge
technologies.
Example 5: Access to Working Capital: Brazil’s BNDES Giro and France’s Mid- Term
Financing Scheme
Brazil’s BNDES Giro provided emergency working capital loans, helping businesses remain
operational, while France also supported companies with asset-based loans, contributing
to lower bankruptcy rates.
Key features of some country-specific programs:
Table 5.4: International Best Practices for Access to Working Capital
Funding
Key
Features
Mode of Support
Emergency
Working
Brazil
BNDES Giro: Temporary financing scheme for emergency working
capital: Under this finance is offered through the national development
bank. It allows them to apply at their own retail bank’s local branch in
person and receive an immediate decision, that if positive will arrange
for a wire transfer within 24 hours. Maximum loan amount of 20% of
gross revenue, up to R$ 70 million (~€ 16 million) a year, and R$ 20
million (€ 4,5 million) per request.
France
Mid Term Financing: Provision of asset loans intended for VSEs, MSMEs
and mid-cap companies with at least 12 months of balance sheets.
Allows financing a cash requirement related to cyclical difficulty, a
temporary fragile situation or a working capital requirement that
does not allow normal operating condition. Financing ceiling: €10,000
to 300,000. Term: 7 years, including 2 years of deferred capital
amortization.
International Best Practices73
Designing a Policy for Medium Enterprises Funding
Key
Features
Mode of Support
Fiscal
Support for
Transitioning
Enterprises
Germany
KfW Bank offers “KfW Entrepreneur Loan”, which provides funding
for companies in their growth phase, allowing them to access capital
even as they transition between categories such as small to medium.
Tax incentives related to R&D and investment in technology are not
tied to the size classification but are available to all enterprises that
meet certain criteria. Thus, transitioning from small to medium does
not automatically disqualify a business from these benefits.
Australia
“Small Business Investment Company (SBIC)” program is designed to
assist small businesses in transitioning to medium-sized enterprises.
It provides access to capital, tax incentives, and co-investment
opportunities that are not lost when a business grows.
Example: After transitioning from small to medium, Australian
businesses can continue to access the “Instant Asset Write-Off
program”, which allows them to immediately deduct the cost of
eligible assets.
Insights gained from the above global best practices can provide a roadmap for enhancing
support for MEs in India.
International Best Practices74
Designing a Policy for Medium Enterprises Recommendations 75
RECOMMENDATIONS
6 CHAPTER 6
RECOMMENDATIONS
UNLOCKING THE POTENTIAL OF MEDIUM ENTERPRISES FOR
ECONOMIC GROWTH
Medium enterprises play a pivotal role in driving economic growth, contributing significantly
to employment generation, industrial output, and exports. However, several structural and
operational challenges hinder their full potential. To address these gaps, a targeted and
well-structured policy approach is essential. The recommendations in this chapter draws
on identified challenges, stakeholder consultations, and gaps in the current policy
ecosystem, supported by a comprehensive review of best practices from both developing
and developed countries. The focus is on financial access, technological integration, R&D
promotion, skill development, and policy facilitation to create an enabling ecosystem
for medium enterprises in India.
The recommendations outlined below are based on identified challenges, stakeholder
consultations, and global best practices. The focus is on financial access, technological
integration, R&D promotion, skill development, and policy facilitation to create an enabling
ecosystem for medium enterprises in India.
Our findings indicate that MSME’s require support in:
90
1. Facilitating Financial Access and working capital support
2. Supporting Technology Integration and industry 4.0 adoption in Business
Operations.
3. Strengthening R&D and Innovation Ecosystem
4. Enhancing support for cluster-based testing and quality certification
5. Need for a Centralized Digital Portal for Medium Enterprises
6.1 FACILITATING FINANCIAL ACCESS AND WORKING
CAPITAL SUPPORT
Medium enterprises require higher working capital than micro and small enterprises,
yet they lack dedicated financing mechanisms to support their liquidity needs. While
initiatives like the Self-Reliant India (SRI) Fund aim to provide equity-based support, there
is no specific intervention for addressing the working capital financing needs of medium
enterprises as various existing programs such as Mudra Loan, PMEGP, CGMSE primarily
focus on micro and small enterprises.
90 Land Issue has not been taken up for the purpose of providing recommendations because land is a state
subject. However, some of the best practices of states have been included in Chapter 4.
76Recommendations Since at present Micro and Small Enterprises are allowed to get all non-tax incentives
for up to 3 years after upgradation to higher category, it is proposed that these benefits
mentioned below be given to those that have consistently remained in the medium category
for at least three continuous years. This ensures that the support is targeted at stable
and genuinely growing medium enterprises.
Intervention for Working Capital
Medium enterprises typically have significantly higher capital requirements than micro and
small enterprises. While the Government of India has established initiatives such as the
Self-Reliant India (SRI)
91
Fund to bridge this gap, there is currently no dedicated scheme
for addressing the working capital needs of medium enterprises.
The 2017 Prabhat Kumar Committee report also highlighted the need for revising the
classification of NPA for banks lending to MSMEs by extending the 90-day limit set by
RBI for classifying overdue payments as NPAs to 180 days. This shall be instrumental in
alleviating the pressure being faced by medium enterprises, thereby allowing them to
prioritise operational activities over servicing loan instruments.
Another important critical issue is regarding the support for small enterprises transitioning
to medium enterprises. Many small businesses face credit shortages during this critical
growth phase, which often discourages them from making the transition. Although there is
a mechanism that allows micro and small enterprises that transition to medium enterprise
status to continue availing the benefits previously received for a period of three years.
92
Global Best Practices
Singapore has topped direct government spending for MSMEs at 8.9%
93
of GDP
during the pandemic, including wage subsidies, working capital loans and specific
grants for sectors most impacted. Canada spends nearly 6.6% of GDP on MSMEs.
In contrast, India spends 0.08% of its GDP
94
on the MSME sector that generates
29% of the country’s GDP. Canada offers structured MSME financing, with sector-
specific loan caps and subsidized interest rates.
Recommendations
A. Working Capital Financing Scheme for Medium Enterprises
Introduce a dedicated financing scheme under the Ministry of MSME, allowing medium
enterprises to avail loans at concessional rates. This scheme should provide loans of up
91 SRI Fund essentially functions as ‘Fund of Funds’ channeling capital through private equity firms to eligible
MSMEs with high growth potential. Through a combination of government contribution and private equity
investments, it consists of a total corpus of Rs. 50,000 crores.
92Source: PIB 20th July 2023 – Delay in projects
93HYPERLINK “http://theglobaleconomy.com/”TheGlobalEconomy.com HYPERLINK “http://www.
theglobaleconomy.com/Singapore/Government_size/”(www.theglobaleconomy.com/Singapore/
Government_size/
94 Nominal GDP or GDP at current prices for the year 2022-23 is estimated at Rs. 269.50 lakh crore. MSME
Budget 2022-23 is 22137.95 crore, which is 0.08% of GDP.
Recommendations 77
Designing a Policy for Medium Enterprises to acertain percentage of gross revenue, depending upon the sector of the unit (i.e.
manufacturing or service), capped at `25 crore, with a maximum of `5 crore per request.
In line with India’s vision of becoming ‘Atmanirbh ar’ and boosting its manufacturing
capabilities and exports, it is advisable to promote medium enterprises in manufacturing
by easing their access to working capital. This is because medium enterprises
contribute significantly to t he MSME sect or’s GDP and export. By providing easier
accessto work ing capital, these enterprises can scale up operations, improve
productivity , and contribute even more to India’s manufacturing growth, which is
expected to reach $1 trillion by 2025-26.
B. Emergency Credit Line (Medium Enterprise Credit Card)
For emergency needs, a credit card with a pre-approved limit of up to `5 crore, may
be introduced. This facility will allow enterprises to manage urgent expenses, such as
payroll, inventory procurement, and equipment repairs, in case the loan disbursement
longer than usual. The credit card’s interest rates should align with the market rate of
interest.Another benefit of these kind of initiatives is that it provides collateral-free credit
for smaller amoun ts tomeet operational requirements. Ensure that credit card interest
rates align with market rates while allowing a grace period for repayment.
Loan at subsidized
interest rate up to a
certain percentage
of gross revenue,
capped at ` 25 crore
Credit Card with
pre-approved
limit of ` 5 crores
Expected Impact
Ensures immediate access to capital, reducing financial distress and improving
liquidity management.
Strengthens business continuity, allowing enterprises to scale without funding
bottlenecks.
6.2 TECHNOLOGY INTEGRATION AND INDUSTRY 4.0
ADOPTION.
While large corporations have the required resources to invest in cutting-edge technologies,
and small enterprises often benefit from targeted Government schemes, medium
enterprises fall into a policy gap, where they do not qualify for small enterprise benefits
but also lack the resources and expertise to adopt advanced AI, IoT, automation, and
smart manufacturing solutions independently. The absence of structured support has
made technology adoption slow and fragmented. Additionally, global supply chains are
evolving rapidly, with an increasing focus on automation, digital integration, and smart
manufacturing. Medium enterprises must upgrade their capabilities to meet international
Recommendations78
Designing a Policy for Medium Enterprises standards and participate in global value chains. Failure to do so could result in reduced
market access, lower productivity, and an inability to scale.
While initiatives like MSME Champions and Udyog Bharat are in place to support technology
upgrades 82% of medium enterprises have yet to incorporate advanced technologies into
their operations.
Tool Rooms and Technology Centres established by the Government of India provide a
strong foundation for technological development and skill enhancement which can be built
upon using their infrastructure for adoption of Industry 4.0 technologies among medium
enterprises.
Government of India’s initiative to establish 20 new Technology Centres (TCs) and 100
Extension Centres (ECs) under the scheme “Establishment of New Technology Centres /
Extension Centres” marks a significant stride towards empowering the MSME sector and
skill seekers across the nation. The scheme was approved by the Cabinet Committee on
Economic Affairs (CCEA) on November 1, 2018. These TCs and ECs will provide critical
services such as technology support, skilling, incubation, and consultancy to MSMEs and
skill seekers.
GLOBAL BEST PRACTICES
Germany’s SME 4.0 Competence Centers provide targeted technological
support to medium enterprises. They offer digital transformation training to
help businesses adopt automation and IoT. Financial incentives encourage
investment in smart manufacturing solutions. This approach strengthens SMEs,
making them globally competitive.
China’s Smart Factory Initiative helps medium enterprises adopt AI-driven
manufacturing for efficiency. It promotes AI, data analytics, and automation to
optimize production processes. Government support includes policy incentives
and technology partnerships. This initiative enhances innovation and boosts
China’s global manufacturing leadership.
Recommendations
A. India SME 4.0 Competence Centres
Leverage the existing Technology Centres (TCs) under the Ministry of MSME and revamp
them into “India SME 4.0 Competence Centres.” These Competence Centres ensures cost-
effective implementation, maximized resource utilization, and streamlined support for
medium enterprises.
These new TCs can be designed to act as competence centres that will cater to various
industries, including General Engineering, Fragrance and Flavour, Electronics Systems
Design and Manufacturing (ESDM), Sports, and other sectors based on regional and
industry-specific demands. This targeted approach will ensure alignment with industry
Recommendations 79
Designing a Policy for Medium Enterprises needs, making the services offered by these centres highly relevant and impactful. By
equipping MSMEs with cutting-edge tools and fostering a culture of innovation, the centre
will aim to create future-ready enterprises capable of competing in global markets. The
integration will ensure these centres become innovation hubs for MSMEs, equipping them
with the tools and knowledge needed to adopt Industry 4.0 technologies and drive growth.
These centres should provide:
AI & IoT labs, AR/VR workstations for training including innovation
ecosystems.
Rapid prototyping facilities, including 3D printing and smart manufacturing hubs.
Capacity building and Training.
Consultancy services, Incubation and Start-Up support for digital transformation.
B. Hub-and-Spoke Model for Outreach
TCs and ECs may operate in a Hub-and-Spoke Model. Each TC (Hub) should act as a
centralized node for cutting-edge facilities. Extension Centres (Spokes) ensure outreach
in underserved areas. The SME Competence Centres’ resources can flow seamlessly.
Collaboration with IITs, NITs, and other technical institutes will help to foster R&D projects
and internships.
C.Phased Implementation Strategy
Pilot Phase: Test SME Competence Centre components in select Technology
Centres (TCs) and assess MSME readiness.
Full Integration: Expand to all 20 TCs, leveraging the Hub-and-Spoke model via
100 Extension Centres (ECs).
Continuous Improvement: Monitor adoption rates, MSME growth, and training
participation, updating programs with emerging technologies.
Recommendations80
Designing a Policy for Medium Enterprises Expected Impact
The initiative is expected to significantly accelerate the adoption of Industry 4.0
technologies among medium enterprises, fostering a more digital and data-driven
manufacturing ecosystem. Through targeted interventions such as skill development,
technology demonstrations, and access to smart manufacturing solutions, these enterprises
will be better equipped to integrate advanced automation, IoT, AI-driven analytics, and
digital twin technologies into their operations. This will lead to increased efficiency, reduced
downtime, and enhanced production quality, ensuring that medium enterprises remain agile
and resilient in an evolving industrial landscape.
Furthermore, by enabling participation in digital supply chains, the initiative will enhance
the global competitiveness of medium enterprises. With improved data integration, real-
time monitoring, and seamless connectivity with international buyers and suppliers, Indian
manufacturers will be able to meet stringent global quality standards and compliance
requirements. This transformation will not only open new export opportunities but also
position India as a preferred manufacturing hub, aligning with the broader vision of ‘Make
in India’ and ‘Atmanirbhar Bharat’ for a self-reliant and technologically advanced industrial
sector.
6.3 STRENGTHENING R&D AND INNOVATION
ECOSYSTEM
Being more export orientated and having larger presence in manufacturing sector,
investment on R&D is a compulsion rather than a choice for the medium enterprises.
India has established a set of schemes to provide R&D support to MSMEs. As for example
The Technology Centre Scheme (TCS) provides services such as product development,
prototyping, and consultancy in the areas like Aerospace, Automotive, electronics, IT and
General Engineering. However, a very few Medium Enterprises take the benefit of the
scheme. The untapped potential of Medium Enterprises to innovate can be realized by
creating a research promotion cell.
Global Best Practices
The EU’s Horizon 2020 Program provides competitive grants to SMEs for
industry-led R&D. It encourages innovation by funding projects in advanced
manufacturing and digital transformation. These grants help SMEs develop
cutting-edge technologies and enhance market competitiveness. The program
strengthens collaboration between businesses, researchers, and technology
providers.
South Korea’s SME Innovation Fund connects universities and MSMEs for joint
research initiatives. It fosters innovation by facilitating knowledge exchange and
technology development. Government-backed funding supports collaborative
projects in smart manufacturing and Industry 4.0. This approach enhances
SMEs’ capabilities, driving industrial growth and global competitiveness.
Recommendations 81
Designing a Policy for Medium Enterprises Recommendations
A. Establishment of an MSME Research & Innovation Fund
The Self-Reliant India (SRI) Fund has an allocation of Rs. 10,000 crores from the
Government of Indiaand Rs. 40,000 crores fro m Private Equity/Venture Capital Funds,
totaling Rs. 50,000 crores in equity support for MSMEs with high growth potential. Since
the laun ch of the Fund in 2021, a total of Rs. 4,885 crores has been invested in MSMEs,
including the Government of India’s share of Rs. 529.40 crore.
Forthis intervention, funds from the SRI Fund may be utilized by reserving 25-30% of
the GoI’s share (i.e. Rs. 2500-2800 crores) for focusing exclusively on financing Medium
Enterprise projects in this regard.
Adopt EU type funding mechanism in which the government after due process will identify
a set of major R&D gaps and invite proposal from the Medium Enterprises to bridge
those gaps. A competition amongst the Medium Enterprises will improve the quality of
proposals and thegovernment will through this mech anism en sure that the R&D is aligned
to national priorities.
B.Three-Tier Governance Mechanism
Create a three-tier mechanism of managing the funding process and monitoring
and reviewing the progress of projects is required. At the apex level there should be a
“Expert Com mittee” con sisting of expert bodies that will chalk out the research
agenda for the near future and for the long-term future. This council will identify areas of
research tha t will enable the entire country to become globally competitive. This council
may have member s of industry , industrial res earch organ ization , research institutions,
academic institutions (technical as well as management) and officials from variou s
Ministries.Below this will be the Research Funding Management Committee that will
call for R&D proposals from medium enterprises based on identified gaps and national
priorities. And finally the Project Review and Monitoring Committee will monitor the
performance and progress of these R&D initiatives.
Expected Impact
The initiative will boost domestic R&D investment, reducing dependence on foreign
technologies. By encouraging industry-led research, it will drive the development
of indigenous solutions. This will enhance technological self-reliance and foster a
robust innovation ecosystem. Strengthening local capabilities will position India
as a leader in advanced manufacturing.
Creating high-value innovations will significantly improve global competitiveness.
Cutting-edge developments in automation, AI, and smart manufacturing will
enhance product quality and efficiency. These advancements will open new
export opportunities for Indian industries. A strong innovation culture will ensure
sustained growth in the global market.
6.4 ENHANCE SUPPORT FOR CLUSTER-BASED TESTING
AND QUALITY CERTIFICATION
Cluster-wise testing facilities are crucial for medium enterprises in India because they
enable easier access to quality assurance, product certification, and regulatory compliance,
Recommendations82
Designing a Policy for Medium Enterprises especially in sectors like manufacturing, pharmaceuticals, and textiles. Medium Enterprises
often produce at a larger scale than small enterprises, making it vital to maintain consistent
quality standards to compete in both domestic and international markets. Establishing
testing facilities within industry clusters helps reduce logistical costs, accelerates time-
to-market, and ensures that Medium Enterprises can meet stringent export standards,
enhancing their global competitiveness. This intervention will present an opportunity to
implement targeted support. Establishing these cluster-wise testing facilities could serve
as an effective starting point to enhance the capabilities and competitiveness of Medium
Enterprises.
Medium enterprises face significant challenges in quality assurance, product certification,
and regulatory compliance, particularly for export markets. Limited access to affordable,
sector-specific testing facilities forces them to rely on distant or private testing centres,
increasing operational costs, certification delays, and barriers to global market entry. The
absence of cluster-based testing infrastructure further hampers competitiveness, slows
innovation, and limits adherence to international quality standards.
Currently, the MSE-CDP focuses on micro and small enterprises only, offering shared
facilities and infrastructure to enhance their productivity and competitiveness. Medium
enterprises often operate on a larger production scale, making it imperative for them to
maintain stringent quality standards.
The establishment of testing facilities under the MSE-CDP also aligns with the government’s
broader objectives of promoting Make in India and boosting exports. Medium enterprises,
being the bridge between small-scale industries and large corporations, hold the potential
to drive innovation and contribute to a robust supply chain. Including them in the MSE-CDP
ensures a more inclusive approach, addressing a significant gap in the policy landscape
while maximizing the impact of existing resources.
Global Best Practices
Japan’s JIS Standards & Testing Network ensures product quality through
government-backed certification. It helps industries meet global standards,
boosting market acceptance
Singapore’s Enterprise SG Testing Hubs provide sector-specific labs for MSME
compliance. They accelerate product certification, enhancing global trade
readiness..
Recommendations
A. Expand MSE-CDP to Include Medium Enterprises
Modify MSE-CDP guidelines to extend support to medium enterprises, ensuring inclusivity.
Medium enterprises, being the bridge between small-scale industries and large corporations,
hold the potential to drive innovation and contribute to a robust supply chain. Including
them in the MSE-CDP ensures a more inclusive approach, addressing a significant gap in
the policy landscape while maximizing the impact of existing resources.
Recommendations 83
Designing a Policy for Medium Enterprises B. Establish Sector-Specific Cluster-Based Testing Facilities
To ensure the effective and sustainable operation of these testing facilities, the following
operational framework should be integrated into the MSE-CDP. These facilities will provide
essential services such as quality testing, product certification, and regulatory compliance,
all of which are vital for the growth and competitiveness of medium enterprises.
Design the testing facilities based on the specific requirements of the identified sectors. For
instance, testing facilities in a textile cluster will focus on fabric durability, dyeing processes,
and quality standards, while those in a pharmaceutical cluster will provide support for drug
formulations, stability testing, and compliance with regulatory standards. Utilize MSE-CDP’s
existing infrastructure for cluster development to create these testing centers, reducing
implementation time and ensuring synergies with ongoing cluster-related activities.
C. Identification of predominant sectors in each State which has potential for
high medium enterprise concentration.
We can begin by identifying the predominant sectors in each state and then investigate
to determine the concentration of Medium Enterprises within those sectors. Focus on
identifying the strongest sectors in each state that have the potential for high medium
enterprise concentration. For example, Maharashtra leads in textiles, pharmaceuticals,
chemicals, and automobile engineering, while Gujarat excels in textiles, dairy products,
and auto components.
Table 6.1: Sector-Specific Concentration of MSMEs in Six States
States
Sectors
1 2 3 4 5 6
Maharashtra Textiles Pharma Chemicals AutomobileEngineering Leather
UP
Food
Products
Hosiery and
Garments
Metal
Products
Cotton
textiles
Ceramics
Wool, Silk,
Synthetic
Fibre
Tamil Nadu Coir Automobile
Food
Processing
Textiles Leather
Precision
Engineering
Gujarat Textile
Dairy
Products
Chemicals
Agro-based
Industries
Auto
Component
Engineering
West
Bengal
Jute Leather Textile Handicraft
Food
Processing
Printing and
Publishing
Telangana
Pharma
& Life
Science
Defense
and
Precision
Electronics
Food
Products
IT Services -
Establish cluster wise testing facilities as a core component of MSE-CDP.
These facilities will provide essential services such as quality testing, product
certification, and regulatory compliance, all of which are vital for the growth and
competitiveness of medium enterprises.
Recommendations84
Designing a Policy for Medium Enterprises Develop sector-focused testing labs offering quality certification, regulatory
compliance, and R&D support.
Design the testing facilities based on the specific requirements of the identified
sectors. For instance, testing facilities in a textile cluster will focus on fabric
durability, dyeing processes, and quality standards, while those in a pharmaceutical
cluster will provide support for drug formulations, stability testing, and compliance
with regulatory standards.
Utilize MSE-CDP’s existing infrastructure for cluster development to create these
testing centers, reducing implementation time and ensuring synergies with
ongoing cluster-related activities.
Good Practice: CIPET Chennai
The CIPET (Central Institute of Petrochemicals Engineering & Technology) in Chennai
provides a range of testing services primarily focused on the plastics and petrochemicals
sectors. The Institute has established several best practices for cluster testing facilities,
which can be beneficial for Medium Enterprises.
A. Adopt Public-Private Partnerships (PPPs) for Co-Funding
The co-financing model leverages both government funding and industry contributions
to drive innovation. By sharing financial responsibility, it ensures sustainable investment
in advanced manufacturing and R&D. This approach encourages industries to actively
participate in technology adoption and upskilling. It also enhances accountability, ensuring
efficient utilization of resources for long-term growth.
Engaging the private sector and industry bodies strengthens infrastructure, technology,
and expertise. Collaboration with businesses accelerates the deployment of cutting-
Recommendations 85
Designing a Policy for Medium Enterprises edge solutions in manufacturing. Industry partnerships facilitate knowledge-sharing, skill
development, and access to global best practices. This synergy fosters a competitive
ecosystem, driving sustained industrial advancement.
B. Enhance Certification & Compliance Support
Offer subsidized testing services for MSMEs, particularly export-oriented
enterprises. It is also suggested to Implement fast-track certification with digital
tracking and automated compliance tools.
Provide tailored equipment for each cluster based on the industries present. For
example, textile testing labs should be equipped with fabric durability testers,
and pharmaceutical clusters may require stability chambers for drug testing.
Ensure that testing facilities are equipped with digital tools for easier certification
processes, including real-time tracking, reporting, and automation to reduce
manual work and improve efficiency.
C. Capacity Building and Skill Development
Create training modules to educate medium enterprises on how to effectively use these
testing facilities. This should include how to prepare products for testing, understand
certification requirements, and interpret results. Train the staff responsible for operating
the testing facilities, including laboratory technicians and quality assurance officers. This
will help maintain high standards of testing and customer service.
Expected Impact
Faster certification processes will minimize delays, ensuring quicker market entry
for exporters. This will strengthen export readiness by helping industries meet
global regulatory requirements efficiently. Streamlined approvals will enhance
India’s reputation as a reliable manufacturing hub.
Lower operational costs will make local testing more accessible to industries.
Reducing dependence on distant facilities will cut logistics expenses and speed
up compliance. This will encourage more businesses to adopt quality certification
without financial strain.
Stronger global competitiveness will come from improved adherence to
international quality standards. Enhanced certification frameworks will build trust
in Indian products worldwide. This will open new market opportunities and drive
industrial growth.
6.5 CUSTOMIZED SKILL DEVELOPMENT FOR MEDIUM
ENTERPRISES
Medium enterprises in India play a critical role in driving innovation and economic growth,
especially in sectors like manufacturing, IT, and services. However, the fast-evolving landscape
and technological demands require these enterprises to continually upskill their workforce
to maintain competitiveness. While the Indian government has launched initiatives like the
Skill India Mission and the Entrepreneurship & Skill Development Programme (ESDP) to
support skill development, there are several challenges that limit their effectiveness for
medium enterprises.
Recommendations86
Designing a Policy for Medium Enterprises The availability of skill development courses tailored specifically for medium enterprises
is limited, contributing to a significant mismatch between the skills required and the
courses offered. There is also limited availability of subsidized and customized programs
specifically designed for Medium Enterprises.
The absence of structured online learning opportunities and effective coordination between
central, state, and local agencies adds to the complexity, resulting in delayed and inefficient
implementation of skill development initiatives. For medium enterprises to succeed in
a globalized market, there is a clear need for a tailored, data-driven approach to skill
development that can align with industry needs and ensure a competitive, skilled workforce.
Global Best Practices
Canada’s Canada Job Grant (CJG): Offers tailored provincial-level training
programs aligned with industry needs, providing co-funding for skills
development.
Singapore’s Skills Future Initiative: Provides a comprehensive framework
that categorizes courses by career stage (early-career, mid-career, employer-
focused), ensuring continuous skill development.
Turkey’s e-Academy: An online training platform providing subsidized
courses, enhancing accessibility for SMEs across regions.
Australia’s Industry Skills Fund (ISF): A co-contribution model for training,
shared between government, industry, and employers, facilitating skills
development.
Recommendations
A. Skill Mapping for Medium Enterprises in India
Recommendations 87
Designing a Policy for Medium Enterprises Enhancing the MSME Sampark Portal with real-time data will help medium enterprises
address skill gaps efficiently. By providing live updates on industry-specific training needs,
it will enable businesses to upskill their workforce strategically. This will ensure a stronger
alignment between industry demands and employee capabilities, improving productivity.
Offering detailed insights into training providers and relevant courses will enhance
accessibility for medium enterprises. With a streamlined platform, businesses can identify
and enroll in specialized programs with ease. Greater transparency will drive higher
participation in skill development, strengthening competitiveness in global markets
B. Expansion of the ESDP Scheme
The expansion of the Entrepreneurship and Skill Development Programme (ESDP)
Scheme can play a crucial role in strengthening the capabilities of medium enterprises by
addressing their specific skill development needs. Currently, the scheme comprises three
key components: the Entrepreneurship cum Skill Development Programme (E-SDP), a six-
week intensive training program; the One Week Advanced ESDP programmes that provide
specialized knowledge in key industry areas; and the One Week Advanced Management
Development Programmes (MDP), which focus on managerial and leadership skills. To make
the ESDP scheme more impactful for medium enterprises, its scope can be broadened to
incorporate targeted skill development initiatives that align with emerging industrial trends
and technological advancements.
The proposed expansion should focus on customized training modules for medium
enterprises, addressing their unique challenges in adopting Industry 4.0, automation, and
digital manufacturing. The scheme should integrate sector-specific upskilling programs
covering areas such as smart manufacturing, supply chain digitization, quality control, and
export readiness. Additionally, partnerships with technology hubs, research institutions,
and industry associations can be established to offer hands-on training and real-world
exposure. A dedicated online learning platform can be introduced to provide flexible, on-
demand training solutions for enterprises looking to enhance workforce capabilities without
disrupting daily operations. By expanding the ESDP scheme in this direction, medium
enterprises will be better equipped to compete in both domestic and global markets,
fostering innovation and sustainable growth. The proposed expansion of the ESDP scheme
should include the following:
Recommendations88
Designing a Policy for Medium Enterprises emehcSPDSEfonoisnapxE
•
•
Identify regions and clusters with a high concentration of medium enterprises and
collaborate with educational institutions (e.g., IITs, NITs) and Technology
Centers(TCs) to expand the reach of trainingprograms.
Identifying the targeted i ndustries to provide customized skilldevelopment courses
(as identifi ed under Australia’s ISF) wi llbe helpful.
Regions/Clusters/
Industries based
training
• Ensuring tec hnology-linkedskilldevelopment is crucial so that enterprises
are not leftwith a shortage of skilledworkers when adopting new
technologies.
• Provide cluster-based training facilities, offer advanced courses, and
deliversector-specifictraining aligned with emerging industry trends
Technology-linked skill
development
• The identifiedskillneeds in specificregions and cluster-based training
requirements should be supplemented with advanced courses, andsector-
specifictraining should bedelivered in a way that is aligned with emerging
industry trends.
Training aligned with
emerging industry
trends
•
•
Online learning provides affordable and flexible training options that
minimize disruption to operations.
The foundational entrepreneurship skills can be developed through
e-courses, helping to broaden the program'saccessibility and impact
Online Training
Program
Identify Regions/Clusters
C. Curriculum Development and Customisation
Develop and diversify curricula for sector-specific and advanced skill courses, including
technology adoption, product design, and marketing. CJG of Canada maintains a provincial
stream for each province and territory, which should be followed in India because different
states have different sectors of medium enterprises, requiring different skill sets.
Since Medium Enterprises are more export-oriented, design export-oriented, sustainable
products and lifecycle-specific programs to address different growth stages of medium
enterprises.
Like Singapore’s SkillsFuture initiative, categorize courses based on target audiences,
such as individuals (early-career, mid-career), students, and employers, offering a wide
range of relevant courses. For Medium Enterprises, categorizing courses based on target
audiences is essential due to their larger and more diverse workforce, which demands
specialized training at different career stages. Unlike MSEs, which have limited personnel
and simpler organizational structures, Medium Enterprises require tailored skill development
to enhance role-specific competencies and leadership development across various levels
of the organization.
Curricula for Sector-
Specific
Categorize courses based
on target audiences
Curricula for Online
Training Program
•Technology Adoption,
Product Design, and
Marketing
•Best Practice: CJG of
Canada
•Categorize courses
based on target
audiences, such as
individuals (early- career,
mid-career), students,
and employers
•Best Practice:
Singapore's Skills
Future initiative
•Lecture videos,
interactive course
content,
entrepreneurship
e-books
•Best Practice: Turkey's
e-Academy program
Recommendations 89
Designing a Policy for Medium Enterprises D. Introduce Subsidized & Incentive-Based Training Programs
Subsidized training programs can still be beneficial for medium enterprises, although they
may not be as critical as for MSEs. Medium enterprises often have more financial resources,
but subsidies can encourage them to invest more heavily in continuous skill development
for their workforce, especially in specialized or advanced areas. Subsidies can also make
training more accessible for employees at all levels, fostering a culture of upskilling and
ensuring competitiveness in the market.
01
02
03
Subsidized Online Training
Programmes for
Marginalized Group
Absentee Payroll for
Employers Who Sponsor
Employee Training
Skill Credit
Introduce training vouchers, skill credit (as provided by SkillsFuture in Singapore),
and incentives and grants (similar to CJG of Canada) to increase participation in skill development initiatives. Options such as providing grants, course fee funding, and absentee payroll for employers who sponsor employee training on a co-contribution basis (co-contribution model of ISF Australia, Singapore’s SkillsFuture, Canada’s CJG) between
center, state, and industry can be explored.
Additionally, online training programs can be offered at a subsidized rate, and free of cost
for marginalized groups (as provided in Turkey’s e-Academy).
Expected Impact
Enhanced workforce capabilities: Addressing skill gaps will improve efficiency,
productivity, and innovation within medium enterprises.
Increased global competitiveness: Provides essential skills for export-readiness
and compliance with international standards.
Improved adoption of technology: Promotes digital skills and advanced
manufacturing capabilities, leading to a more modernized workforce.
Wider participation in skill development: Financial incentives and subsidies
will make training more accessible and foster a culture of upskilling across
organizations.
Recommendations90
Designing a Policy for Medium Enterprises 6.6 NEED FOR A CENTRALIZED DIGITAL PORTAL FOR
MEDIUM ENTERPRISES
Medium Enterprises in India face significant barriers in accessing timely and relevant
information related to government programs, compliance requirements, and financial
assistance. Currently, there is no centralized platform that consolidates this vital information,
leading to confusion, inefficiency, and missed opportunities. As a result, these enterprises
often struggle to navigate the complex ecosystem of resources available to them. They
may face delays in accessing government schemes, compliance requirements, and financial
support, impeding their growth and competitiveness.
A lack of a streamlined system also complicates application processes and prevents medium
enterprises from making full use of available resources, further limiting their potential to
expand, innovate, and become more export ready.
By creating a centralized portal that integrates essential information on scheme availability,
compliance guidelines, and financial support, the proposed platform aims to empower
Medium Enterprises with the knowledge and tools they need to navigate the complex
ecosystem. Features such as AI-enabled assistance, real-time updates, and a user- friendly
interface will enhance accessibility and facilitate a smoother application process.
Medium Enterprises will benefit from accessing information, applications, and support
schemes tailored specifically for them through a single, centralized platform embedded
within a system they already recognize and use.
Global Best Practices
Singapore’s Business Grants Portal: The portal integrates government grant
opportunities, compliance requirements, and financial assistance in a unified
platform. It also features AI-powered tools that help businesses identify
relevant grants and track application statuses.
Australia’s Business.gov.au: This portal serves as a one-stop-shop for
Australian businesses, offering resources on regulations, funding, and advice.
It also integrates real-time compliance updates and application status
tracking.
Recommendations
A. Creation of a Centralized Sub-Portal for Medium Enterprises
It is recommended related to creation of a centralized, user-friendly, and credible platform
as a sub-portal of the Udyam Portal specifically designed for Medium Enterprises,
consolidating key information across multiple areas. Such a platform is necessary to provide
streamlined access to vital resources, including details on available schemes, compliance
requirements, financial assistance options, regulatory updates, and market opportunities.
The MSME portal should serve all enterprises, with a distinct link catering to the unique
needs of Medium Enterprises. By adding it to the Udyam’s database infrastructure, the
sub-portal can efficiently access existing data, minimizing redundancy and improving ease
of access for enterprises. Creating a sub-portal ensures smoother interoperability with
Recommendations 91
Designing a Policy for Medium Enterprises Udyam’s database, avoiding technical complexities and offering a unified interface for
stakeholders.
The centralized platform should:
Be regularly updated
with real-time
information.
Provide easy access
to all central, state,
and ministry-level
schemes.
GPT assistance with
Generative AI for
eligible schemes.
Offer tools for MEs
to track applications
and compliance
status.
Key Features:
Single Source of Information: A unified platform offering detailed information on
government schemes, financial options, and compliance guidelines for Medium
Enterprises.
AI-enabled Assistance: A Generative AI chatbot will be integrated into the portal
to provide personalized assistance, scheme filtering assistance and answer queries
in real time.
Real-time Updates: The portal will be updated regularly with the application
status, latest schemes, amendments, and industry insights to ensure businesses
are equipped with current information.
User-Friendly Interface: A simplified, intuitive interface that guides Medium
Enterprises through various processes, including scheme applications, compliance
tracking, and market analysis
Table 6.2: The comparison between proposed portal and existing portal of
MSMEs are given in below table:
Particulars
Proposed
Portal
NSWS
My
Scheme
Udyam
Registration
Portal
Schemes availability (Central, State &
Other Ministry)
Yes Yes YesYes
Online forms for direct filing and
applying of schemes
Yes Partially NoNo
e-filing–DSC or Aadhar OTPYes Yes No Yes
Pre-filled Tax ReturnsYes No NoNo
Online Tracking MechanismYes Yes No No
Approving authority accessYes Yes No Yes
Helpline 24x7Yes Yes No No
Artificial Intelligence Enabled Yes No NoNo
Chat-BotYes No NoNo
Mobile ApplicationYes Yes No No
Connected to Udyam Server for pre-
filled data
Yes No NoYes
Recommendations92
Designing a Policy for Medium Enterprises B. Proposed Key Modules of the Portal
B.1. Basic Information Module:
Scheme Information: Detailed information on central and state government
schemes, including eligibility criteria and benefits.
Compliance Requirements: Pre-filled data on Income Tax and GST compliance,
along with guidance on other regulatory requirements.
Financial Assistance: Information on loans, grants, and subsidies from various
government and private institutions.
Generative AI Model: Large Language Model (LLM) for enterprises to probe and
seek guidance on available schemes and their eligibility.
B.2. Process Module:
Regulatory Compliance Tracking: Pre-filled forms for regulatory compliance
(licenses, clearances) and real-time notifications for filing deadlines.
Automated Compliance Updates: Regular updates on changes in tax laws,
environmental regulations, and labor laws.
Integrated Document Management: Digital repository for managing compliance-
related documents such as tax returns, certifications, and licenses.
Compliance Support via AI-Chatbot: Real-time AI support for navigating
compliance processes and sector-specific regulations.
B.3. Market Research Module:
Identify Growth Opportunities: Market analysis and competitor insights using
GenAI to help businesses identify growth areas.
Access Financial Resources: Information on financing options such as bank loans,
venture capital, and government grants.
Explore Export Potential: Guidance on entering new markets, including sector-
specific regulations and logistics.
C. Technological Integration
AI-Driven Personalization: The portal will use AI algorithms to analyse the business profile
of each ME and provide tailored scheme recommendations.
Chatbot for Real-Time Assistance: An AI chatbot will offer step-by-step guidance on
navigating compliance procedures, applying for schemes, and availing financial support.
Mobile App Integration: The platform will include a mobile application to provide Medium
Enterprises with seamless access to information and real-time notifications.
Expected Impact
Improved Access to Information: A single, centralized source for all relevant data
will help Medium Enterprises easily access government schemes, financial support,
compliance guidelines, and market opportunities.
Recommendations 93
Designing a Policy for Medium Enterprises Increased Participation in Government Programs: Simplified application processes
and clear guidelines will encourage more Medium Enterprises to participate in
government schemes and utilize available resources.
Enhanced Export-Readiness: By providing access to market insights and export
resources, the portal will support Medium Enterprises in expanding to international
markets.
Reduced Compliance Burden: Pre-filled compliance forms and automated
tracking will simplify the regulatory process and ensure timely adherence to legal
obligations.
Efficiency in Operations: Streamlining the process for applying to schemes and
tracking compliance will save time and reduce the operational burden for Medium
Enterprises.
Fostering Innovation and Growth: Providing access to resources like R&D hubs,
financial support, and export tools will empower Medium Enterprises to innovate
and grow in a competitive global market.
Recommendations94
Designing a Policy for Medium Enterprises Annexures 95
ANNEXURES ANNEXURE I
MOMSME SCHEMES
S.No. Schemes Guidelines
1 MSME Champions
https://dcmsme.gov.in/CLCS_TUS_Scheme/MSME%20I
nnovative%20Scheme%20Guidelines.pdf
https://www.dcmsme.gov.in/schemes/clcs-tus/LEAN-
Operational-Guidlelines.pdf
https://zed.msme.gov.in/uploads/Subsidy_Women.pdf
2
Raising and Accelerating
MSME Performance
(RAMP)
https://www.nimsme.org/news-article/raising- accelerating-
msme-performance-ramp-scheme
3
International Cooperation
(IC) Scheme
https://ic.msme.gov.in/IC_APP/WriteReadData/GuideLi
ne/Final%20and%20approved%20IC%20Scheme%20Gu
idelines-2021.pdf
4
Assistance to Training
Institutions (ATI)
Scheme
https://msme.gov.in/sites/default/files/PDF%20REVISE
D%20ATI%20GUIDELINES%20English%201.9.2016%20%
281%29.pdf
5
Technology Centres
Scheme
https://dcmsme.gov.in/CLCS_TUS_Scheme/new-
Technology-Centers/Scheme_Guidelines.aspx#:~:text=by%20
these %20Centres-,Guidelines,the%20vacant%20built%20
up%20spaces.
6
Marketing Assistance
Scheme
https://msme.gov.in/sites/default/files/MASCHEME-
New-18112014.pdf
7
Promotion of MSME in
NER and SIKKIM
https://www.dcmsme.gov.in/schemes/Revised_Guideli nes_
on_31May2022.pdf
8
Self-Reliant India (SRI)
Fund
https://dcmsme.gov.in/Final%20SRI%20Operating%20
Guidelines%20%20approved%20by%20Minister%20%2
017%2008%202021.pdf
9
Credit Guarantee
Scheme for Micro
& Small Enterprises
(CGTMSE)
https://www.cgtmse.in/Default/ViewFile/?id=1673390
907997_CGTMSE%20-%20Scheme%20Document%20
CGS%20I_updated%20 as%20on%20Jan%2010,%202023.
pdf&path=Page
10
Procurement and
Marketing Support
(PMS) Scheme
https://dcmsme.gov.in/OM%20&%20PMS%20Scheme %20
Guidelines.pdf
96Annexures S.No. Schemes Guidelines
11
Prime Minister’s
Employment Generation
Programme (PMEGP)
https://www.kviconline.gov.in/pmegp/pmegpweb/doc s/pdf/
PMEGPscheme.pdf
12
Entrepreneurship
Skill Development
Programme (ESDP)
Scheme
https://msmedi.dcmsme.gov.in/Manuals/Approved%2
0ESDP%20Guidelines_new.pdf
13
A Scheme for Promotion
of Innovation, Rural
Industries and
Entrepreneurship
(ASPIRE)
https://aspire.msme.gov.in/WriteReadData/Document File/
ASPIRE_NEW.pdf
14
Scheme of fund
for regeneration of
traditional industries
(SFURTI)
https://sfurti.msme.gov.in/WriteReadData/Circular/SF URTI_
NEW.pdf
15
Micro & Small
Enterprises Cluster
Development
Programme (MSE-CDP)
Scheme
https://www.dcmsme.gov.in/schemes/New- Guidelines.pdf
16
National SC-ST Hub
Scheme
https://www.scsthub.in/sites/default/files/NSSH_Guid
elines_o.pdf
17 Coir Vikas Yojana
https://msme.gov.in/sites/default/files/Revised_Operation_
Guidelines_of_CVY.pdf
18
Khadi Gramodyog Vikas
Yojana
https://msme.gov.in/sites/default/files/
RevisedoperationalGuidelinesofGVY.pdf
19
PM Vishwakarma–
Enabling Artisans and
Craftspeople to Build
Enterprises
https://jrgbank.in/tenders/PM%20VISHWAKARMA-
SCHEME%20GUIDELINES.pdf
Annexures 97
Designing a Policy for Medium Enterprises ANNEXURE II
STATE SCHEMES:
Telangana
S. NoScheme NameGuidelines
1
T-IDEA (Telangana State Industrial
Development and Entrepreneur
Advancement) Incentive Scheme,
2014
https://industries.telangana.gov.in/Librar
y/2015INDS_MS77.pdf
2
T –PRIDE(Telangana State
Programme for Rapid Incubation
of Dalit Entrepreneurs Incentive
Scheme)
https://industries.telangana.gov.in/Librar
y/2015INDS_MS78.pdf
3
Telangana State Industrial Project
Approval and Self-Certification
System (TS-iPASS)
https://ipass.telangana.gov.in/viewpdf.as
px?enc=olSBrXl6rl1gh1Zl/gAtCIkxOo/1mE
K3ZEGdedYO3dbgHlf+VSWFL6LVs+mm8R
g6nTRHe7ixLA1Uzvt6vtEOd7yNOlXTsEGt9
qK4Uv6FedkHCt/kkWVR29+JYNYHIZscBFb
Jdq58wnda+4yAdpgLl0kO7S3ylF5rB2c2iH
YP+7tg9EjvNHByfVEvNylEWGg+UoSdX02 uK/
fnSHrc+5C7QINOmv0Fbs9y8Mef1uZRoL8=
4
Scheme for economic development
of ST entrepreneurs
https://startup.telangana.gov.in/wp-content/
uploads/2021/06/cmstei_schem e_details.pdf
5 Self Employment Scheme
https://industries.telangana.gov.in/
selfemployment.aspx
6 Bank linked schemeshttps://tsmfc.in/schemeinfo.php?id=5
7 Suvidha Incubation
https://www.msmekipathshala.com/web
kype/assets/pdf/SCHEMES%20OF%20DIF
FERENT%20STATE%20GOVERNMENTS%2
0/SCHEMES%20DETAIL%20OF%20
TELANGANA%20STATE.pdf
8 T-Fund (Telangana Innovation Fund)
https://www.startupindia.gov.in/content/ dam/
invest-india/Templates/public/state_startup_pol
icies/Telangana-Innovation-Policy-Issued-GO.
pdf
Annexures98
Designing a Policy for Medium Enterprises S. NoScheme NameGuidelines
9
The Telangana Handloom Weavers
Thrift Fund Saving and Security
Scheme (THWTFSSS) “Nethannaku
Cheyutha”.
https://www.msmekipathshala.com/web
kype/assets/pdf/SCHEMES%20OF%20DIF
FERENT%20STATE%20GOVERNMENTS%2
0/SCHEMES%20DETAIL%20OF%20
TELANGANA%20STATE.pdf
10
Common fiscal incentives for all
companies
https://www.msmekipathshala.com/web
kype/assets/pdf/SCHEMES%20OF%20DIF
FERENT%20STATE%20GOVERNMENTS%2
0/SCHEMES%20DETAIL%20OF%20
TELANGANA%20STATE.pdf
Maharashtra
S.No Scheme NameGuidelines
1
Industrial Promotion
Subsidy (IPS)
https://maitri.mahaonline.gov.in/PDF/I ndustrial%20Promotion%20Subsidy%2 0(IPS)%20under%20Industrial%20Policy%2-%20modification%20under%20Goods%20and%20Services%20Tax%20(GST)% 20regime.pdf
2
Interest Subsidy
Incentive
https://maitri.mahaonline.gov.in/PDF/Package%20Scheme%20of%20Incentiv es%20-%202019.pdf
3
Exemption from
Electricity Duty
https://maitri.mahaonline.gov.in/PDF/Package%20Scheme%20of%20Incentiv es%20-%202019.pdf
4
Waiver of Stamp
Duty
https://maitri.mahaonline.gov.in/PDF/ Package%20Scheme%20of%20Incentives%20-%202019.pdf
5 Power tariff Subsidy
https://maitri.mahaonline.gov.in/PDF/Package%20Scheme%20of%20Incentiv es%20-%202019.pdf
6
Additional Incentives
for Strengthening
MSMEs
http://di.maharashtra.gov.in/_layouts/ 15/doistaticsite/English/investors_guide_psi.html
West Bengal
S.No Scheme NameGuidelines
1
Bhabisyat Credit
Card Scheme
https://wbmsme.gov.in/sites/default/fi les/cms/circularpdf/bhabishyat_credit_card.pdf
2
Karma Sathi
Prakalpa
https://wbxpress.com/files/2021/01/1825-MSMET.pdf
3 Banglashree Scheme
https://www.wbsidcl.in/assets/content s/incentive_scheme_4420_msmet-09112023.pdf
4
Interest Subsidy on
Term Loan (IS)
https://msme.icai.org/wp-content/uploads/2022/12/West- Bengal-1.pdf
Annexures 99
Designing a Policy for Medium Enterprises S.No Scheme NameGuidelines
5
Textile Incentive
Scheme
https://msme.icai.org/wp-content/uploads/2022/12/West-
Bengal-1.pdf
6 Finance Clinic https://wbmsmet.gov.in/ki_ies_finclncs
7
Incentive Scheme
2020 for approved
Industrial Park
https://wbmsme.gov.in/sites/all/themes/anonymous/pdf/
SAIP%202020_Notifi cation.pdf
8
Rural
Entrepreneurship
Hub
https://wbmsme.gov.in/sites/all/themes/anonymous/pdf/reh_for_
website.pdf
9 Silpa Disha
https://msme.icai.org/wp-content/uploads/2022/12/West-
Bengal-1.pdf
10 Silpa Sathi https://silpasathi.wb.gov.in/msme_Incentives
11
State Capital
Investment Subsidy
https://wbmsme.gov.in/sites/all/theme s/anonymous/pdf/
SAR_642_MS MA T_Department_Revenuey_31.07.2020_pdf
Uttar Pradesh
S.No Scheme Name Guidelines
1 ODOP Scheme https://abhinavpahal.nic.in/uploads/0d7X2fcBcYODOP.pdf
2
Common Facility
Centre (CFC)
Scheme
https://odopup.in/site/writereaddata/siteContent/201904171130237521cfc_s cheme.pdf
3
Marketing
Development
Assistance Scheme
https://epbupindia.in/Home/MDA
4
Skill Development
and Toolkit
Distribution Scheme
https://odopup.in/site/writereaddata/s iteContent/201905081050489239odop-sceam.pdf
5
Uttar Pradesh Chief
Minister Youth
Self Employment
Scheme
https://up.nic.in/news/launch-of-mysy- mukhyamantri-yuva-swarojgar-yojana- portal-for-directorate-of-industries- and-enterprise-promotion-government-of-uttar-pradesh/
6
Scheme for
Promoting
Establishment of
Private Industrial
Parks 2017
https://invest.up.gov.in/wp-content/themes/investup/pdf/Private- Industrial-Park_Scheme.pdf
7 Land Incentives
https://msme.icai.org/wp-content/uploads/2021/06/UP-MSME- Policy.pdf
8
Land Use
Conversion
https://msme.icai.org/wp-content/uploads/2021/06/UP-MSME- Policy.pdf
Annexures100
Designing a Policy for Medium Enterprises S.No Scheme Name Guidelines
9
Special Purpose
Vehicles (SPV)
Formation
https://msme.icai.org/wp-content/uploads/2021/06/UP-MSME-
Policy.pdf
10
Stamp Duty
Exemption
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
11
Employee Provident
Fund (EPF)
Reimbursement
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
12
Capital Interest
subsidy
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
13
Infrastructure
interest subsidy
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
14
Industrial quality
development
subsidy
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
15
Land conversion
waiver
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
16
Electricity charges
reimbursement
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
17
A Small, Medium
Enterprise Venture
Capital Fund
(SMEVCF)
https://invest.up.gov.in/wp-content/themes/investup/pdf/
Medium-Small-Micro-Enterprise-brochure.pdf
18
Vishwakarma Shram
Samman Yojna
https://upid.ac.in/vishwakarma-shram-samman-yojana-vssy/
Gujarat
S.No Scheme/Policy NameGuidelines
1
Gujarat Industrial Policy
2020
https://ic.gujarat.gov.in/documents/co mmondoc/2020/Industrial-Policy2020.pdf
2
Gujarat MSME Export
Promotion Scheme
https://slbcgujarat.in/wp-content/uploads/2021/04/Compendiu m-of-schemes-and-guidelines-for-MSME-sector-Final.pdf
3
Assistance of Capital
Investment Subsidy
https://slbcgujarat.in/wp-content/uploads/2021/04/Compendiu m-of-schemes-and-guidelines-for-MSME-sector-Final.pdf
4
Assistance for Interest
Subsidy forManufacturing &
Service Sector
https://slbcgujarat.in/wp-content/uploads/2021/04/Compendiu m-of-schemes-and-guidelines-for-MSME-sector-Final.pdf
Annexures 101
Designing a Policy for Medium Enterprises S.No Scheme/Policy NameGuidelines
5
Assistance for Quality
Certification (ERP
Assistance)
https://slbcgujarat.in/wp-content/uploads/2021/04/
Compendiu m-of-schemes-and-guidelines-for-MSME-
sector-Final.pdf
6 Net SGSTReimbursement
https://msme.icai.org/wp-content/uploads/2022/12/
Gujarat.pdf
7
Assistance for Quality
Certification (Quality
certification)
https://msme.icai.org/wp-content/uploads/2022/12/
Gujarat.pdf
8
Financial Support to MSMEs
in ZED Certification
https://ic.gujarat.gov.in/documents/co mmondoc/2023/
Draft%20ZED%20Guideline.pdf
9 EPFReimbursement
https://msme.icai.org/wp-content/uploads/2022/12/
Gujarat.pdf
10
Assistance in
implementation
ofInformation and
Communication Technology
https://ic.gujarat.gov.in/documents/commondoc/2023/
Draft%20ICT%20Guid eline.pdf
11
Assistance for Technology
Acquisition
https://ic.gujarat.gov.in/assistance-for-technology-
acquisition.aspx
12
Assistance for Patent
Registration
https://msme.icai.org/wp-content/uploads/2022/12/
Gujarat.pdf
13
Assistance for saving in
consumption ofEnergy and
Water
https://msme.icai.org/wp-content/uploads/2022/12/
Gujarat.pdf
14
Rehabilitation ofSick
Enterprises
https://imd.gujarat.gov.in/Document/2016-7-29_650.pdf
15 power connection charges
https://msme.icai.org/wp-content/uploads/2022/12/
Gujarat.pdf
16 reimbursement of rent
17
Assistance for raising
Capital through SME
Exchange
https://ic.gujarat.gov.in/documents/pagecontent/
Sme%20Final%20Guideline_ 24-10-2017-gen.pdf
Tamil Nadu
S.No Scheme NameGuidelines
1
Grant of Quality
CertificationReimbursement of
Charges (Qcert)
https://www.msmetamilnadu.tn.gov.in/pdf/msme_e_35_2019.pdf
2
Promotion of Energy Audit
and Conservation of Energy
(PEACE)
https://msmeonline.tn.gov.in/incentive s/pdf/peace_ea_cye.pdf
Annexures102
Designing a Policy for Medium Enterprises S.No Scheme NameGuidelines
3
New Entrepreneur Cum
Enterprise Development
Scheme (NEEDS)
https://www.dictiruchi.in/needs.pdf
4
Unemployed Youth
Employment Generation
Programme (UYEGP)
https://msmeonline.tn.gov.in/uyegp/p df/uyegp_
go_66.pdf
5
Annal Ambedkar Business
Champions Scheme (AABCS)
https://msmeonline.tn.gov.in/uyegp/p df/uyegp_
go_66.pdf
6
MSME Skill Training and
EmploymentScheme
https://msmeonline.tn.gov.in/uyegp/pdf/uyegp_
go_66.pdf
7
Subsidy for Fund Raising from
SMEExchange
https://www.msmeonline.tn.gov.in/incentives/html_
cye_sme.php
8
Incentive for Patent
Registration/ Trade
Mark Registration /
GeographicalIndications
https://www.msmeonline.tn.gov.in/inc entives/html_
cye_ipr.php
9
Reimbursement of Stamp Duty
&Registration Charges
https://www.msmeonline.tn.gov.in/incentives/html_
cye_stamp.php
10 Pay Roll Subsidy
https://www.msmeonline.tn.gov.in/incentives/html_
cye_pay.php
11 Power Subsidy-LTPT
https://www.msmetamilnadu.tn.gov.in/new-schemes.
php
12 Generator Subsidy
https://www.msmetamilnadu.tn.gov.in/new-schemes.
php
14 Subsidy for Fund Raising
https://www.msmetamilnadu.tn.gov.in/new-schemes.
php
15
BACK–ENDED INTEREST
SUBSIDY
https://www.msmetamilnadu.tn.gov.in/beis.
php#:~:text=Back%2Dended%20i nterest%20
subsidy%20of,Fund%20Trus t%20Scheme%20
(CGTMSE).
Annexures103
Designing a Policy for Medium Enterprises Designing a
POLICY FOR MEDIUM
ENTERPRISES
Designing a Policy for Medium Enterprises
POLICY FOR MEDIUM
ENTERPRISES
Designing a Policy for Medium Enterprises DESIGNING A
POLICY FOR
MEDIUM
ENTERPRISES DISCLAIMER:
Administrative Staff College of India, Hyderabad has
received financial assistance under the Research
Scheme of NITI Aayog to prepare the report. While
due care has been exercised to prepare the report
using the data from various sources, NITI Aayog
does not confirm the authenticity of data and
accuracy of the methodology to prepare the report.
NITI Aayog shall not be held responsible for the
findings or opinions expressed in the document. This
responsibility completely rests with ASCI. AUTHORS
Administrative Staff College of India (ASCI)
Principal Investigator
Dr. Karnak Roy, Associate Professor, ASCI
Co-Principal Investigator
Dr. Sweety Pandey, Assistant Professor, ASCI
Research Team
Dr. Raman Ghosh, Assistant Professor, ASCI
Ms. Surabhi Mishra, Senior Research Associate, ASCI
Ms. Bindu Madhavi, Senior Research Associate, ASCI
STUDY ADVISORS
Dr. Nirmalya Bagchi, Professor and Director, ASCI Business School
Dr Valli Manickam, Dean of Research Studies (DoRS), ASCI
B.P. Acharya (IAS. Retd.) Former Special Chief Secretary, Government of Telangana
Dr. Yerram Raju, Founder Director, Telangana Industrial Health Clinic Ltd
iiiAuthors CONTENTS
Acknowledgement............................................................................................................................................. vii
Message, Vice Chairman, NITI Aayog........................................................................................................ ix
Message, Member, NITI Aayog...................................................................................................................... xi
Message, Chief Executive Officer, NITI Aayog..................................................................................... xiii
Message, Programme Director, NITI Aayog ...........................................................................................xv
List of Abbreviations......................................................................................................................................xvii
Preface...................................................................................................................................................................xxi
Executive Summary .......................................................................................................................................xxiii
1.India’s MSME Landscape: An Overview ....................................................................1
2.Role and Economic Impact of Medium Enterprises in India ............................ 11
2.1. Export............................................................................................................................................................13
2.2. R&D Investment.......................................................................................................................................14
2.3. Employment Generation......................................................................................................................16
2.4. Profitability..................................................................................................................................................17
2.5. Scenario Analysis ....................................................................................................................................19
2.6. Potential loss/gain for the economy.......................................................................................... 20
3.Challenges and Current State of Affairs – A Deep Dive into Medium
Enterprises......................................................................................................................23
3.1. Challenges and Current State of Affairs...................................................................................25
Awareness of Schemes .................................................................................................................................. 26
Technological Upgradation ............................................................................................................................27
Skilled Manpower.............................................................................................................................................. 29
Compliance ...........................................................................................................................................................32
Innovation Barrier ............................................................................................................................................. 34
Funding ................................................................................................................................................................. 36
Land & Infrastructure ...................................................................................................................................... 38
4.MSME Policy Landscape............................................................................................. 41
4.1 Ministry of Micro, Small and Medium Enterprises (MoMSME) ......................................42
4.2 State Government Initiatives........................................................................................................... 60
4.3 Gaps in the Policy ecosystem.........................................................................................................63
5.International Best Practices.......................................................................................65
6. Recommendations........................................................................................................75
6.1 Facilitating Financial Access and working capital Support............................................76
vContents 6.2 Technology Integration and Industry 4.0 adoption. ...........................................................78
6.3 Strengthening R&D and innovation ecosystem......................................................................81
6.4 Enhance support for cluster-based testing and quality certification........................82
6.5 Customized skill development for Medium Enterprises....................................................86
6.6 Need for a Centralized Digital Portal for Medium Enterprises......................................91
7. Annexures.......................................................................................................................95
Annexures-1: MoMSME Schemes..............................................................................................................96
Annexures-2: State Schemes: ....................................................................................................................98
Telangana.............................................................................................................................................................. 98
Maharashtra ......................................................................................................................................................... 99
West Bengal........................................................................................................................................................ 99
Uttar Pradesh ................................................................................................................................................... 100
Gujarat ...................................................................................................................................................................101
Tamil Nadu..........................................................................................................................................................102
vi
Designing a Policy for Medium Enterprises
Contents ACKNOWLEDGEMENT
The authors extend their sincere gratitude to NITI Aayog for its leadership, guidance,
and support in the successful completion of this study. We would like to express our
gratitude to Shri Suman K. Bery, Vice Chairman, NITI Aayog; Dr. V.K. Saraswat, Member, NITI
Aayog and Shri B.V.R. Subrahmanyam, CEO, NITI Aayog, whose vision and encouragement
have been instrumental in shaping this report. Their guidance and encouragement were
invaluable throughout the entire process. The role of their leadership was instrumental in
facilitating the development of this report.
Furthermore, we would like to extend our heartfelt gratitude to Shri Ishtiyaque Ahmed,
Program Director, Industry and Foreign Investment Division. His support and incisive
feedback were pivotal in shaping the report’s direction and depth ensuring a robust policy
framework tailored to the unique needs of medium enterprises. Finally, we would also like
to acknowledge Ms. Neha Nautiyal, Deputy Secretary, NITI Aayog; Shri Upendra Kumar
Gupta, Deputy Advisor, NITI Aayog; Shahid Qayoom, Consultant, NITI Aayog; and Karun
Gupta, Young Professional, NITI Aayog, for their valuable insights and continuous support
throughout the study. Their expertise and strategic direction have significantly contributed
to the depth and relevance of this report. This study reflects the collective efforts of all
involved in strengthening the ecosystem for medium enterprises in India.
viiAcknowledgement MESSAGE
VICE CHAIRMAN
NITI AAYOG MESSAGE
MEMBER
NITI AAYOG MESSAGE
CHIEF EXECUTIVE OFFICER
NITI AAYOG MESSAGE
PROGRAMME DIRECTOR
NITI AAYOG LIST OF ABBREVIATIONS
ASPIRE A Scheme for Promotion of Innovation, Rural Industries &
Entrepreneurship
ATIAssistance to Training Institutions
CVYCoir Vikas Yojana
CGTMSE Credit Guarantee Fund Trust for Micro and Small Enterprises
ESDPEntrepreneurship and Skill Development Programme
EUEuropean Union
GDPGross Domestic Product
GoIGovernment of India
ICInternational Cooperation Scheme
IoTInternet of Things
KGVYKhadi Gramoday Vikas Yojana
MEMedium Enterprises
MSEMicro and Small Enterprises
MSE-CDP Micro and Small Enterprises-Cluster Development Programme
MSMEMicro, Small and Medium Enterprises
MoMSME Ministry of MSME
PMEGP Prime Minister’s Employment Generation Programme
PMSProcurement and Marketing Support
RAMPRaising and Accelerating MSME Performance
R&DResearch & Development
SFURTI Scheme of Fund for Regeneration of Traditional Industries
SMESmall and Medium Enterprise
SRI Fund Self-Reliant India (SRI) Fund
TCsTechnology Centres
xviiList of Abbreviations LIST OF TABLES
LIST OF FIGURES
Table 1.1.Classification of the MSME Units................................................................................................2
Table 1.2.Funds Allocated during 2022-23 to Schemes for Medium Enterprises...............8
Table 2.1:Classification of MSMEs Based on Turnover......................................................................12
Table 2.2:R&D Expenditure Per Unit by MSME Categories (INR crore)..................................15
Table 3.1:Priority sectors at 6 FGD locations .......................................................................................25
Table 4.1:Snapshot of support not provided to Medium Enterprises .....................................59
Table 5.1:International Best Practices for Technology Adoption................................................68
Table 5.2:International Best Practices for Addressing Skill Gap ..................................................71
Table 5.3:International Best Practices for Promoting Innovation................................................72
Table 5.4:International Best Practices for Access to Working Capital ....................................73
Table 6.1:Sector-Specific Concentration of MSMEs in Six States .............................................84
Table 6.2:The comparison between proposed portal and existing portal of MSMEs ...92
Figure 1.1:Percentage Share of MSME Unit.............................................................................................3
Figure 1.2:Activity Wise MSME Registrations .........................................................................................3
Figure 1.3:Contribution of MSMEs in GDP for the Last Three Years......................................3
Figure 1.4:Employment per Unit of MSME..............................................................................................4
Figure 1.5:Percentage share of Export by MSMEs in All India Export....................................4
Figure 1.6:Exports by Registered MSMEs .................................................................................................5
Figure 2.1:Classification of Enterprises as per the analysis ..........................................................13
Figure 2.2:MSMEs Export Contribution (USD million)......................................................................13
Figure 2.3:Average Ratio of (ForEx Income/Entity).....................................................................14
Figure 2.4:Category-wise R&D Expenditure Per Unit .......................................................................15
Figure 2.5:Employment Distribution in MSMEs ....................................................................................16
Figure 2.6:Profit to Capital Investment Ratios by Sectors. ...........................................................18
Figure 3.1:Awareness of portals..................................................................................................................26
Figure 3.2:Access to technology.................................................................................................................28
Figure 3.3:Technology Adoption Rate.....................................................................................................28
Figure 3.4:Access to training program and their relevance........................................................ 30
Figure 3.5:Availability of skilled labour (%).......................................................................................... 30
xixList of Tables Figure 3.6:Inputs from stakeholders – on – improving ease of doing business............. 32
Figure 3.7:Innovation Index ............................................................................................................................36
Figure 3.8:Funding Pattern of Medium Enterprises.....................................................................37
Figure 3.9:Credit Demand Vs Supply in Medium Enterprises.....................................................38
Figure 3.10:Stakeholders input on land related issues..................................................................39
Figure 4.1:Percentage Distribution of Funds Allocated Under Each Scheme..................42
xx
Designing a Policy for Medium Enterprises
List of Tables PREFACE
The Micro, Small, and Medium Enterprises (MSME) sector is a cornerstone of India’s
economy, significantly contributing to GDP, exports, and employment generation. Among
these, medium enterprises play a critical role, in the manufacturing and service sector, where
they drive industrial growth, innovation, and global competitiveness. Despite their immense
potential, medium enterprises face challenges such as limited access to finance, inadequate
technological integration, and a lack of tailored policy support. While various government
schemes exist for the MSME sector, only a few specifically address the unique needs of
medium enterprises. Bridging this gap through targeted policy interventions can enhance
their scalability, sustainability, and competitiveness in the global market. Recognizing their
importance, this report, Designing a Policy for Medium Enterprises, seeks to explore the
challenges and opportunities within this sector while proposing a comprehensive policy
framework to support its growth.
The study aims to address gaps in the current policy landscape and identify measures
to enhance the competitiveness, sustainability, and scalability of medium enterprises
in India. Through extensive research, stakeholder consultations, and data analysis, this
report presents recommendations to foster a conducive business environment for medium
enterprises. The report brings together insights from government agencies, industry bodies,
and financial institutions to ensure that the proposed policy framework is well-grounded
in the realities of the sector. It examines existing policies while integrating global best
practices to provide a comprehensive roadmap for strengthening the medium enterprise
ecosystem in India.
As part of the consultation process, discussions were held with officials from the Ministry
of Micro, Small & Medium Enterprises (MoMSME) to gain insights into existing policies and
regulatory frameworks. Shri S.C.L. Das, Secretary of MoMSME, provided invaluable support
and insightful feedback on this report. Other key officials of MoMSME who contributed
include Dr. Rajneesh (AS & DC); Shri Vipul Goel (JS-ARI); Ms. Mercy Epao (JS-SME); Ms.
Sudha Keshari (ADC); Dr. Ishita Ganguli Tripathy (ADC); Shri Bharat Prakash (JDC); Ms.
Rukmani Attri (JDC); Shri Arun G. (Director); Shri Sunil Kumar Newar (Joint Director);
Shri Amit Kumar Tamaria (Joint Director); and Shri O P Singh (Deputy Director). Their
perspectives on policy implementation, sectoral challenges, and potential reforms were
instrumental in shaping the recommendations.
In addition to government consultations, discussions were also held with key industry
stakeholders to incorporate their perspectives on the needs and challenges faced by
medium enterprises. Inputs were gathered from senior officials and experts from the
Federation of Telangana Chambers of Commerce and Industry (FTCCI), Indian Industries
Association (IIA), World Trade Centre (WTC), Association of Lady Entrepreneurs of India
(ALEAP), Industry Development Council (IDC), Industry, Commerce & Export Promotion
Department of the Government of Telangana, Maharashtra Small Scale Industries
Development Corporation (MSSIDC), Department of MSME & Export Promotion of the
Government of Uttar Pradesh, Small Industries Development Bank of India (SIDBI), and
other banking institutions. Additionally, the team engaged with the management, CEOs,
xxiPreface and representatives of various MSMEs to ensure that first hand industry insights were
incorporated into the policy framework.
Drawing upon the findings of extensive research and stakeholder consultations, this
report identifies the critical challenges facing medium enterprises in India and explores
opportunities to enhance their growth and competitiveness. It highlights key intervention
areas, including access to finance, technology adoption, and market linkages. Furthermore,
the report provides detailed policy recommendations with action points across multiple
domains, such as financial initiatives, skill development, infrastructure development,
technology upgradation, and institutional support for R&D initiatives. It is expected to
serve as a comprehensive guiding document for policymakers, industry leaders, and other
stakeholders, fostering a robust ecosystem that enables medium enterprises to thrive and
contribute significantly to India’s economic progress. With the right policy interventions,
this sector can significantly contribute to economic growth, job creation, and technological
innovation. With this report, we aspire to initiate a meaningful dialogue on the future of
medium enterprises and pave the way for their sustained growth and success.
xxii
Designing a Policy for Medium Enterprises
Preface EXECUTIVE SUMMARY
The Micro, Small, and Medium Enterprises (MSME) sector in India plays a crucial role in
the country’s economic landscape, contributing approximately 29% to the nation’s GDP,
40% to total exports, and employing over 60% of the workforce. MSMEs cater to the
demand for a wide variety of products, with the sector producing 6,000 distinct items.
The sector remains largely dominated by micro enterprises, which constitute 97% of the
registered MSMEs, followed by Small Enterprises (2.7%) and medium enterprises (0.3%).
Medium enterprises are vital contributors to India’s GDP, particularly within the
manufacturing sector. In addition, they contribute 40% of MSME export income, and are
more innovation driven than small and micro enterprises.
Despite immense potential and strengths, medium enterprises need certain interventions to
unlock their full potential. These include improved access to working capital, technology
integration in business operations, availability of a conducive R&D innovation ecosystem,
availability of skilled manpower, and better awareness of schemes. To address these
needs, the Government of India has been implementing a wide array of schemes aimed
at supporting MSMEs. However, only a small proportion of these initiatives are tailored
specifically for medium enterprises. If targeted interventions are made in this direction, it
will augment the ability of Medium Enterprises to scale and compete in the global market.
Through this report, we aim to design a policy framework that addresses the specific needs
of medium enterprises by analysing existing opportunities and reviewing international best
practices. Each recommendation focuses on areas identified for improvement, ensuring a
targeted and effective approach.
1.TAILORED FINANCIAL INITIATIVES FOR MEDIUM
ENTERPRISES
Medium enterprises typically have significantly higher capital requirements than micro
and small enterprises. There is currently no dedicated scheme for addressing the
working capital needs of medium enterprises. A dedicated financing scheme under
the Ministry of M6M( is proposed allowing Medium (nterprises to apply for loan at
concessional rates at their local retail banNs and receive fast tracN decisions. /oan up
to a certain percentage of revenue depending upon the sector of the unit i.e.
manufacturing or service capped at Rs. crores with a ma[imum of Rs. crores
per reTuest can be availed. Introduce a credit card with a pre-approved limit of up to
`5 crore for medium enterprises, aligned with marNet rate of interest. The
implementation can be handled by MoMSME in collaboration with other ministries.
2.TECHNOLOGY INTEGRATION IN BUSINESS
OPERATIONS
Medium enterprises have enormous scope of incorporating advanced technologies into
theiroperations. It is proposed to leverage the e[isting 7echnology Centres 7Cs under
the Ministry of M6M( and revamp them into ?,ndia 6M( . Competence Centres.
xxiiiExecutive Summary New TCs can be designed to act as competence centres that will cater to various
industries, including General Engineering, Fragrance and Flavour, Electronics Systems
Design and Manufacturing (ESDM), Sports, and other sect ors based on regional and
industry-specific demands. The integration will ensure these centres become innovation
hubs for MSMEs, equipping them with the tools and knowledge needed to adopt
Industry 4.0 technologies.
3.R&D PROMOTION FOR MEDIUM ENTERPRISES
Being more expor t orient ated and having larger presence in manufacturing
sector, investment in R&D is a compulsion rather than a choice for the medium
enterpr ises. A dedicated cell focused on promoting technology development and R&D
activities within the MSME sector may be created for fostering coordinated efforts.
Identify cluster specific R&D projects of National Importance, adopt (8 type funding
mechanism in which the government after due process will identify a set of major
R&D gaps and invite proposal from the Medium (nterprises to bridge those gaps.
and create a three-tier mechanism of managing the funding process. At the ape[ level
there could be an ?([pert Committee? consisting of e[pert bodies that will chalN out
the research agenda for the near future and for the longterm future. Below this can be
a Research Funding Management Committee that will call for R&D proposals from
medium enterprises based on identified gaps. And finally the Project Review and
Monitoring Committee will monitor the performance and progress of these R&D
initiatives. The existing financing under Self-Reliant India Fund may be utilized by
reserving a certa in port ion for focusing exclusively on financing Medium Enterprise
projects in this regard. This intervention may be supported by ministries/Agencies
decided by Ministry of MSME.
4.ENHANCING MSE-CDP: INTEGRATING CLUSTER-WISE
TESTING FACILITIES FOR MEDIUM ENTERPRISES
Cluster-wise testing facilities are crucial for medium enterprises in India because they
enable easier access to quality assurance, product certification, and regulatory compliance,
especially in sectors like manufacturing, pharmaceuticals, and textiles. Currently, the MSE-
CDP focuses on micro and small enterprises only. Extending the scheme to include medium
enterprises through the establishment of cluster-based testing facilities aligns with the
scheme’s core objective of fostering collective growth. First step should be identifying the
predominant sectors in each state and then investigate to determine the concentration of
Medium Enterprises within those sectors. Once the sectoral concentrations are identified,
the next logical step is to establish cluster wise testing facilities as a core component
of MSE-CDP .
5.CUSTOMIZED SKILL DEVELOPMENT INITIATIVES FOR
MEDIUM ENTERPRISES
xxiv
Designing a Policy for Medium Enterprises
Medium Enterprises require continuous upskilling to remain competitive, especially in
sectors like manufacturing, IT, and services. It is proposed to map the skill requirements
of Medium Enterprises, focus on specific skills and regional clusters to identify unique
requirements of Medium Enterprises, and provide customized skill development courses.
The three components of the ESDP Scheme—Entrepreneurship cum Skill Development
Programme (E-SDP), a six-week training programme; the One Week Advanced ESDP
programmes; and the One Week Advanced MDP Training Programmes can be
Executive Summaryxxiii e[panded to incorpora te skill development initiatives tailored for medium enterprises.
Ministry of Skill Development and Entrepreneurship may play a pivotal role in
implementing the changes. Design e[portoriented curriculum for Medium (nterprises
including sustainable products and lifecyclespecific programs to address different
growth stages of medium enterprises.
6.CENTRALIZED PORTAL FOR MEDIUM ENTERPRISES
Medium Enterprises need timely access to relevant information about government
programs, compliance requirements, and financial assistance. The creation of a
centralized, user-friendly,and credible platform asasub-portal of the Udyam Portal
specifically designed for Medium Enterprises, will help then in accessing information,
applications, and support schem es tailored specifically for them. The sub-portal should
havethree modules Basic informationmoduleProcess module andMarNet research
moduleOverall, the potential of Medium Enterprises to drive India’s economic growth,
innovation, and employment generation is largely underutilized.The focus of our
recommendations has been tooptimizetheexisting policy framework and
initiatives, ensuringthey better caterto theunique needs of Medium Enterprises
instead of proposing additional schemes, which could lead to redundancy and
fragmentation. Withastrategic and coordinated approach, the growth trajectory of
Medium Enterprises can be accelerated, enabling them to emerge as apillar of India’s
industrial ecosystem and a key driver of the nation’s long-term economic resilience.
xxv
Designing a Policy for Medium Enterprises
Executive Summary India’s MSME Landscape: An Overview1
INDIA’S MSME
LANDSCAPE:
AN OVERVIEW
1 CHAPTER 1
INDIA’S MSME LANDSCAPE:
AN OVERVIEW
The Micro, Small, and Medium Enterprises (MSME) sector in India is characterized by
diverse range of businesses that vary in size, technological capability, and employment
generation. The sector’s significance is underscored by its contribution of nearly 29%
1
to
the country’s GDP, 40%
2
to total exports and employing more than 60%
3
of the nation’s
workforce. With the capacity to produce 6,000 distinct products, MSMEs play a pivotal role
in catering to the demand for mass consumption goods. Given its strategic importance,
the MSME sector has the potential to serve as an engine of economic growth, provided
it is supported by a conducive policy environment and targeted developmental initiatives.
In accordance with the provision of Micro, Small & Medium Enterprises Development
(MSMED) Act, 2006 of Government of India, a classification came into effect on 1st July,
2020, based on investment in plant and machinery and turnover. A revised classification
has come into effect from April 1, 2025, as per the Ministry of MSME’s Notification S.O.
No. 1364(E) dated March 21, 2025.
Table 1.1. Classification of the MSME Units
Enterprise
Earlier classification (July 2020) Revised Classification (April 2025)
Investment in plant
and machinery
Turnover
Investment in plant
and machinery
Turnover
Micro
Not exceeding
Rs. 1 crore.
Not exceeding
Rs. 5 crores.
Not exceeding
Rs. 2.5 crore.
Not exceeding
Rs. 10 crore.
Small
Not exceeding
Rs. 10 crores.
Not exceeding
Rs. 50 crores.
Not exceeding
Rs. 25 crores.
Not exceeding
Rs. 100 crores.
Medium
Not exceeding
Rs 50 crores.
Not exceeding
Rs. 250 crores.
Not exceeding
Rs 125 crores.
Not exceeding
Rs 500 crores.
This report is based on the earlier classification of Micro, Small and Medium Enterprises (MSMEs) as applicable at the time of data collection and analysis.
There are approximately 6 crore
4
unincorporated non-agricultural MSMEs (excluding
construction) in the country engaged in different economic activities. Only 3.35 crore of
these MSMEs are registered on the Udyam Registration Portal. Another 2.55 crore micro
1Source: Press Information Bureau (11 December 2023)
2Source: Data Dissemination Portal of Directorate General of Commercial Intelligence and Statistics (DGCIS)
3Source: Report by McKinsey Global Institute (MGI)
4As per the latest National Sample Survey (NSS) 73rd round, conducted by National Sample Survey Office, Ministry of Statistics & Programme Implementation
2 India’s MSME Landscape: An Overview and tiny enterprises are registered on the Udyam Assist Platform. 97% of registered
MSMEs are micro enterprises
5
.
M icroSmall
Small
2 .7 %
M edium
Micro
9 7%
M edium
0 .3 %
Figure 1.1: Percentage Share of MSME Unit
Out of 2.95 crore registered MSMEs, 72% are engaged in the service sector and remaining
28% in manufacturing sector
6
.
Manufacturing Service
58%42%
48%52%
30%70%
MEDIUM
SMALL
MICRO
Figure 1.2: Activity Wise MSME Registrations
MSMEs, contribute approx. 29%
7
to India’s Gross Domestic Product (GDP), playing a
crucial role in driving economic growth.
2 5.0 0%
3 1.0 0%
3 0.0 0%
2 9.0 0%
2 8.0 0%
2 7.0 0%
2 6.0 0%
2 0 19-2 0 2 0 20-2 1 2 0 21-2 2
Share of M SM E in all
India G ross Domestic
Product(G DP)
3 0.4 8% 2 7.2 4% 2 9.1 5%
Figure 1.3: Contribution of MSMEs in GDP for the Last Three Years
5Source: Udyam Registration Portal
6MSME Annual Report 2023-24
7This represents the total value added by MSMEs (Gross Value Added) in the production of goods and
services. It measures the contribution of MSMEs to the economy after accounting for the costs of inputs
and raw materials. Source: Press Information Bureau (11 December 2023)
India’s MSME Landscape: An Overview3
Designing a Policy for Medium Enterprises Employment per U nit
1 0 0.0 0
5 0.0 0
0 .0 0
M icroSmallM edium
5 .7 01 9.1 18 9.1 4Employment per U nit
Figure 1.4: Employment per Unit of MSME
MSME sector employs 62%
8
of the country’s workforce. The sector generates employment
for 18.36 crore
9
people including approximately 5 crore women. The Micro Enterprises
comprise about 89% of total MSME employment in 2024. Medium Enterprises contributed
3% to the total MSME employment in 2023-24. However, per unit employment generated
by Medium Enterprise is 89.14.
MSMEs’ share in the country’s export is about 40%
10
. However, only 1.36% of registered
MSMEs export
11
–out of which 64% units have export turnover less than Rs. 1 crore. While
micro & small enterprises make up most exporting units (91%), their contribution to the
total export value is 60% of total MSME exports. While Medium Enterprises comprise 9%
of exporting units that contribute to 40% of MSME exports.
4 9 . 7 7 %
4 9 . 3 5 %
4 5. 0 3 %
4 5. 5 6 %
4 3. 5 9 %
2019-20 2020-21 2021-22 2022-23 2023-24*
Figure 1.5: Percentage share of Export by MSMEs in All India Export
8Report by McKinsey Global Institute (MGI)
9Source: Udyam Registration Portal
10 Source: Data Dissemination Portal of Directorate General of Commercial Intelligence and Statistics (DGCIS)
11 EXIM Report 2023
India’s MSME Landscape: An Overview4
Designing a Policy for Medium Enterprises 7 0,0 00
6 0,0 00
5 0,0 00
6 0,9 08
4 5 0 8 6.9 9
5 0 5 6 2.1
4 0,0 00
3 0,0 00
2 9 8 7 6.6 5 3 8,3 65
2 0,0 00
9 ,7 41
1 0,0 00
0
5 0 5 6 2.14 5 0 8 6.9 92 9 8 7 6.6 5
Exports
(U SD M illion)
9 ,7 413 8,3 656 0,9 08
Exporting
U nits
M ediumSmallM icro
Figure 1.6: Exports by Registered MSMEs
The MSME sector has long been recognized as the backbone of the economy. In view
of this, the Government of India has implemented a robust array of initiatives aimed at
bolstering the sector, recognizing its pivotal role in the economy. These efforts range from
financial support, skill development and training programmes, quality upgradation and
procurement policies to capacity building and market integration.
BOX 1.1: BUDGET 2023-24 INSIGHTS
Budget 2023-24 announced to revamp the credit guarantee scheme for MSMEs, adding Rs. 9,000 crores to the corpus, enabling Rs. 2 lakh crores in collateral-free credit and reducing borrowing costs by 1%. Additionally, Government support for the sector has significantly increased, with the MoMSME’s spending rising to Rs. 23,583.90 crore in FY23, a 260% increase from FY19. The Interim Budget 2024-25 introduced a Rs. 1 lakh crore corpus for 50-year interest-free loans to boost R&D in emerging sectors. These measures, along with a Rs. 22,137.95 crore allocation in the Interim Budget 2024 for new clusters and technology centers, underscore the government’s focus on strengthening the MSME sector.
The Ministry of MSME alone has announced 18 schemes
12
for MSMEs, while several other
ministries also offer schemes tailored to support MSMEs. In addition to these Central schemes, State governments have introduced their own programs to further support MSMEs. Maharashtra has the highest number of MSMEs in the country
13
, accounting for
16.5% of the total, followed by Tamil Nadu (9.8%), Uttar Pradesh (9.5%), Rajasthan (7.1%), and Gujarat (7.1%). Each of these states have their own MSME programs ranging from 8
12 Source: MSME Booklet 2024
13 As per Udyam Registration Dashboard (https://dashboard.msme.gov.in/Udyam_Statewise.aspx)
India’s MSME Landscape: An Overview5
Designing a Policy for Medium Enterprises to 15 schemes across each state. Across various ministries and states, there are over 250
schemes available for MSMEs. (For the list of schemes, refer to Annexure II).
These schemes cater to one or more key areas, including:
Credit Assistance
0 1
Skill Development
0 2
Market Assistance
0 3
Technology and
Quality Upgradation
0 5
R&D Innovation
0 6
Infrastructure
Development
0 4
Snapshot of Ministry of MSME Schemes:
Scheme Name
Funds Allocated
(2022-23) Rs. (Crores)
Self-Reliant India (SRI) Fund is a Fund of Funds (FoF) scheme
that involves investing in daughter funds managed by professional
investment firms, which in turn, provide growth capital to promising
MSMEs.
This scheme is available to Medium Enterprises.
392.78
International Cooperation Scheme provides international marketing
opportunities to MSMEs by providing financial assistance on
reimbursement basis for airfare, space rent, freight charges, etc.
This scheme is available to Medium Enterprises.
11.28
Entrepreneurship and Skill Development Programme (ESDP) provides
training and development to youth of the country in order to motivate
them to consider self-employment or entrepreneurship as one of the
career options.
This scheme is available to Medium Enterprises.
80 (Budget Estimate)
Assistance to Training Institutions (ATI) Scheme strengthens the
capacity of training institutions.
This scheme is available to Medium Enterprises.
21.99
Technology Centres (TCs) focus on supporting industries to train and
support first-generation entrepreneurs.
This scheme is available to Medium Enterprises.
100 (Budget Estimate)
Promotion of MSME in NER provides financial support for enhancing
the productivity and competitiveness as well as capacity building of
MSMEs in the NER and Sikkim.
This scheme is available to Medium Enterprises.
50 (Budget Estimate)
India’s MSME Landscape: An Overview6
Designing a Policy for Medium Enterprises Scheme Name
Funds Allocated
(2022-23) Rs. (Crores)
Raising and Accelerating MSME Performance (RAMP) scheme backed
by the World Bank, boosts MSME performance through state-prepared
Strategic Investment Plans (SIPs). Grants support projects to enhance
innovation, market access, and infrastructure.
This scheme is available to Medium Enterprises.
269.38
MSME Champions objective is to modernize the processes, reduce
wastages, sharpen business competitiveness consists of MSMEs through
three sub-components–MSME- Sustainable (ZED), MSME-Competitive
(Lean) and MSME-Innovative.
This scheme is available to Medium Enterprises.
44.05
Prime Minister’s Employment Generation Programme (PMEGP) is a
unique scheme that focuses on employment generation of unemployed
youth. Under the scheme, Margin Money (Subsidy) is provided to
individuals availing loan from banks for setting up new enterprises.
This scheme is not available to Medium Enterprises.
2733.21
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
provides collateral-free credit support to Micro and Small Enterprises
(MSEs) through a credit guarantee for loans extended by Member
Lending Institutions.
This Fund Trust is not available to Medium Enterprises.
This scheme is being
revamped
Procurement and Marketing Support (PMS) Scheme supports the
marketing activities of MSEs, helping them explore and access new
markets.
This scheme is not available to Medium Enterprises.
27.49
Coir Vikas Yojana (CVY) is an Umbrella Scheme being implemented by
Coir Board for the Development of Coir Industry all over the Country.
This scheme is not available to Medium Enterprises.
87.14
Khadi Gramoday Vikas Yojana (KGVY) was set up to revive khadi
institutions by providing training and skill development, subsidy on
raw material procurement and interest subsidy.
This scheme is not available to Medium Enterprises.
344.17
A Scheme for Promotion of Innovation, Rural Industries &
Entrepreneurship (ASPIRE)’s main objective is promoting
entrepreneurship and employment generation in agro-rural sector with
special focus on rural and underserved areas.
This scheme is not available to Medium Enterprises.
4
Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
organizes artisans into clusters to provide support for their long-term
sustainability.
This scheme is not available to Medium Enterprises.
1.95
India’s MSME Landscape: An Overview7
Designing a Policy for Medium Enterprises Scheme Name
Funds Allocated
(2022-23) Rs. (Crores)
Micro and Small Enterprises-Cluster Development Programme (MSE-
CDP) was launched for the development of clusters across country
for creation of Common Facility Centres (CFCs).
This scheme is not available to Medium Enterprises.
150 (Budget Estimate)
National SC-ST Hub is an umbrella scheme set up to provide advisory
and business support to SC/ST Entrepreneurs.
This scheme is not available to Medium Enterprises.
135
PM Vishwakarma Scheme provides holistic support to artisans and
craftspeople including credit support, digitization, and marketing
assistance.
This scheme is not available to Medium Enterprises.
989.52 (Revised
Estimate)
As understood from scheme guidelines, there are only 8 schemes specifically targeted at
Medium Enterprises and only one of which provides credit support. Most of the schemes
are designed to support micro and small enterprises. Details of each scheme and the
components applicable to Medium Enterprises is discussed in depth in Chapter 4.
This inference of distorted incentive structure is based on data that is available in
the public domain. As per the Expenditure Budget published by MoF, the total funds
allocated to the MSME sector in the year 2022-23 is approximately Rs. 5,442 Crores out
of which 68% of the funds are allocated to only two schemes – PMEGP (50%) and PM
Vishwakarma (18%), both of which are not meant for Medium Enterprises. Interestingly, the
percentage share of the total funds allocated to schemes that are available for Medium
Enterprises is only 17.81%.
Table 1.2. Funds Allocated during 2022-23 to Schemes for Medium Enterprises
Schemes available for Medium Enterprises
Funds Allocated
(Rs. in Crores)
MSME Champions44.05
Raising and Accelerating MSME Performance (RAMP)269.38
International Cooperation (IC) Scheme11.28
Entrepreneurship and Skill Development Programme80
Assistance to Training Institutions (ATI) Scheme21.99
Technology Centres Scheme100
Promotion of MSME in NER and SIKKIM50
Self-Reliant India (SRI) Fund392.78
Total969.48
Percentage of Total17.81%
India’s MSME Landscape: An Overview8
Designing a Policy for Medium Enterprises The rationale behind the heavy focus on micro and small enterprises may be multi-fold:
Large chunk of MSME population: MSEs constitute 99% of the MSME population.
Resource Constraints: MSEs often lack resources and access to formal credit
channels, making them more vulnerable compared to medium enterprises.
Employment Generation: MSEs are labor-intensive, providing a significant share
of employment in sectors like manufacturing, agriculture, and services.
Sustainable Development Goals: Many international organizations, such as the
International Labour Organization (ILO) and World Bank, have long emphasized
the role of small businesses in poverty reduction and sustainable development.
The Sustainable Development Goals (SDGs) also highlight the importance of
supporting micro and small enterprises, aligning government schemes with
broader global commitments.
Perceived Inclusivity: Supporting micro and small enterprises is viewed as
pro-poor and inclusive. Many of these enterprises are owned by marginalized
communities, women, or socially disadvantaged groups. Therefore, policies
targeting MSEs align with broader goals of social equity and inclusive growth.
Owing to this rationale, majority of the schemes emphasize training for unemployed youth,
credit assistance for setting up micro enterprises, support for domestic marketing and
infrastructure, quality certification, international marketing, and sustained credit flow.
While the preferential treatment of MSEs can spur growth and reduce unemployment,
the current structure of MSME schemes may lead to distorted incentives. The Economic
Survey 2023-24 implications published through Press Information Bureau testifies the same
by mentioning that the “threshold effect” (i.e., a reluctance to grow beyond certain financial
limits) leads to an underutilization of growth potential in India’s industrial ecosystem
14
.
The disproportionate support for smaller enterprises might encourage businesses to remain
small to continue benefiting from these schemes, thus avoiding natural growth to the
medium enterprise category. This can result in several adverse outcomes:
1.Missed Opportunities for Job Creation: By maintaining micro or small status,
enterprises miss out on opportunities to scale up operations, potentially stunting
larger employment generation.
2.Reduced Innovation and Productivity: Economies of scale often allow for greater
innovation and improved operational efficiencies. The existing incentive structure
may deter businesses from expanding to achieve such economies, limiting competitiveness and
productivity gains.
3.Weak Global Competitiveness: Medium enterprises typically possess the potential
to scale up and compete internationally, but the lack of targeted support for
medium firms may hinder their ability to take advantage of global market
opportunities. In contrast, MSEs may remain domestic players, limiting the sector’s
contribution to export-driven growth.
14 Economic Survey 2023-24 https://pib.gov.in/PressReleseDetail.aspx?PRID=2034922®=3&lang=1
India’s MSME Landscape: An Overview9
Designing a Policy for Medium Enterprises The current focus of MSME schemes on Micro and Small Enterprises, while important
for fostering inclusive growth, may unintentionally hold back the expansion of Medium
Enterprises. With less schemes and less funds to support Medium Enterprises, there may
be an imbalance that needs to be addressed. A more balanced approach that recognizes
the distinct needs of medium enterprises could create a more robust and diversified MSME
ecosystem, supporting the overall growth trajectory of the sector and the Indian economy.
This report aims to explore whether a policy intervention to address the challenges
faced by the Medium Enterprises is the need of the hour. The next chapter decodes the
role of Medium Enterprises in the economy and paves the way to answer this question.
India’s MSME Landscape: An Overview10
Designing a Policy for Medium Enterprises Role and Economic Impact of Medium Enterprises in India11
2
ROLE AND ECONOMIC
IMPACT OF MEDIUM
ENTERPRISES IN INDIA CHAPTER 2
ROLE AND ECONOMIC
IMPACT OF MEDIUM
ENTERPRISES IN INDIA
In this chapter, we have tried to identify the role and economic impact of Medium enterprises
in India. The economic impact refers to the influence that the Medium Enterprises have
on the economy, particularly through its contribution to, employment generation, export
activity and Investment in Research & Development (R&D). By analyzing this parameter,
we have tried to understand the overall significance of MEs shaping economic health and
sustainability.
Medium Enterprises accounts for only 0.3% of the total MSMEs with a total of 67,923
entities. Out of these, 39,395 (58%) Medium Enterprises are engaged into manufacturing
activities, while remaining 42% Medium Enterprises are in service sector
15
.
The contribution of MSMEs to India’s GDP is substantial, as MSMEs account for about
31.8% of India’s Gross Value Added (GVA)
16
, translating to approximately $1.18 trillion USD
of India’s overall GDP of $3.7 trillion
17
. Specifically, the manufacturing sector accounts for
around 13-14% of India’s total GDP, amounting to approximately $481 billion to $518 billion
USD in 2023.
We utilized a sample of 8,686 medium-sized enterprises (data collected from the
ProwessIQ
18
) and analysed the contribution of Medium Enterprises in terms of export,
R&D investment, employment and profitability.
15 MSME Annual Report 2023-24
16 Press Information Bureau
https://www.pib.gov.in/Pressreleaseshare.aspx?PRID=1579757
17 https://tradingeconomics.com/india/gdp
18 The CMIE database developed by the Centre for Monitoring Indian Economy provides financial and
operational information on over 55,000 companies across various sectors, including both listed and unlisted
firms. This database includes detailed financial statements, stock market data, and insights into company
ownership, products, and services, making it a valuable tool for research and analysis. The companies can
be classified based on their turnover and capital investment. The companies having turnover between Rs.
50 to 250 crores are considered as medium enterprises.
12Role and Economic Impact of Medium Enterprises in India Table 2.1: Classification of MSMEs Based on Turnover
Classification
Turnover Range
(INR Crore)
Investment Range
(INR Crore)
No. of Entities
Micro0 > to <= 5 0 > to <= 1 16,477
Small5 > to <= 50 1 > to <= 10 11,166
Medium 50 > to <= 250 10 > to <= 50 8,686
M ed ium,2 4%
M ic ro,4 5%
S m a ll,3 1%
Figure 2.1: Classification of Enterprises as per the analysis
Small,
M edium,
6 0 ,0 0 0.0 0
M icro,
2 9,8 7 6.6 5
Small,
4 5 ,08 6 .9 9
5 0,5 6 2.1 0
4 0 ,0 0 0.0 0
2 0 ,0 0 0.0 0
0 .0 0
M icroSmallM edium
2 0 20-2 12 0 21-2 22 0 22-2 3
Figure 2.2: MSMEs Export Contribution (USD million)
2.1. EXPORT
In FY 2022-23, Medium Enterprises contributed USD 50,562.1 million to India’s forex
earnings, accounting for nearly 40% of the total MSME export income
19
Medium
Enterprises are particularly dominant in sectors such as textiles, pharmaceuticals, and auto
components, where their export contributions far exceed those of smaller enterprises. For
19 Source: EXIM Analysis Report 2023
Role and Economic Impact of Medium Enterprises in India13
Designing a Policy for Medium Enterprises example, in the automotive components sector, Medium Enterprises have pioneered the
export of green technologies, contributing significantly to India’s growing reputation as a
hub for automotive innovation
20
.
Participation in global supply chains allows Medium Enterprises to increase foreign exchange
earnings while contributing to India’s overall economic stability
21
. While innovation barriers
remain a challenge, the efficiency and export orientation of Medium Enterprises continue
to drive their foreign exchange performance
22
.
3 9 . 95
8 . 3 0
1 . 39
M icroSmallM edium
F O RE X I N CO M E P E R E N T I T Y ( I N R I N CRO RE )
Figure 2.3: Average Ratio of (ForEx Income/Entity)
The analysis shows that on an average Medium Enterprises generated INR 39.95 crore
per entity in terms of foreign exchange income, compared to INR 1.39 crore for Micro Enterprises and INR 8.30 crore for Small Enterprises
23
.
2.2. R&D INVESTMENT
The analysis reveals that Medium Enterprises contribute 81% of the total R&D investment
made by MSMEs. This enables them to innovate and expand their market share both
20 Venkateswarlu, M. (2011). Role of Micro, Small and Medium Enterprises in Indian Economic Development.
Asian Pacific Journal of Research, 2(3), 210-223. https://dx.doi.org/10.15373/2249555X/APR2014/20
21 Sharma, N. (2014). Barriers to Innovation in Small and Medium Enterprises in India. SSRN Electronic Journal.
https://dx.doi.org/10.2139/ssrn.2397991
22 Uma, R., & Anbuselvi, R. (2023). Role of Micro Small and Medium Enterprises (MSME) in Employment
Generation in India. Shanlax International Journal of Economics, 11(2), 1-14. https://dx.doi.org/10.34293/economics.v11i2.5809
23 Uma, R., & Anbuselvi, R. (2023). Role of Micro Small and Medium Enterprises (MSME) in Employment
Generation in India. Shanlax International Journal of Economics, 11(2), 1-14. https://dx.doi.org/10.34293/economics.v11i2.5809
Role and Economic Impact of Medium Enterprises in India14
Designing a Policy for Medium Enterprises domestically and globally. Medium Enterprises are more likely to invest in new technologies
and processes compared to small and micro enterprises, giving them a competitive
advantage
24
.
Micro, 2 %
Small, 1 6 %
M edium, 8 1 %
% S H A RE O F R& D E X P E N S E
Figure 2.4: Category-wise R&D Expenditure Per Unit
Medium Enterprises play a larger role in fostering technological advancements in sectors such as pharmaceuticals, IT services, and automotive components. R&D focus helps the Medium Enterprises to drive innovation, which in turn enhances their profitability and long-term sustainability
25, 26
.
The analysis reveals that on average Medium Enterprises spent INR 2.07 crore per entity on R&D, significantly more than Small Enterprises (INR 0.84 crore) and Micro Enterprises (INR 0.73 crore).
Table 2.2: R&D Expenditure Per Unit by MSME Categories (INR crore)
Classification Per Unit R&D Expense
Micro0.73
Small0.84
Medium2.07
24Singh, A. K. (2022). A study on the growth and role of SMEs in the Indian economy. International Journal of Finance, Management & Economics, 5(2), 114-117. https://dx.doi.org/10.34293/economics.v11i2.5809
25 Chandramouli, V. V., & Mahanty, B. (2016). Subcontracting dimensions in the small and medium
enterprises: Study of auto components’ manufacturing industry in India. Proceedings of the Institution of Mechanical Engineers, Part B: Journal of Engineering Manufacture, 230(2), 345-355. https://dx.doi.org/10.1177/0954405414565137
26 Dinesha, P. T., Jayasheela, & Hans, V. (2008). Micro, Small and Medium Enterprises in India:
Trends and Challenges. Indian Journal of Industrial Relations, 44(2), 123-134. https://dx.doi.org/10.1177/0970846420080204
Role and Economic Impact of Medium Enterprises in India15
Designing a Policy for Medium Enterprises BOX 2.1: CASE – MEDIUM ENTERPRISES ARE LEADERS IN
R&D-DRIVEN INNOVATION
In the IT services and automotive sectors, Medium Enterprises like KPIT Technologies
have emerged as leaders in R&D-driven innovation. These firms have developed
cutting-edge solutions, such as green vehicle technologies, which have enhanced
their competitive position globally.
2.3. EMPLOYMENT GENERATION
Medium Enterprises are significant contributors to employment generation in India,
particularly in tier-2 and tier-3 cities. These enterprises employ more people per entity
compared to Micro and Small Enterprises, thus playing a crucial role in addressing
unemployment and fostering regional development.
9 0
8 0
7 0
6 0
5 0
4 0
3 0
2 0
1 0
0
M icro
Small
M edium
M icro Small M edium
AverageEmploymentper
Entity
5 .7 1 9 .11 8 9 .14
Figure 2.5: Employment Distribution in MSMEs
Role and Economic Impact of Medium Enterprises in India16
Designing a Policy for Medium Enterprises Medium Enterprises have a higher employment-to-capital ratio. Their presence in both
the manufacturing and services sectors provides widespread employment opportunities
across less industrialized regions of India
27
.
Medium Enterprises employ an average of 89.14 people per entity, compared to 19.11
in Small Enterprises and 5.70 in Micro Enterprises. This demonstrates the critical role of
Medium Enterprises in reducing unemployment, particularly in rural and semi-urban areas.
BOX 2.2: CASE – MEDIUM ENTERPRISES ARE LEADING JOB
CREATORS
In manufacturing sectors such as food processing, textiles, and automotive components, Medium Enterprises are leading job creators. These industries have helped to generate employment in regions that previously lacked industrial infrastructure, contributing significantly to inclusive and balanced economic development
28
.
2.4. PROFITABILITY
Medium Enterprises have consistently demonstrated higher profitability ratios compared
to smaller businesses. This is largely due to their ability to make larger capital investments and leverage economies of scale. Medium Enterprises benefit from their capacity to invest in infrastructure, technology, and human resources, leading to improved returns on investment
29
. The profitability of Medium Enterprises is reflected in higher returns on
capital compared to micro and small firms. Their strategic investments in sectors such as manufacturing and technology have not only increased profitability but also enhanced their global competitiveness
30, 31
.
27Garima, C., & Singh, G. (2023). A Study on Marketing Aspect of Medium and Small Enterprises. Shanlax International Journal of Economics, 11(2), 1-12. https://dx.doi.org/10.34293/economics.v11i2.5809
28 Nayak, S. S., & Mahapatra, P. (2016). FDI in Retail Sector and its impact on MSMEs in India. Journal of
Business Management Studies, 5(3), 111-118. https://dx.doi.org/
29https://financialexpress.com/business/sme-msme-tech-one-third-of-indian-smbs-will-invest-more-in-automation-by-2026-to-tackle-manpower-issues-idc-report-2997664/
30 Sharma, N. (2014). Distinguishing Sectoral Innovation Behaviour: A Study of SMEs in India. SSRN Electronic
Journal. https://dx.doi.org/10.2139/ssrn.2391928
31https://www.business-standard.com/article/sme/return-on-capital-non-corporates-have-an-edge-over-corporates-in-msme-sector-113120901025_1.html
https://www.emerald.com/insight/content/doi/10.1108/ejmbe-03-2021-0077/full/html
https://manufacturing.economictimes.indiatimes.com/news/industry/indian-manufacturers-to-allocate-11-15-
pc-of-investments-on-smart-tech-in-2-years-cii/116762184
Role and Economic Impact of Medium Enterprises in India17
Designing a Policy for Medium Enterprises M anufacture ofceramic laboratory, chemicaland industrial…
Retail sale of refrigerators, washing machinesand other…
M anufacture of non-refractoryceramic pipes, conduits,…
Growing of spices, aromati c, drugand pharmaceuti cal crops
M anufacture of R.C.C. bricks and blocks
M anufacture of protective safety equipment (fi?e-resistant…
M anufacture of railway or tramway rolling stock,not self-…
Real estate activities on afee or contract basis
M anufacture of cigare?es, cigare?e tobacco
G athering of lac, resinsand rubb
M ining of lignite
M anufacture of measuring instrumentssuc as thermometers…
M anufacture of other non-metallic mineral products
M anufacture of basic preciousand other non-ferrous metals
M ining of barytes
M anufacture of other perfumesand toilet preparati ons n.e.c.
M anufacture of pan masala and related products.
Raisingand breeding of petanimals (cats, dogs, birds,…
M anufacture of vitaminised high proteinflour, frying of dal…
M anufacture of railway track materials (unassembled ra
M anufacture sweetmeats includind dairy based sweetmeats
M anufacture of catechu(katha)and chewinglime
M anufacture of other coke oven products such as gas, crude…
M anufacture of prepared feeds for pets, including dogs, cats,…
0 .0 0 1 0 0 .0 0 2 0 0 .0 0 3 0 0 .0 0 4 0 0 .0 0 5 0 0 .0 0
Figure 2.6: Profit to Capital Investment Ratios by Sectors.
Medium Enterprises in sectors such as automotive components, IT services, and
pharmaceuticals have consistently outperformed smaller enterprises in terms of profitability.
Their capacity to make targeted capital investments in high-growth areas ensures sustained
financial performance and long-term competitiveness
32
. This data analysis and review
of previous research reports underscores that Medium Enterprises are key drivers of
innovation, employment generation, and export orientation, with a significant focus on
manufacturing.
32 Venkateswarlu, M. (2011). Role of Micro, Small and Medium Enterprises in Indian Economic Development.
Asian Pacific Journal of Research, 2(3), 210-223. https://dx.doi.org/10.15373/2249555X/APR2014/20
https://www.ceoinsightsindia.com/news/midcap-erd-firms-thrive-in-automotive-sector-nwid-18541.html
Role and Economic Impact of Medium Enterprises in India18
Designing a Policy for Medium Enterprises 2.5. SCENARIO ANALYSIS
Presently, there are 67,923 MEs registered in Udyam Portal in India. We have analysed, how
incremental increases in the number of MEs impact three key parameters: employment
generation, R&D investment, and foreign exchange (forex) income.
For this analysis, the Multiplier Effect Methodology (Swaroop, 2021) is used which assumes
that MEs have a direct impact, employment, R&D, and foreign exchange (forex) income.
By scaling the contributions per entity based on the new Medium Enterprises count, we
can estimate the overall effect.
Contribution of Medium Enterprises (As per our analysis in section 2.1, 2.2
and 2.3)
1. Forex Income per Unit: `39.94 crore
2. R&D Investment per Unit: `2.07 crore
3. Employment per Unit: 89.14 persons
SCENARIO - 1
10% Increase:
Parameter
Per Unit
Value
Current
(67,923)
10% Increase
(74,715)
Percentage
Increase
Forex Income (` Crore) 39.94 2712844.62 2984117.110.0%
R&D Investment (`Crore) 2.07 140600.61 154660.0510.0%
Employment (Persons) 89.14 6054656.22 6660095.110.0%
SCENARIO - 2
15% Increase:
Parameter
Per Unit
Value
Current
(67,923)
15% Increase
(78,111)
Percentage
Increase
Forex Income (` Crore) 39.94 2712844.62 3119753.34 15.0%
R&D Investment (`Crore) 2.07 140600.61 161689.77 15.0%
Employment (Persons) 89.14 6054656.22 6962814.54 15.0%
Role and Economic Impact of Medium Enterprises in India19
Designing a Policy for Medium Enterprises SCENARIO - 3
20% Increase:
Parameter Per Unit Value
Current
(67,923)
20% Increase
(81,507)
Percentage
Increase
Forex Income (` Crore) 39.94 27,12,844.62 32,55,389.5820.0%
R&D Investment (`Crore) 2.07 1,40,600.61 1,68,719.49 20.0%
Employment (Persons) 89.14 60,54,656.22 72,65,533.98 20.0%
2.6. POTENTIAL LOSS/GAIN FOR THE ECONOMY
1.Underutilization of Employment Potential: Under the 20% growth scenario,
approximately 12 Lakh additional jobs could be created, which are not being
realized under the current count of Medium Enterprises. The missed opportunity of
providing millions of jobs is critical, especially in areas with higher unemployment
rates.
2.Suboptimal R&D Investment: The shortfall in the number of Medium Enterprises
leads to a significant loss in R&D investment. For example, with the 20% increase
in Medium Enterprises, an additional `28,118.88 crore could be directed towards
R&D, boosting innovation in critical sectors like pharmaceuticals and automotive
technology. This would also increase India’s Gross Expenditure on R&D (GERD),
helping to meet the 2% target set by the Science, Technology, and Innovation
(STI) Policy, 2013.
3.Lower Forex Income: The gap in forex earnings due to fewer Medium Enterprises
severely impacts India’s foreign exchange reserves. Under the 20% increase
scenario, the country could generate an additional `5,42,544.96 crore in forex
earnings.
Despite their significant contribution to India’s economy, Medium Enterprises face substantial
challenges. Access to finance remains a key issue, with many Medium Enterprises relying
on personal savings due to limited funding options
33
. Inadequate infrastructure, particularly
in rural areas, further constrains their growth, affecting productivity and market access
34
.
Additionally, regulatory barriers, including complex compliance requirements, create further
33 Eniola, A. A., & Entebang, H. (2015). Small and Medium Business Management-Financial Sources and
Difficulties. International Journal of Finance Management.
DOI:10.18052/www.scipress.com/ILSHS.58.49
34 Shinozaki, S. (2014). A new regime of SME finance in emerging Asia: Enhancing access to growth capital
and policy implications. Journal of International Commerce.
https://doi.org/10.1142/S1793993314400109
Role and Economic Impact of Medium Enterprises in India20
Designing a Policy for Medium Enterprises obstacles for Medium Enterprises, hindering their ability to scale
35
. The existing regulatory
landscape often places an undue burden on Medium Enterprises, limiting their ability to
expand and compete with larger firms
36
. These challenges are compounded by the evolving
needs of the global market, where Medium Enterprises must adapt to new technologies
and business models but often struggle due to insufficient resources
37
. Chapter 3 will
examine these challenges in detail.
35MSME Financing–Key Issues and Solutions. (2016). Resurgent India.https://www.resurgentindia.com/pdf/1868771320Innovative%20Financial%20Solutions%20for%20MSMEs.pdf
36 Roy, A., Sekhar, C. & Vyas, V. Barriers to internationalization: A study of small and medium enterprises in
India. J Int Entrep 14, 513–538 (2016). https://doi.org/10.1007/s10843-016-0187-7
37i. Alwabel, Rakan & Chaudhary, Arslan & Lazab, Lahcene. (2024). Digital Transformation in Small and Medium
Enterprises (SMEs): Challenges, Opportunities, and Future Directions. https://www.researchgate.net/publication/386375382_Digital_Transformation_in_Small_and_Medium_Enterprises_SMEs_Challenges_Opportunities_and_Future_Directions
ii. putri, aulia utami (2023) “Digital Transformation for MSME Resilience in The Era of Society 5.0,”
Proceedings IAPA Annual Conference. Indonesian Association for Public Administration. https://www.academia.edu/126735679/Digital_Transformation_for_MSME_Resilience_in_The_Era_of_Society_5_0
Role and Economic Impact of Medium Enterprises in India21
Designing a Policy for Medium Enterprises Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises23Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises23
CHALLENGES AND CURRENT
STATE OF AFFAIRS –
A DEEP DIVE INTO MEDIUM
ENTERPRISES
3 CHAPTER 3
CHALLENGES AND CURRENT
STATE OF AFFAIRS – A
DEEP DIVE INTO MEDIUM
ENTERPRISES
Having established the role and importance of medium enterprises, this chapter delves
into the various challenges they face in sustaining growth and competitiveness. It examines
obstacles such as limited access to finance, outdated technology, and a shortage of skilled
manpower. Additionally, the chapter explores regulatory complexities and constraints that
hinder innovation and expansion. The study identifies the challenges and current state of
affairs of Medium Enterprises using a two-fold approach:
1.Inferences were derived after analysing the questionnaire responses received
from entrepreneurs (MSMEs): The respondents were selected using cluster
sampling from six states, namely Maharashtra, Gujarat, Uttar Pradesh, Tamil
Nadu, West Bengal, and Telangana. The rationale for choosing these states is:
®High concentration of medium enterprises: The selected states collectively
represent a large share of India’s medium enterprise population (54% of total
Medium Enterprises in India).
®Geographical and economic significance: The six states cover different regions
of India (north, south, west, and east), ensuring that the study captures region-
specific challenges and opportunities.
A total of 207
38
responses were received from beneficiaries for the survey.
2.Insights were gathered from Stakeholder Consultation Workshops: In addition to
the survey, qualitative insights were gathered through a series of six stakeholder
consultation workshops and two FGDs with bankers and key persons from
the Ministry of MSME. The participants included representatives from industry
associations, government officials, financial institutions, and enterprises. A stratified
sampling method was used to select participants, ensuring that all key strata,
including industry sectors and regions, were adequately represented.
38 To calculate the sample size, the following standard formula was used: n=z
2
×p×(1−p)/E
2
Where, n = required sample size, Z = Z-score for the desired confidence level (1.98 for a 95% confidence
level), p = assumed population proportion (0.5 for maximum variability), E = margin of error (set to 0.05).
Using this, we arrived at a sample size of 388, which is proportionally distributed among the six states
based on their share of the total population. This approach allows the study to be both statistically reliable
and representative. However, 207 responses were received for the survey.
24Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises Six FGDs conducted between June to September 2024:
Table 3.1: Priority sectors at 6 FGD locations
Workshop
Location
Sectors
1 2 3 4 5 6
Mumbai,
Maharashtra
Textiles Pharma Chemicals AutomobileEngineering Leather
Lucknow,
UP
Food
Products
Hosiery and
Garments
Metal
Products
Cotton
textiles
Ceramics
Wool, Silk,
Synthetic
Fibre
Textiles
Chennai, TN Coir Automobile
Food
Processing
Textiles
Leather &
Footwear
Precision
Engineering
Tiruppur,
TN
Coir Automobile
Food
Processing
Textiles
Leather &
Footwear
Precision
Engineering
Guntur, AP
Pharma
& Life
Science
Defence and
Precision
Engineering
Electronics
Food
Products
IT Services —
Hyderabad,
TS
Pharma
& Life
Science
Defence and
Precision
Engineering
Electronics
Food
Products
IT Services —
In addition, secondary sources such as the World Bank Report on Ease of Doing Business
(2023), various committee reports on MSMEs, and research articles on MSMEs are used
to arrive at the challenges.
3.1. CHALLENGES AND CURRENT STATE OF AFFAIRS
The main challenges faced by Medium Enterprises are:
Awareness of
Schemes
Skilled Manpower
Technology
Upgradation
Compliance
InnovationBarrierFunding
Land &
Infrastructure
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises25
Designing a Policy for Medium Enterprises Awareness of Schemes
The lack of awareness about government schemes significantly
limits the ability of medium enterprisestotake advantage of
available support. Only 10% of Medium Enterprises
39
reported
having availed of any of the 18 schemesbyMoMSME Scheme.
Some of the most recognized schemes include PMEGP, PM
Vishwakarma, CGT-MSE, and RAMP. While there is some awareness
of the schemes, detailed knowledge on how to effectively utilize
them is lacking. This highlights a disconnect between policy
design and practical implementation. In a poll of 39 associations
at Hyderabad workshop, only one had used the Procurement and Marketing Scheme
(PMS), despite many being eligible. Even when MSMEs are aware of schemes such as ZED,
MSME Champions, and RAMP, they lack knowledge on how to apply or navigate the
process, rendering these schemes ineffective in practice. Out of 18 schemes listed, the
awareness regarding the schemes is only about 25%,i.e. 4-5 schemes. While government
efforts are commendable, such as the introduction of the.RAMP scheme, there are still
disconnects in policy implementation.
The key players of the MSME ecosystem are
largely unaware of online portals for accessing
information on government schemes, with 90%
of Medium Enterprises reporting they had not
utilized any such platforms. Only 10% indicated
they use resources like NIVESH MITRA, NCD
India, and GeM.
Reports suggest that while
more than 70% of MSMEs
40
are aware that
a variety of government schemes exist,
information about eligibility, application,
type of support under the schemes and
their usage remains significantly low.
MSMEs in
general face the challenge of
gathering information
41
about all the schemes,
policies, and programmes. Medium Enterprises
are often unaware of support available, which limits their ability to take advantage of them.
Reportedly, only 13%
42
of Medium Enterprises utilize the available marketing schemes
which indicates that even when support is available, it remains underutilized due to a lack
of awareness. Furthermore, enterprises are not aware of credit schemes
43
and special
financial privileges given by banks.
The gap analysis of RAMP scheme reveals a notable disparity between the allocated
budget and its utilization. As per a report by Impact and Policy Research Institute, despite
39Sample size is 388 MEs, responses received from 207 entrepreneurs
40 FTCCI Report: CURRENT PRACTICES AND CHALLENGES OF MSMEs
41Press Information Bureau 20 Jul 2023
42 FTCCI Report: CURRENT PRACTICES AND CHALLENGES OF MSMEs
43 A Report on Issues and Challenges in Financing MSME in Pune, Maharashtra
Scheme
25%
A W A RE N E S S O F O N L I N E
P O RT A L S F O R
G O V E RN M E N T S CH E M E S
Y es; 2 0 ;1 0%
N o; 1 8 7 ;9 0%
Figure 3.1: Awareness of portals
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises26
Designing a Policy for Medium Enterprises a substantial total outlay of `6,062.45 crore, less than 40% of the allocated funds have
been utilized
44
, indicating potential inefficiencies in scheme implementation. The under-
utilization highlights that the beneficiaries are unaware of the support available to them and
the potential benefit that they can get from availing it. These issues hinder the scheme’s
effectiveness in achieving its goals of improving credit access, strengthening governance,
and promoting sustainable practices.
Barrier to Competitiveness
The lack of awareness not only restricts access to financial resources but also hinders
the adoption of best practices, technological advancements, and market expansion
opportunities that these schemes are designed to promote. This adversely impacts the
competitiveness and sustainability of medium enterprises.
Ineffective Implementation
Another key issue is ineffective implementation, as medium enterprises struggle with
awareness and navigating application processes for schemes like ZED, MSME Champions,
and RAMP, reflecting systemic shortcomings in government communication and execution.
Potential for Centralized Solutions
Additionally, medium enterprises face challenges in accessing information from a single
source. A centralized platform could bridge this gap, providing a consolidated source
of information and empowering these enterprises to leverage available support more
effectively.
Technological Upgradation
Technological advancement is crucial for Medium Enterprises to remain competitive in
today’s rapidly evolving market. As market demands evolve and new technologies emerge,
MEs must adapt to survive and thrive. However, many enterprises face significant barriers
in accessing modern technologies, often resulting in the continued use of outdated systems
and practices. The major challenges associated with technological upgradation that are
essential for enabling medium enterprises to harness the full benefits of innovation and
improve their overall performance in the marketplace are as follows:
Outdated Technology: Majority of Medium Enterprises use outdated technology that
prevents them from keeping up with the modern world. 82% of Medium Enterprises in
our survey reported that they do not have advanced technologies integrated into their
business operations (Industry 4.0 – AI, IoT, etc.), which hampers competitiveness. Moreover,
60% of these enterprises still rely on outdated machinery, affecting their productivity and
product quality.
High Costs of Implementation: Adoption of new technology and training employees is
difficult and expensive, especially in manufacturing where both physical equipment and
software are involved. Lack of access to IT education contributes to the technological
gap. Unlike larger industries, Medium Enterprises struggle to keep pace with technological
44 Impact and Policy Research Institute https://www.impriindia.com/insights/msme-ramp-performance-
scheme-2022/
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises27
Designing a Policy for Medium Enterprises advancements because they lack access to the latest tools and systems essential for
improving productivity and competitiveness. The time and high costs associated with
acquiring, implementing, and maintaining new technologies are often prohibitive, especially
in the absence of adequate financial support or incentives for acquiring latest technology.
Ineffective Outreach of Schemes: It has been highlighted that the outreach of the
Technology Centres Scheme remains limited, leaving many medium enterprises without
access to the scheme. Further, schemes designed for micro and small enterprises, such as
CGTMSE, do not address the capital needs of medium enterprises for technology
upgradation.
Y es5 6
No
0 5 0 1 00 1 50 2 00
AREY OUB ENEFITTINGFROMTECH NOL OG YCENTRESSCHEM E
DIRECTL YORINDIRECTL Y ?
1 51
Figure 3.2: Access to technology
Although Medium Enterprises are aware of information technology tools such as Customer Relationship Management (CRM), Enterprise Resource Planning (ERP), and Human Resource Management Systems (HRMS), their usage remains critically low at just 14%
45
. Another factor is the lack of
awareness, which reduces willingness to invest in advanced technology solutions
46
.
According to the World Bank’s Ease of
Doing Business Report (2023), India’s overall technology adoption rate is only 42%
47
,
significantly lagging behind high-income countries where 70% of enterprises have embraced automation. India ranks 63rd
48
globally in “Automation and Innovation,” highlighting a substantial gap in technological progress.McKinsey’s research reports that 45 CURRENT PRACTICES AND CHALLENGES OF MSMEs
46 Data.worldbank.org/indicator/GB.XPD.RSDV.GD.Z and forumias.com/blog/msmes-significance-challenges-
and-solutions-explained- pointwise/
47Source: https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS )
48 Source: World Bank’s Ease of Doing Business Report (2023)
Figure 3.3: Technology Adoption Rate
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises28
Designing a Policy for Medium Enterprises Medium Enterprises often lag in technology adoption compared to larger firms, which
affects their productivity and competitiveness
49
.
Competitiveness at Risk
The lack of technology adoption among medium enterprises can be attributed to a
combination of high costs, outdated infrastructure, and insufficient access to necessary skills
and resources. The low adoption of technology among Medium Enterprises significantly
jeopardizes their competitiveness in a rapidly evolving marketplace. Without advanced tools
and systems, Medium Enterprises are less equipped to enhance productivity, 4.0 technologies,
such as automation, IoT, and AI. A key takeaway is the need for a structured support
ecosystem to facilitate technology upgradation. This includes government initiatives to
attract private investment and create a conducive environment for innovation. For example,
programs that provide access to capital, technology transfers, and skill development can
help medium enterprises leverage new technologies effectively. Targeted support and
handholding may be essential for Medium Enterprises, helping them integrate advanced
technologies like AI, IoT, and automation into their business operations. This support
can include regional hubs or specialized facilities offering consultancy, hands-on training,
and access to digital tools.
Skilled Manpower
Skilled manpower is essential for any enterprise as it enhances productivity, ensuring
efficient use of resources and minimizing operational errors. It drives innovation and adapts
to technological advancements, improving the quality of products and services. However,
medium enterprises face the following challenges concerning manpower:
Low Utilization of Skill Development Schemes: Survey data reveals that a staggering 88%
of Medium Enterprises are not availing themselves of any government skill development
or training schemes. The reasons for this low uptake may include:
Perceived irrelevance: 31% of Medium Enterprises find the available training programs
irrelevant to their business needs, while another 59% consider them only moderately
relevant. Many feel that these programs are geared more toward micro and small
enterprises, rather than addressing the advanced skills needed for medium enterprises.
Lack of awareness: Stakeholder consultations revealed that 40% of participants could not
name a single government scheme focused on skill development. Of the remaining 60%,
most cited schemes like:
Pradhan Mantri Kaushal Vikas Yojana (PMKVY) (Ministry of Skill Development
and Entrepreneurship)
Deen Dayal Upadhyaya Grameen Kaushalya Yojana (DDU-GKY) (Ministry of
Rural Development)
Entrepreneurship and Skill Development Programme (ESDP) (Ministry of MSME)
49McKinsey Digital: How medium-size manufacturers can boost their digital capabilities innovate, and maintain
product quality. This situation leaves them vulnerable to being outpaced by larger firms or international
competitors who have already integrated Industry
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises29
Designing a Policy for Medium Enterprises However, these schemes, particularly the ESDP, focus on basic entrepreneurial skills for
micro and small enterprises and lack the advanced, specialized training that medium
enterprises require, especially in technological fields.
H ow relevant are the training programs offe?ed by
M oM SM E?
Not Relevant8 2
M oderately Relevant1 01
Extremely Relevant2 4
Figure 3.4: Access to training program and their relevance
Need for Industry-Relevant, Specialized Skill Development: There is a gap between the
skills required by Medium Industries and the workforce available in the country. It is
reasoned that medium enterprises require specialized training programs to enhance the
capabilities of their workforce, particularly in areas like technology adoption and advanced
manufacturing processes. Majority of the workforce is unskilled or low-skilled with little to
no knowledge of factory operations. Medium enterprises are increasingly reliant on
advanced manufacturing processes and technologies such as Industry 4.0 tools (e.g.,
automation, AI, IoT), but the workforce is largely unprepared to meet these demands.
Several key issues have been identified in this context:
Limited specialized training: Current training programs do not sufficiently address the
advanced technical skills required by Medium Enterprises. There is a significant gap in
training for cutting-edge technologies that could boost productivity and innovation.
Brain drain:Many skilled young workers
are migrating overseas in search of
better job opportunities and higher
wages, contributing to a “brain drain”.
This loss of talent is particularly harmful
to Medium Enterprises, which struggle
to compete with large enterprises or
multinational corporations in offering
attractive compensation packages.
High attrition rates: Medium
Enterprises also face difficulty retaining
skilled employees, who often leave for
better-paying opportunities in larger
organizations. This adds pressure on
Medium Enterprises to offer competitive
wages, which they are often financially
unable to do.In sectors like automation,
AI, and IoT, the lack of appropriately
skilled workers further exacerbates the
Figure 3.5: Availability of skilled labour (%)
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises30
Designing a Policy for Medium Enterprises challenges Medium Enterprises face in implementing technology-driven solutions, thereby
reducing their productivity and global competitiveness.
Medium Enterprises face critical challenges in accessing skilled labour due to a lack of
awareness
50
about the benefits of technological advancement and skill development. While
training and skill development programs could bridge this gap, a coordinated approach is
missing, leaving Medium Enterprises unable to fully leverage their potential
51
. World Bank
Reports suggest that 65% of India’s fast-growing population many lack skills needed
by a modern economy
52
.
Key obstacles include:
Absenteeism and high wage rates: Medium Enterprises report difficulties in retaining
employees due to frequent absenteeism and the need to offer competitive wages that
are often beyond their financial capabilities.
Unionization and work stoppages:Industrial relations challenges, such as union demands
and work stoppages, continue to disrupt smooth operations, further complicating labour
management.
Training costs and relevance:The cost of upskilling employees is high, with many employers
viewing existing training programs as irrelevant to their specific needs. The unavailability
of industry-aligned training exacerbates the issue.
Despite the growing need for technologically proficient employees, the availability of work-
ready, skilled manpower remains alarmingly low, with only 55% of the workforce having
adequate skills. This shortage is particularly pronounced in technical fields such as automation,
artificial intelligence (AI), machine learning (ML), and advanced manufacturing. Notably,
the NSDC Annual Report 2019-20 emphasizes the need for enhancing skill development
initiatives to meet industry requirements for medium enterprises that often struggle to
find adequately skilled labour.
Bridging the Skill Gap: Industries face a significant gap in technically skilled labour, with
only 51% employability
53
suggesting a gap between what is produced by educational
institutions and what is required by industries. This gap severely limits Medium Enterprises’
ability to adopt advanced technologies, impeding productivity improvements and
competitiveness. Medium Enterprises are facing challenges due to a significant gap between
the skills needed in the industry and those available in the workforce. To mitigate this, a
thorough skill gaps analysis may be conducted to identify the precise areas where skills
are deficient.
Focus on Specialized Training: Further, the emphasis on specialized training in technology
adoption and advanced manufacturing processes is vital. Medium Enterprises should be
50 Naveen Negi, Arvind Mohan, Musliadi Bin Usman, Almighty C. Tabuena. (2023). Challenges of Skill
Development of Workers in MSME Sector: An Empirical Study of Training Organisations. European Economic Letters (EEL), 13(3), 89–94. https://doi.org/10.52783/eel.v13i3.214
51 ADBI Working Paper Series–Major Challenges Facing Small and Medium-sized Enterprises in Asia and
Solutions for Mitigating Them
52Helping India Build a Skilled, Inclusive Workforce for the Future https://www.worldbank.org/en/results/2023/11/03/
helping-india-build-skilled-inclusive-workforce
53India Skill Report 2024 https://wheebox.com/assets/pdf/ISR_Report_2024.pdf
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises31
Designing a Policy for Medium Enterprises supported in developing partnerships with training providers that offer industry-relevant,
specialized programs, thereby enhancing their workforce’s capabilities and competitiveness.
Compliance
Compliance poses a significant challenge for medium enterprises, often creating barriers
that hinder their operational efficiency and growth potential. While regulations are designed
to ensure accountability and standardization, Medium Enterprises frequently find themselves
navigating a complex web of compliance requirements that can be disproportionately
burdensome compared to their micro and small counterparts. The demands of adhering
to various regulatory frameworks can lead to increased administrative costs and divert
valuable resources away from core business activities. The major challenges related to
compliance are:
Ease of Doing Business: Medium Enterprises strongly opine that there is scope of
improvement in ease of doing business which includes ease in fund disbursement, ease
of application, process of availing the scheme, processing speed, etc. The burden of
compliance increases significantly for Medium Enterprises compared to Micro and Small
Enterprises, leading to a perception of overwhelming administrative demands without
corresponding benefits. Entrepreneurs express that compliance requirements for Medium
Enterprises are more than MSEs. Medium Enterprises who have recently migrated from
small to medium because of a slight increase in turnover feel that compliance is a burden
2 001 501 005 00
7 8Awareness M echanism
8 0H andholding by ob8cials
1 22Processing Speed
1 75Ease ofApplication
Disbursement Ease1 82
I M P RO V I N G E A S E O F D O I N G BU SI N E S S
Figure 3.6: Inputs from stakeholders – on – improving ease of doing business
Inspector Visits and Compliance Burden
Medium Enterprises face a significant compliance burden due to the numerous inspections from various authorities, including labour inspectors, health inspectors, safety and
environmental inspectors, often leading to overlapping and frequent visits that disrupt business operations. They are subjected to extensive auditing processes, such as internal, statutory, and secretarial audits, with requirements often mirroring those for large corporations, adding to the administrative load. Compliance with multiple regulations, including company laws, tax laws (such as income tax and GST), environmental standards, and workplace safety, demands meticulous record-keeping and documentation. Medium
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises32
Designing a Policy for Medium Enterprises Enterprises also encounter challenges with reconciliation issues and receive notices from
different tax authorities, complicating their tax compliance. Sector-specific regulations
and the complexity of compliance procedures necessitate significant resources for legal
and compliance support.
Multiplicity of Notices
Entrepreneurs often receive multiple notices from different GST sectors—CGST, GST, IGST—
which adds to the administrative burden. The process becomes even more cumbersome
when audit notices are issued separately, requiring additional responses from enterprises.
Further, there are variations in compliance across states that add another layer of
complexity for companies operating in multiple locations. The experts identified that GST
filing for MSMEs should not be necessary since all the purchase and sales transactions are
recorded in GST server. This issue could potentially be addressed through automation and
digitalization of GST filing. According to the FGD at FTCCI, 78% of Medium Enterprises face
challenges in complying with GST regulations and 65% report delays due to cumbersome
audit requirements.
Lack of Centralized Information and Guidance
There is a significant gap in accessible information regarding statutory compliance,
especially for Medium Enterprises transitioning from small to medium enterprises, leading
to confusion and potential non-compliance. A large proportion of Medium Enterprises
(75%) emphasize the need for a centralized source of information on statutory compliance
to ease the burden associated with transitioning.
Complexity and Volume of Compliance Requirements for Medium Enterprises
Research reports have highlighted that even understanding the compliance needs is difficult
for most MSMEs. Lack of training and skilled manpower makes it more challenging for the
units to comply. It has been established in the Economic Survey Report that for growth of
India’s Mittelsand, a German term referring to small and medium-sized enterprises (SMEs)
and family-owned businesses, “deregulation” is a vital contributor
54
. However, the present
situation of Indian MSMEs is marred with regulatory compliances. For instance, each unit
in the chemical sector must adhere to approximately 635 compliance requirements
55
per
month across various areas, including factory operations, health, explosives, hazardous
materials, and food safety regulations. While larger companies can utilize dedicated in-
house teams, Medium Enterprises face immense difficulty staying compliant.
The World Bank’s report
56
on Ease of Doing Business discusses the regulatory environment
for businesses in India, with a focus on the challenges faced by small and medium
enterprises. It identifies specific compliance burdens, including labour laws, tax regulations,
54 Anil Bhardwaj, secretary general, Federation of Indian Micro and Small & Medium Enterprises (FISME) for
Economic Survey Report
55 Compliance Burden Hampers India’s $220 Billion Chemical Industry https://www.businesswise.in/compliance/
details/2386/Compliance- Burden-Hampers-Indias—Billion-Chemical-Industry
56https://documents1.worldbank.org/curated/fr/688761571934946384/pdf/Doing-Business-2020-Comparing-
Business-Regulation-in-190- Economies.pdf
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises33
Designing a Policy for Medium Enterprises and environmental regulations, which are particularly challenging for medium enterprises.
The report emphasizes that simplifying these regulations is crucial for improving the ease
of doing business in India.
Disincentives for Upgrading
The fact that transitioning from micro or small to medium status brings more regulatory
burdens without significant benefits can discourage enterprises from scaling up. This
creates a stagnation in growth and limits the broader economic contributions of Medium
Enterprises.
Knowledge Gap
The lack of centralized information and guidance contributes to a knowledge gap regarding
compliance obligations. This can lead to unintentional non-compliance, further resulting in
penalties or additional scrutiny.
Innovation Barrier
Innovation is vital for the growth and competitiveness of medium enterprises, yet many face
significant barriers that impede their ability to innovate effectively. The main challenges are:
Inadequate Support for Innovation: For Medium Enterprises, innovation is key to sustaining
growth and competitiveness and their ability to innovate is hindered by a lack of adequate
policies that foster innovation. Innovation not only means product innovation, it includes
method, and process. Without innovation, it becomes extremely difficult for Medium
Enterprises to scale up to large enterprises. Therefore, it is essential for the government to
actively encourage and support R&D efforts in Medium Enterprises. They need government
support for Innovation in more ways than the present. In our study, 78% of respondents feel
that existing support is inadequate, and there is a pressing need for additional measures
to promote innovation. These measures should either strengthen innovation where it is
already present or cultivate an innovative mindset where it is lacking. Further, 76% of
Medium Enterprises expressed that they would benefit from cluster-based testing facilities,
which would help them improve their products and processes. A dedicated fund for R&D
is also seen as a potential game-changer for fostering innovation in Medium Enterprises.
Financial Risk of Innovation: Innovation carries a significant financial risk for Medium
Enterprises. If an innovation effort fails, Medium Enterprises often lack the financial cushion
that large firms have, making such risks particularly daunting. This poses a fundamental
question: what incentive do Medium Enterprises have to be competitive if innovation
puts them at financial risk? To encourage innovation, there should be some kind of
de-risking mechanism. One possible approach could be lowering corporate taxes for
Medium Enterprises that invest in R&D or product and process innovations. This would
act as a direct incentive, signalling that the government is sharing the risk and supporting
Medium Enterprises in their pursuit of innovation. Additionally, creating government-backed
innovation funds or grants, offering low-interest innovation loans, and simplifying access
to public-private partnerships could further mitigate risks and stimulate innovation among
firms.
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises34
Designing a Policy for Medium Enterprises An economy’s R&D is generally concentrated in a limited number of large firms. In
some economies, however, small and medium-sized firms account for a significant share
of the total business R&D effort. ADBI Working Paper Series have highlighted that
Medium Enterprises cannot compete against larger firms in terms of R&D expenditure
and innovation (product, process, and organization)
57
. It is argued that Medium Enterprises
are more Innovative as compared to Small Enterprises and they spend more on R&D as
well
58
. While it is feasible for Medium Enterprises to make limited investments towards
innovation, concerted efforts are also necessary at a policy level to create institutional
support
59
. The Organisation for Economic Co-operation and Development (OECD) also
supports these findings, noting that Medium Enterprises are critical drivers of innovation
but often struggle with inadequate access to financing and infrastructure
60
.
Only 22% of Medium Enterprises engage in R&D activities
61
, which is much higher
than MSEs. In contrast, 60% of large enterprises invest in R&D
62
. India’s Innovation
Index or spending on R&D is on the lower side at 0.68%
63
against the target of
2% highlighted in the Science and Technology Innovation Policy 2013. A NITI
Aayog report points out that India’s innovation ecosystem is growing but remains
underdeveloped compared to other large economies
64
. They struggle particularly
due to the lack of accessible financing for R&D, limited collaboration opportunities
with research institutions, and insufficient government incentives. While India has
launched various initiatives such as the ‘Startup India’ and ‘Make in India’ campaigns,
these efforts primarily target start-ups and large industries, leaving a significant
gap in support for Medium Enterprises.
Global Best Practices could serve as models
Countries such as South Korea, Israel, and Sweden, where R&D spending exceeds 4% of
GDP, provide examples of how effective government intervention and policy support can
enhance innovation. By providing incentives for private sector participation and ensuring
continuous public investment in R&D, these countries have successfully boosted their
competitiveness globally. India’s R&D expenditure requires focused efforts to reach the
2% target.
57ADBI Working Paper Series–Major Challenges Facing Small and Medium-sized Enterprises in Asia and Solutions for Mitigating Them
58 Barriers to Innovation in Indian Small and Medium-Sized Enterprises
59CURRENT PRACTICES AND CHALLENGES OF MSMEs
60 OECD (2008), Enhancing the Role of SMEs in Global Value Chains, OECD Publishing, Paris, https://doi.
org/10.1787/9789264051034-en.
61Source: OECD R&D Tax Incentives database https://data-explorer.oecd.org/, World Bank’s Ease of Doing
Business Report (2023)
62 Source: OECD R&D Tax Incentives database https://data-explorer.oecd.org/, World Bank’s Ease of Doing
Business Report (2023)
63Source: https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS
64Source:India Innovation Index https://www.niti.gov.in/sites/default/files/2021-01/IndiaInnovationReport2020Book.
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises35
Designing a Policy for Medium Enterprises Structured Mechanism for R&D
The absence of adequate support for innovation,
financial risks associated with R&D, and limited
testing facilities are key barriers for Medium
Enterprises. By establishing a structured
mechanism, the government can mitigate
financial risks for these firms, offer de-risking
incentives such as tax benefits, and ultimately
drive innovation and competitiveness within the
medium enterprise sector.
Funding
Despite their importance in the economy, many
Medium Enterprises struggle to secure the
necessary financial resources due to a variety of
challenges, including stringent lending criteria,
limited access to capital markets, and a lack of
collateral. These funding gaps can hinder their ability to scale and compete effectively
against larger firms that have more established financial networks. Some of the main
funding challenges faced by medium enterprises are:
Banks’ Hesitance to Fund Medium Enterprises:
Collateral Requirements: Banks often require collateral for loans, which is a
significant barrier for Medium Enterprises. Many banks do not offer collateral-
free loans to Medium Enterprises, citing higher turnover compared to micro and
small enterprises as a reason for their hesitance compounded by high-interest
rates averaging around 10%, which are not competitive when compared to the
lower rates offered to micro and small enterprises.
Limited availability of Working Capital Loans: There is a notable scarcity of
schemes aimed at helping Medium Enterprises secure working capital loans. This
lack of financial support limits their operational flexibility and growth potential.
72% of the respondents believe that medium enterprises need more support in
terms of Working Capital.
Shift Towards Alternative Financing: As traditional banking loans become harder to
access, there is a gradual shift towards digital lending platforms and alternative finance
methods such as factoring and supply chain finance. However, most Medium Enterprises
still primarily rely on bank loans. The reluctance of banks to fund medium enterprises
means that even as they look for alternatives, these may not always be sufficient or as
accessible as traditional loans.
Interest Rates and Loan Amounts: FGDs with bankers indicate that the interest rates for
Medium Enterprises are often 4% higher than those for larger firms, making financing
considerably more expensive.
Figure 3.7: Innovation Index
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises36
Designing a Policy for Medium Enterprises Trade Receivables Discounting
System (TReDS)
Self-Funded
Indigenous L endors
B ank L oan against Collateral
Supply Chain Financing
Non-B anking Financial
Companies (NB FCs)
1 2% 1 3%
7 %
1 0%
1 9%
3 9%
M ed ium E nterp rise Funding P a?ern
Figure 3.8: Funding Pattern of Medium Enterprises
Limited access to affordable finance has been cited as one of the most cited challenges
faced by Medium Enterprises world-wide. Medium Enterprises receive much lesser priority
sector loans, compared to micro enterprises
65
. Additionally, the interest rates for Medium
Enterprises are on average 4% higher than for larger firms, making capital more expensive
66
.
World Bank Indian MSME Financing Report indicates that, In India, only 37% of Medium
Enterprises
67
are able to secure these loans, which can be attributed to the lack of
specialized MSME branches within public sector banks across various districts
68
. A study
report by NABARD confirms the same. Interestingly, in 2023, the amount of loans given
to small and medium businesses increased by 20% compared to last year. 7% YoY growth
is seen in borrowers who availed sub-INR 1 Crore loans (Micro segment) but growth of
borrowers seeking greater than INR 10 Crores (Medium) decreased by value. From the
banker’s perspective, the poor financial health of many Medium Enterprises is a significant
barrier to securing loans
69
.
Banks often require extensive financial documentation and may view insufficient credit
histories as risky. To ensure sufficient liquidity for operations, Medium Enterprises require
substantial financial support from government initiatives and financial institutions in the
form of favourable working capital loans. The India Digital SME Credit Report 2023
underscores the critical gap between the demand for and supply of credit for Medium
Enterprises, emphasizing the urgent need for tailored financing solutions
70
.
65 Source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=9688&Mode=0
66 Source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=9688&Mode=0
67Source: World Bank Indian MSME Financing Report
68 Source: https://www.nabard.org/auth/writereaddata/careernotices/0905220212msme.pdf
69Source: Issues in SME Financing https://www.iibf.org.in/documents/reseach-report/report-30.pdf
70Source: India Digital SME Credit Report 2023 https://www.iamai.in/sites/default/files/research/India%20
SME%20Credit%20Report%202023_%20Getvantage-Redseer_compressed.pdf
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises37
Designing a Policy for Medium Enterprises Figure 3.9: Credit Demand Vs Supply in Medium Enterprises
Necessity for Financial Literacy
Many Medium Enterprises lack the financial acumen necessary to navigate the complexities
of loan applications and funding options. Initiatives aimed at enhancing financial literacy
could empower these enterprises to better present their cases to banks and access the
necessary funding.
Access to Working Capital Loans
A notable scarcity of schemes aimed at helping Medium Enterprises secure working capital
loans limits their operational flexibility and growth potential. Banks and financial institutions
may introduce simplified application processes, reduced collateral requirements, and
favourable interest rates. Government-backed initiatives that incentivize banks to provide
working capital loans can also enhance availability.
Land & Infrastructure
Access to adequate land and infrastructure is a fundamental requirement for the growth
and operational efficiency of medium enterprises. These businesses often face challenges
related to securing suitable locations that offer the necessary facilities and resources for
their operations. In many regions, the availability of affordable land is limited, and the
regulatory hurdles associated with land acquisition can further complicate the process.
Additionally, insufficient infrastructure—such as reliable transportation, power supply, and
communication networks—can hinder productivity and increase operational costs. The
main land-related challenges faced by Medium Enterprises are:
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises38
Designing a Policy for Medium Enterprises 1.High Land Costs: The escalating cost of industrial land restricts the ability of
Medium Enterprises to establish and expand operations. This issue is compounded
by the lack of adequate financing options specifically tailored for real estate
purchases by Medium Enterprises. Our survey found that high land costs are the
primary barrier to expansion, particularly in urban areas.
2.Bureaucratic Delays: Lengthy and complex processes involved in obtaining
construction permits hinder timely project execution. According to the Doing
Business Report, the average time taken to secure all necessary permits can
stretch into several months, deterring potential investments in infrastructure.
3.Infrastructure Development: Many regions, especially rural areas, still lack basic
infrastructure such as reliable roads, power supply, and water facilities. This lack
of essential services makes it challenging for Medium Enterprises to operate
efficiently and competitively.
4. Additionally, inadequate support from District Industries Centres (DIC) for
acquiring industrial land and facilities. Medium Enterprises stress the need for
targeted investments in industrial parks and export hubs that address the specific
requirements of these enterprises.
8 0
1 6 0
1 9 6
0 5 0 1 0 0 1 5 0 2 00
Obtaining Construction Permits
Inadequate Support from DICs
H igh L and Cost
W hat are the most pressing land related issues
faced by M edium Enterprises?
Figure 3.10: Stakeholders input on land related issues
Access to affordable land and infrastructure is a critical issue for Medium Enterprises
in India. Over the past decade, industrial land costs have surged by approximately
150% in Maharashtra alone
71
, significantly impacting the viability of new and expanding
businesses. This sharp increase in land prices can be attributed to various factors, including
urbanization, regulatory constraints, and increasing demand for industrial spaces.
Global data from the World Bank highlights that India’s performance in dealing with
71Source: MIDC Annual Report 2022
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises39
Designing a Policy for Medium Enterprises construction permits remains subpar. India is currently ranked 27th in the world
72
, which,
although an improvement, still places it behind several other countries in the ease of
obtaining construction permits. This bureaucratic lag results in delays and increased costs
for Medium Enterprises, further complicating their ability to secure necessary facilities for
operations.
State Subject Implications
Since land is a state subject in India, the varied approaches and policies adopted by
different states can significantly impact the availability and affordability of industrial land
for Medium Enterprises. This necessitates a coordinated effort between central and
state governments to create a unified strategy that ensures access to affordable land and
streamlined processes across all regions.
Need for Streamlined Regulatory Processes
The bureaucratic delays in obtaining construction permits reveal an urgent need for reform
in state-level regulatory processes. Lengthy timelines for approval can stall projects, leading
to increased costs and deterring potential investments. Simplifying these regulations and
expediting permit issuance would facilitate quicker project initiation, aligning with insights
from the Doing Business Report.
What does the government need to do to? Should it restrict some
items for Medium Enterprises? The answer is No. Any forward-looking
government will not take such a step, they will rather create a culture
of competition and growth. The government needs to connect
Medium Enterprises with the ecosystem of R&D, Export, Skill,
Technology, Infrastructure, and Finance. Once this is done, the they
shall figure out the rest.”
While various support mechanisms exist for these identified challenges, they are either
underutilized or poorly aligned with the specific needs of medium enterprises. This
disconnect not only hinders their current operations but also stifles their future growth
potential. As we move into the next chapter, we will analyse existing government initiatives
to identify gaps for medium enterprises and present a set of focused recommendations to
address these gaps, offering practical solutions to encourage competitiveness and facilitate
the integration of medium enterprises into the broader value chain.
72Source: World Bank’s Ease of Doing Business Report (2023) and MIDC
Challenges and Current State of Afairs – A Deep Dive into Medium Enterprises40
Designing a Policy for Medium Enterprises MSME Policy Landscape 41
MSME POLICY
LANDSCAPE
4 CHAPTER 4
MSME POLICY LANDSCAPE
4.1 MINISTRY OF MICRO, SMALL AND MEDIUM
ENTERPRISES (MOMSME)
A. EXISTING GOVERNMENT INITIATIVES
The primary responsibility of promotion and development of MSMEs is of the State
Governments
73
. However, the Government of India, supplements efforts of the State
Governments through various initiatives. As outlined in Chapter 1, eight (8) schemes
specifically target the needs of Medium Enterprises, offering financial support, technology
upgrades, skill development, and marketing assistance. Key initiatives of the MoMSME
include PMEGP, PM Vishwakarma scheme, RAMP, CGTMSE all aimed at fostering
entrepreneurship, enhancing employment, and integrating informal sectors into the formal
economy. PMEGP and PM Vishwakarma are two schemes that alone account for 68%
74
of
the funds allocated by MoMSME for various schemes, however they are not meant for
Medium Enterprises.
PM V ishwakarma
1 8.1 8 %
Promotion of
M SM E inNER
0 .9 2 %
SRI Fund…
PM EG P5 0.2 2 %Coir V ikas Y oj ana
1 .6 0 %
Technology
Centres 1 .8 4 %
National SC-ST
H ub 2 .4 8%
K hadi G ramodyog
V ikas Y oj ana
6 .3 2 %
Champions 0 .8 1 %
M SE-CDP 2 .7 6 %
SFU RTI 0 .0 4 %
ATI 0 .4 0 %
International
Cooperation
0 .2 1 %Procurement and…
ESDP 1 .4 7 %
ASPIRE 0 .0 7 %
Figure 4.1: Percentage Distribution of Funds Allocated Under Each Scheme
73Draft MSME Policy 2024
74Source: Ministry of Finance Expenditure Budget 2024. Data for the year 2022-23 is used for this analysis. Approved corpus of Rs. 7,500 crores has been achieved for CGMTSE so it has not been included in the chart. Budget Estimates used for ESDP, MSE-CDP, Technology Centre, Promotion of MSME in NER and PM Vishwakarma.
42MSME Policy Landscape A detailed analysis of all the MoMSME schemes and their sub-components – including
where support is not being provided to Medium Enterprises is illustrated below:
Prime Minister’s Employment Generation Programme (PMEGP) is a credit-linked subsidy
scheme for providing employment opportunities through establishment of micro-
enterprises in the non-farm sector. Under the Scheme, Margin Money (Subsidy) is provided
to beneficiaries availing loans from banks for setting up new enterprises. The Government
subsidy under the scheme is routed by KVIC through the identified Banks for eventual
distribution to the beneficiaries/entrepreneurs in their Bank accounts. Beneficiaries are
required to contribute 5-10% of the project cost, based on their category. For General
Category: 15% (Urban), 25% (Rural). For Special Category: 25% (Urban), 35% (Rural).
Financial support is provided as a combination of beneficiary contribution, bank credit,
and government subsidy. Reputed NGOs, SHGs, and institutions provide entrepreneurship
development training to beneficiaries.
1
Provide
Employment
Opportunity
Obj ective
2
Financial
Support, Skill
Development
3
M icro
Enterprises
Eligibility
Area of
Support
PMEGP is applicable to all new viable micro enterprises, including Village Industries
projects except activities indicated in the negative list of Village Industries. Existing/
old units are not eligible. The scheme’s primary focus is on creation of micro-
enterprises, with specific categories like Self-Help Groups (SHGs), Production
Cooperative Societies, and Charitable Trusts being eligible. The scheme provides
margin money (subsidy) for setting up new micro- enterprises in the non-farm
sector. The incentives are heavily skewed towards micro-level operations
Credit Guarantee Trust Fund for MSEs (CGTMSE) is managed by the Credit Guarantee Fund
Trust for Micro and Small Enterprises (CGTMSE), a joint venture between the Government
of India and SIDBI. The scheme aims to provide collateral-free credit support to Micro
and Small Enterprises (MSEs) through a credit guarantee for loans extended by Member
Lending Institutions like banks, financial institutions, and Non-Banking Financial Companies
(NBFCs). The Scheme covers collateral free credit facility (term loan and/ or working
capital) extended by eligible lending institutions to new and existing micro and small
enterprises up to Rs. 200 lakh per borrowing unit. The cap of `200 lakh is the maximum
guarantee coverage limit (irrespective of the unit activity including Trading) per borrower
MSME Policy Landscape43
Designing a Policy for Medium Enterprises based on the outstanding credit facilities. The initial corpus fund of `2,500 crore of the
Trust was contributed by the Government of India (GoI) and Small Industries Development
Bank of India (SIDBI) in the ratio of 4:1. The Corpus of the Trust was gradually enhanced
to `9,000 crore (share of MoMSME, GoI–`8,500 crore and share of SIDBI–`500 crore).
Additional corpus of `8,000 crore was received from GoI out of its share of `8,500 crore
in the month of March 2023. The balance of `1,000 crore (` 500 crore each from GoI and
SIDBI) was expected to be received during FY 2024.
1
Obj ective
23
M icro &
Small
Enterprises
Provide
Collateral-Free
Credit Support
to M SEs
Financial
Support
Eligibility
Area of
Support
Micro and Small Enterprises benefit greatly from the scheme as it offers collateral-
free credit for loans up to `200 lakh. However, once an enterprise crosses the
threshold and becomes a medium enterprise, it is no longer eligible for this credit
guarantee support. The scheme is applicable to new and existing MSEs only.
Self-Reliant India (SRI) Fund is a key initiative under the Atmanirbhar Bharat package,
designed to support MSMEs through equity funding rather than loans. Managed by
NSIC Venture Capital Fund Ltd. (NVCFL), a subsidiary of the National Small Industries
Corporation (NSIC), this Fund of Funds (FoF) structure operates with a “Mother Fund”
and “Daughter Funds” setup. The SRI Fund, which has a total corpus of Rs. 50,000 crores,
aims to inject equity into MSMEs to foster growth, innovation, and competitiveness. The
Government of India contributes Rs. 10,000 crores, while the remaining Rs. 40,000 crores
is sourced from private equity and venture capital funds. The daughter funds, managed
by professional investment firms, identify high-potential MSMEs and provide them with
the necessary capital for expansion and transformation into larger enterprises.
MSME Policy Landscape44
Designing a Policy for Medium Enterprises 1
Obj ective
23
M icro, Small,
M edium
Enterprises
Fund M SM Es
through
equity
Financial
Support
Eligibility
Area of
Support
This scheme is designed to address the capital needs of all MSMEs, without a
stated skewness towards micro or small enterprises.
National SC-ST Hub provides financial assistance, capacity building, and support to SC/
ST entrepreneurs in collaboration with industry associations. It is open to SC/ST MSMEs
with at least 51% ownership. Under NSSH, various components/interventions have been
introduced to cater the needs of SC-ST MSEs in the areas of finance, technology, market
linkages, capacity building etc. with a view to provide a conducive ecosystem. These
components are
a. Special Credit Linked Capital Subsidy for technology enablement
b.Capacity building of existing & aspiring SC/ST entrepreneurs
c. Support for enhancing competitiveness through various reimbursement sub-
schemes/interventions
d. Special Marketing Assistance Scheme (SMAS) for SC/ST entrepreneurs
1
Obj ective
23
M icro, Small,
M edium
Enterprises
Financial
Support,
D?letivPU
Support, Skill
Development
Promote
SC/ST
Entrepreneurs
Eligibility
Area of
Support
MSME Policy Landscape45
Designing a Policy for Medium Enterprises Several key benefits are not available to medium enterprises unless they have
recently transitioned from small to medium scale. These include - Capital
Subsidy for technology enablement, Reimbursement of Bank Loan Processing
Fee, Reimbursement of Bank charges for Performance Bank Guarantee, Testing
Fee Reimbursement, Reimbursement of membership /subscription/entry fee
of Export Promotion Council, Reimbursement of Course Fees to Top 50 NIRF
Rated Management Institutions for short term training of SC/ST entrepreneurs,
Reimbursement of membership in Government promoted E-Commerce Portals,
Reimbursement of Single Point Registration Scheme is available for micro and
small units only.
Procurement and Marketing Support (PMS) Scheme provides domestic & international
market access for MSEs. The scheme objective is to create awareness and educate the
MSMEs about importance / methods/ process of packaging in marketing, latest packaging
technology, import-export policy and procedure, GeM portal, MSME Conclave, latest
developments in international / national trade and other subjects / topics relevant for
market access developments. Support provided includes reimbursement of expenses for
participation in international and domestic trade fairs and supports organizing vendor
development programs (VDP) and buyer-seller meets to connect MSMEs with government
departments and large enterprises. The quantum of assistance for market access initiative
is 80% of space rent charges for general category MSEs and 100% for Special Category.
Capacity Building: 80% reimbursement for adoption of bar code, Adoption of Modern
Packaging Techniques, Financial assistance on annual membership fee for adoption of
E-Commerce Platform. Development of Retail Outlet: Rs. 30 lakh max per outlet in Metro
& A class cities and Rs. 20 lakh max per outlets for other cities.
1
Obj ective
23
M icro &
Small
Enterprises
D?letivPU
Support, Skill
Development
Provide
ouestic ?
]v?e?vtiovo
market access
to M SEs
Eligibility
Area of
Support
MSME Policy Landscape46
Designing a Policy for Medium Enterprises Medium enterprises face several limitations in accessing critical support under the
Procurement and Marketing Support (PMS) Scheme, which is primarily designed
for micro and small enterprises. Subsidies for built-up space rent are exclusively
available to micro and small entities. Financial support for barcode registration and
annual membership fees for e- commerce platforms is similarly restricted. Training
programs aimed at enhancing e- commerce capabilities are also limited to micro
enterprises.
The International Cooperation Scheme aims to build capacity of MSMEs for entering
the export market by facilitating their participation in international exhibitions/ fairs/
conferences/ seminars/ buyer-seller meets abroad as well as providing them with actionable
market intelligence and reimbursement of various costs involved in the export of goods and
services. The Scheme provides opportunities to MSMEs to continuously update themselves
to meet the challenges emerging out of changes in technology, changes in demand, the
emergence of new markets, etc. Thus, in totality, all components of the scheme aim at
various aspects required to advance MSMEs’ position as an emerging export player.
The Scheme covers the following sub-components:
Market Development Assistance of MSMEs (MDA)
Capacity Building of First Time MSE Exporters (CBFTE)
Framework for International Market Intelligence Dissemination (IMID)
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Financial
Support,
D?letivPU
Support, Skill
Development
Provide
]v?e?vtiovo
market access
to M SM Es
Eligibility
Area of
Support
Although the eligibility criteria mention that all MSMEs are eligible for the scheme,
some sub-components such as - Capacity Building of First Time MSE Exporters
(CBFTE) which includes Registration-cum-Membership Certificate (RCMC) paid by
the first-time exporters, Export insurance premium paid by MSEs and Fee paid on
Testing & Quality Certification is exclusively available for micro and small enterprises
only.
MSME Policy Landscape47
Designing a Policy for Medium Enterprises Newly launched PM Vishwakarma scheme launched on September 17, 2023, aims to provide
comprehensive support for artisans and craftspeople working with their hands and tools.
This scheme, with a budget outlay of `13,000 crore for 2023-2024 to 2027-2028, includes
various components designed to enhance the skills and business opportunities of these
individuals.
Support offered under the scheme:
Recognition: Beneficiaries receive a PM Vishwakarma Certificate and ID Card.
Skill Upgradation: The scheme facilitates skill development programs tailored to artisans.
Toolkit Incentive: Financial support is provided for purchasing tools and equipment.
Credit Support: Access to loans and financial assistance to help artisans grow their
businesses.
Incentives for Digital Transactions: Encouragement for using digital payment methods.
Marketing Support: Assistance in promoting and marketing their products effectively
1
Obj ective
23
?tisvs
Financial
Support, Skill
Development
Provide
support
(o? ?tisvs v
c?fts?eo?oe
Eligibility
Area of
Support
The scheme is primarily targeted at artisans and craftspeople rather than being
limited to micro or small enterprises; however, it significantly focuses on micro-level
support for individuals involved in traditional crafts and trades. Therefore, while it
aligns with the goals of MSMEs, its specific support structure primarily benefits
artisans rather than encompassing all types of MSME.
MSME Champions has been formulated by merging all 6 components of erstwhile
Technology Upgradation Scheme (TUS) for a period of 5 years i.e. 2021-22 to 2025-26. It
is a holistic approach to pick up clusters and enterprises and modernize their processes,
reduce wastages, sharpen business competitiveness. There are 3 components under the
new MSME Champions scheme:
1. MSME-Sustainable (ZED)
2. MSME-Competitive (Lean)
MSME Policy Landscape48
Designing a Policy for Medium Enterprises 3. MSME-Innovative (for Incubation, IPR, Design)
The 4
th
component MSME Digital MSME will be interlinked with all the other components.
Financial Support is provided to MSMEs in Zero Defect Zero Effect (ZED) Certification
Scheme to create awareness about ZED manufacturing and motivate them for assessment
of their enterprise for ZED. The MSME (Competitive) Lean aims to optimize production
processes in MSMEs by minimizing waste and enhancing operational efficiency. Under this
initiative,
MSMEs receive consultancy services to analyze their current operations and identify
technological improvements that can streamline processes. Financial assistance is available
for acquiring tools and technologies that support lean practices, such as automation
systems and process optimization software. MSME Innovativeis a new concept for MSMEs
with a combination of innovation in incubation, design intervention and by protecting IPR
in a single mode approach to create awareness amongst MSMEs about India’s innovation
and motivate them to become MSME Champions. This will act as a hub for innovation
activities facilitating and guiding development of ideas into viable business proposition
that can benefit society directly and can be marketed successfully. The scheme has 4
sub-components: Incubation, Design, IPR and Digital. MSME Digitalinitiative encourages
MSMEs to embrace digital technologies to enhance their operational capabilities and
market reach. It provides funding for the procurement of essential digital tools, including
enterprise resource planning (ERP) systems, customer relationship management (CRM)
software, and e-commerce platforms.
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Technology &
Q uality
h?P?tiov
M odernize
Process,
Reduce
W astage,
Sharpen
B usiness
ou?etiti?evess
Eligibility
Area of
Support
Under ZED, the subsidy on the cost of certification for Micro Enterprises is 80%,
for Small Enterprises is 60% and for Medium Enterprises is 50%. By and large, all
MSME units can avail the benefits under each component of the MSME Champions.
MoMSME with World Bank’s loan assistance is implementing Technology Centre Systems
Programme (TCSP) to establish 15 new Tool Rooms and Technology Development Centres
(TCs) and upgrading the existing 18 TCs across the country. Its aim is to provide high
MSME Policy Landscape49
Designing a Policy for Medium Enterprises end skilling and technical support to MSMEs. It focuses on establishing a network of
Technology Centres that provide essential support services such as advanced training,
technology transfer, and R&D.
The key components of the scheme involve:
Setting Up Technology Centres: The scheme involves the establishment of technology
centers in various regions to cater to the needs of MSMEs, particularly in technology
upgradation, skill development, and research.
Support Services: These centers offer a wide range of services, including training programs,
access to state-of-the-art equipment, and consultancy services to help MSMEs adopt
modern technologies and improve their processes.
Focus on Clusters: The TCS particularly emphasizes the development of technology
clusters, which aim to bring together MSMEs in specific industries or regions to foster
collaboration and share resources.
Funding and Subsidies: The scheme provides financial assistance in the form of grants
and subsidies to help MSMEs invest in new technologies and improve their operational
capabilities.
Monitoring and Evaluation: Continuous monitoring and evaluation processes are
implemented to assess the effectiveness of the services provided and to ensure that the
centres meet the evolving needs of MSMEs
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Technology
h?P?tiovU
Training
Technical
Support to
M SM Es
Eligibility
Area of
Support
The Technology Centre Scheme aims to support all categories of MSMEs.
RAMP (Raising and Accelerating MSME Performance) is a World Bank supported Central
Sector Scheme aimed at improving access of MSMEs to market, finance and technology
upgradation by enhancing the outreach of existing MoMSME schemes. The programme also
aims at strengthening institutions at the Central and State level, and enhancing Centre-
State collaboration offers financial assistance to MSMEs for investing in new technologies,
modern machinery, and equipment, which enhances productivity and efficiency. The scheme
includes subsidies on the costs associated with upgrading technology. It encourages the
adoption of innovative solutions that improve product quality and operational efficiency.
MSME Policy Landscape50
Designing a Policy for Medium Enterprises This initiative is backed by a significant investment of `6,062.45 crore (approximately USD
808 million), comprising a loan of `3,750 crore from the World Bank and the remaining
`2,312.45 crore funded by the Government of India. The scheme will be implemented over
five years and aims to address various challenges faced by MSMEs.
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Technology
h?P?tiovU
Training
Centre-State
oooo?tiov
to enhance
the outreach
of M SM E
Schemes
Eligibility
Area of
Support
The scheme aims to benefit over 5.5 lakh MSMEs from FY 2022-23 to FY 2026-27.
It specifically targets MSMEs that are already operational and looking to upgrade
their technology, innovate, or improve their market access. Both small and medium
enterprises are eligible to apply for the benefits provided by the scheme.
Micro & Small Enterprises Cluster Development Programme (MSE-CDP) is launched to
enhance the productivity and competitiveness of micro and small enterprises through a
cluster development approach. This program provides financial assistance for establishing
Common Facility Centres (CFCs) and upgrading essential infrastructure in industrial areas.
For preparation of Diagnostic Study Report (DSR) GoI grant is limited to Rs. 2.50 lakhs
and for field organisation of Ministry of MSME its upto Rs. 1.00 lakh. For Soft Intervention,
GoI will grant 75% of sanctioned amount, with maximum project cost of Rs. 25 lakh per
cluster and for NE / Hill states / 50% of micro, village, women owned, SC, ST units, the
GOI grants will be 90%. Hard Interventions include creation or upgrading of Common
Facility Centres (CFCs), which provide shared services such as testing, training centers,
raw material depots, and other support critical to improving competitiveness. MSE-CDP
also encourages the formation of self-help groups, consortia, and associations to build
collective capacity among MSEs.
MSME Policy Landscape 51
Designing a Policy for Medium Enterprises 1
Obj ective
23
M icro &
Small
Enterprises
Infrastructure
Development
Enhance
??o?cti?]??
of M SEs
through
cluster
development
Eligibility
Area of
Support
The scheme is primarily targeted at Micro and Small Enterprises only aiming to
support their sustainability, growth, and ability to overcome common challenges,
such as technology improvement, skills, market access, and capital availability. It is
applicable to Existing Entrepreneurs in form of a Special Purpose Vehicles (SPVs).
SFURTI (Scheme of Fund for Regeneration of Traditional Industries) focuses on the
development of traditional industries, promoting both financial assistance and capacity
building. Both MSE-CDP and SFURTI involve tangible investments in infrastructure, such
as setting up CFCs and upgrading industrial estates. Traditional industries include Khadi
Industries, Village Industries, and Coir Industries.
The scheme covers three types of interventions
1.Soft interventions: Activities to build general awareness, counseling, skill
development and capacity building, exposure visits, market development initiatives,
design and product development, etc.
2.Hard interventions: Creation of common facility centres, raw material banks,
upgradation of production infrastructure, warehousing facility, tools and
technological upgradation, etc.
3.Thematic interventions: Interventions on a cross-cutting basis for brand building,
new media marketing, e-commerce initiatives, research and development, etc.
The financial assistance provided for any specific project shall be subject to a
maximum of Rs. 5 (five) crore to support Soft, Hard and Thematic interventions.
MSME Policy Landscape52
Designing a Policy for Medium Enterprises 1
Obj ective
23
/vsti??tiovs
with
e??e?tise o(
cluster
development
Infrastructure
Development,
Financial
Support
Development
of
d?]tiovo
Industries
Eligibility
Area of
Support
Since the scheme is specifically designed for regeneration of traditional industries, it
is not available for Medium Enterprises. Eligibility criteria includes Non-Government
organizations (NGOs), institutions of the Central and State Governments and semi-
Government institutions, field functionaries of State and Central Govt., Panchayati
Raj institutions (PRIs), Private sector by forming cluster specific SPVs, Corporates
and Corporate Social Responsibility (CSR) foundations with expertise to undertake
cluster development.
Promotion of MSMEs in North Eastern Region and Sikkim provides financial assistance
for the establishment and modernization of Mini Technology Centres, which offer
vital facilities for manufacturing, testing, R&D, and training on local natural resources.
Additionally, the scheme supports the development of new and existing industrial estates,
and enhance the tourism sector by funding the creation of common services such as
kitchens, cold storage, and cultural activity centres in tourism clusters. The government
contributes up to 90% of the project costs, making it a significant support mechanism
for MSMEs in the region.
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Infrastructure
Development,
Technology
h?P?tiov
Establishing
mini
Technology
Centers in
NER
Eligibility
Area of
Support
MSME Policy Landscape 53
Designing a Policy for Medium Enterprises Micro, Small, and Medium Enterprises (MSMEs) located in any of the eight North
Eastern states (Arunachal Pradesh, Assam, Manipur, Meghalaya, Mizoram, Nagaland,
Sikkim, and Tripura) can apply for the benefits under this scheme. The sub-
components of the scheme, such as technology upgradation, the development of
industrial estates, and support for the tourism sector, all apply to all MSMEs.
The Assistance to Training Institutions (ATI) Schemeis designed to enhance the capabilities
of national-level training institutions under the Ministry of MSME. Its primary goal is to
provide support for the creation, strengthening, and expansion of infrastructure, including
establishing new branches or centers. Financial assistance is available for infrastructure
development and capacity building for training programs focused on skill development
and entrepreneurship.
Assistance to Training Institutions of the Ministry of MSME: This assistance focuses on
creating or strengthening the infrastructure of training institutions, including new branches
or centers. It also provides support for covering any revenue deficits, specifically for
institutions like the National Institute for Micro, Small, and Medium Enterprises (ni-msme).
Assistance to State-Level Entrepreneurship Development Institutes (EDIs): Maximum
assistance of up to `250 lakh can be provided to State-level EDIs for developing
infrastructure, equipment, and faculty training. The grant is limited to building infrastructure
related to training but excludes staff quarters or land costs.
Assistance for Training Programs: Financial support for skill development training is given
based on the type of program (aligned with the National Skills Qualifications Framework–
NSQF).
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Training
Enhance the
c?]o]ties o(
vtiovoroe?eo
training
]vsti??tiovs
Eligibility
Area of
Support
Financial support is available for existing institutions under the Ministry of MSME,
including ni-msme, National Small Industries Corporation (NSIC), Khadi and Village
Industries Commission (KVIC), Coir Board, and others. Assistance is limited to State
Government or Union Territory-controlled EDIs. All MSME units can avail the training
through training institutions.
MSME Policy Landscape54
Designing a Policy for Medium Enterprises Entrepreneurship and Skill Development Programme (ESDP) aims to promote
entrepreneurship among youth by conducting various training sessions that cover essential
aspects of starting and managing small businesses. Activities include workshops, awareness
programs, and skill development sessions, primarily targeting youth interested in self-
employment. The scheme provides basic entrepreneurship training aimed at helping
entrepreneurs to put their ideas into action, bring an attitudinal & behavioral change in the
target group and build their personal entrepreneurial skills and advance entrepreneurship
and advance management training aimed at helping entrepreneurs by providing high
end I advance training in the domain of e- commerce, BPO, Soft Ware, Biotech, Modern
Agricultural & Animal Husbandry and processing, etc.
The programme includes the following modules:
Entrepreneurship Awareness Programme (EAP)
Entrepreneurship-cum-Skill Development Programme (E-SDP): Existing E-SDP
and Advanced E-SDP
Management Development Programme (MDP): Existing MDP and Advanced MOP
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Training &
Skill
Development
Promote
Entrepreneur-
ship among
youth
Eligibility
Area of
Support
Although the scheme guidelines mention that the scheme is applicable to all MSMEs,
the sub- components such as one day entrepreneurship awareness programme
is only meant for setting up MSEs and MDPs are not also available for Medium
Enterprises.
ASPIRE (A Scheme for Promotion of Innovation, Rural Industries, and Entrepreneurship)
scheme, aims to foster innovation and entrepreneurship primarily in rural areas. ASPIRE
has several key components, including the establishment of Livelihood Business Incubators
(LBI) and Technology Business Incubators (TBI). LBIs aim to provide entrepreneurship
training and support to help individuals launch their businesses, while TBIs focus on
commercializing innovative technologies developed in academic or research institutions.
Two main components of the scheme:
MSME Policy Landscape 55
Designing a Policy for Medium Enterprises Livelihood Business Incubator (LBI): These incubators focus on imparting skill development
and running incubation programs to promote entrepreneurship in the agro-rural sector,
with special attention to rural and underserved regions. LBIs aim to create employment
and livelihood opportunities by encouraging the setup of small businesses.
ASPIRE Fund of Funds (FoF) Managed by SIDBI: This Fund of Funds (FoF) was created
to invest in early-stage startups through Alternate Investment Funds (AIFs), specifically in
the agro- based sector. The focus is on nurturing innovation and business development,
creating forward and backward linkages with the value chain of manufacturing and service
delivery.
1
Obj ective
23
M icro, Small
and M edium
Enterprises
Training &
Skill
Development
Foster
/vvo?tiov
and
Entrepreneurs
hip in rural
areas
Eligibility
Area of
Support
The scheme is primarily designed to support micro and small enterprises and
promote entrepreneurship in rural areas. Mentor Institutes focus on Micro Enterprise
creation. Role of Mentor Institutes is to create and engage an ecosystem for the
LBIs enabling Micro-Enterprise creation and creating a platform for converging
with various GoI/State Government schemes to facilitate the creation of micro-
enterprises and employment generation, among other functions.
Coir Vikas Yojana (CVY)aims to promote the growth and development of the coir
industry in India, focusing on various aspects such as technology, skill development, market
promotion, and welfare measures for workers in the sector. This scheme aims to enhance
the socio- economic conditions of those involved in the coir industry by improving their
skills, providing financial assistance, and promoting coir products in both domestic and
international markets.
Components of Coir Vikas Yojana
1.Coir Industry Technology Upgradation Scheme (CITUS): Focuses on technology
and quality upgradation as well as infrastructure development for the coir industry.
2.Science and Technology (S&T): Aims at upgrading technology and quality for
coir entrepreneurs and exporters.
MSME Policy Landscape56
Designing a Policy for Medium Enterprises 3.Skill Upgradation and Mahila Coir Yojana: Focuses on training and skill
development, particularly targeting women artisans.
4.Export Market Promotion (EMP): Provides marketing assistance to coir
entrepreneurs and exporters.
5.Domestic Market Promotion (DMP): Offers marketing assistance specifically to
small- scale coir entrepreneurs.
6.Trade and Industry Related Functional Support Services (TIRFSS): Encompasses
training and skill development, as well as infrastructure development for the coir
industry.
7.Welfare Measures: Includes insurance and other welfare measures aimed at coir
workers.
1
Obj ective
23
Coir
Entrepreneurs
Technology
h?P?tiovU
Training & Skill
Development,
D?letivP v
Infrastructure
Support
Development
of
the Coir
Industry
Eligibility
Area of
Support
Medium enterprises can primarily benefit from the Technology Upgradation
component of the Coir Vikas Yojana, while the other components cater mostly
to individuals, small enterprises, or women artisans. For instance, the Domestic
Market Promotion (DMP) is only available for small-scale coir workers. Similarly, the
other sub-components are applicable to individual coir workers or entrepreneurs
or women artisans.
Khadi Gramoday Vikas Yojana (KGVY) is an initiative by the Government of India aimed
at promoting the production and marketing of khadi and village industries. It has two
major components: (i) Khadi Vikas Yojana and (ii) Gramoday Vikas Yojana. It seeks to
provide comprehensive support to artisans and entrepreneurs involved in the khadi sector
and other traditional crafts, fostering rural development and self-sufficiency. The main
objective of the scheme includes Promotion of Khadi Production, Skill Development, Market
Development, and Sustainability. Under this scheme, financial assistance can cover up to
50% of the project cost for establishing new production units or upgrading existing ones.
For specific projects, support can reach up to Rs. 25 lakhs per unit, depending on the
MSME Policy Landscape 57
Designing a Policy for Medium Enterprises nature of the intervention. Marketing Assistance provides subsidy on cost of raw material.
Interest subsidy is also given to Khadi Institutions (4%).
1
Obj ective
23
M icro and
Small
Enterprises
Technology
U pgradation,
M arketing and
Infrastructure
Support
W?ouotivP ?Ze
??o?ctiov
v u?letivP
of khadi and
village
industries
Eligibility
Area of
Support
The scheme primarily targets micro and small enterprises, specifically those
engaged in khadi production and related activities. The scheme is designed to
support artisans and small-scale producers, including self-help groups (SHGs) and
cooperatives involved in the khadi sector.
B. COMMENTARY ON M oMSME INITIATIVES
The current documentation of schemes
75
implemented by the Ministry of MSME presents
an opportunity for greater standardization and transparency. A unified approach to naming
conventions and scheme listings across sources would enhance clarity and accessibility.
Creating a comprehensive document that consolidates all schemes, along with details on
fund allocation and disbursement, could help address existing discrepancies. Additionally,
ensuring timely updates on the operational status of schemes and making all relevant
documents publicly available would further strengthen transparency and support informed
decision-making.
75Such as the MSME Booklet published by MoMSME, the Annual Reports, Invest India Portal, MSME Website.
MSME Policy Landscape58
Designing a Policy for Medium Enterprises Table 4.1: Snapshot of support not provided to Medium Enterprises
Type of SupportMicro Small Medium
MSME SAMADHAAN- Delayed Payments
Management Development Programs
76
Training on Modern Packaging
Techniques
77
Training on Adoption of Bar Code
78
Adoption of e-Commerce Platform
Participation of Individual Enterprises in Trade Fairs / Exhibition
79
80% subsidy on
built-up space
rent paid
80% subsidy on
built-up space
rent paid
Subsidy on Technology Upgradation for ZED Effect Solutions
80% subsidy 60% subsidy 50% subsidy
Facilitation Council
Capacity Building of First Time MSE Exporters
80
Special Credit Linked Capital Subsidy for technology enablement
81
In conclusion, the analysis of the 18 MoMSME schemes outlined above, reveals a significant
disparity in support for medium enterprises, with only 8 schemes accessible to them.
Furthermore, within these schemes, several sub-components are restricted for Micro and
Small Enterprises, limiting the benefits that medium enterprises can derive. It should be
noted that the provision for credit is alarmingly sparse, with only a single scheme catering
to this crucial need. This skewed distribution of resources highlights the inadequacy of
support mechanisms for medium enterprises, ultimately hindering their growth potential
and competitiveness in the market.
If these issues are addressed, medium enterprises can significantly enhance their growth
potential and competitiveness in the market. By gaining better access to financial resources,
they will be able to invest in expanding operations, upgrading technology, and enhancing
productivity. Improved access to government schemes and incentives will allow medium
enterprises to innovate, enter new markets, and scale up more effectively.
76Sub-Component of Entrepreneurship and Skill Development Programme (ESDP) Scheme
77 Sub-Component of Procurement and Marketing (PMS) Scheme
78Sub-Component of Procurement and Marketing (PMS) Scheme
79Sub-Component of Procurement and Marketing (PMS) Scheme
80 Sub-Component of International Cooperation (IC) Scheme
81 Sub-Component of National SC-ST Hub Scheme
MSME Policy Landscape59
Designing a Policy for Medium Enterprises 4.2 STATE GOVERNMENT INITIATIVES
A. Overview of Existing State Government Initiatives
The proposed 6 states (Maharashtra, Tamil Nadu, Uttar Pradesh, Gujarat, West Bengal
and Telangana) account for 54% of the total MSMEs in India. Each state has distinct
sectors of concentration, and these sectors vary from one state to another. For example,
Maharashtra’s most concentrated sectors include textiles, pharmaceuticals, chemicals,
automobiles, engineering, and leather, reflecting the state’s diverse industrial base. Similarly,
West Bengal’s
prominent sectors include textiles and engineering (mainly leather), Foundry and Forging
industry, Food and agro processing, Gems and Jewellery, textiles and engineering.
B. Commentary on Existing State Government Initiatives
Maharashtra has 8 MSME-related schemes, all of which are extended to medium enterprises,
offering a variety of incentives like Capital subsidy, Investment Subsidy, Assistance in
Marketing, Reimbursement for stamp duty, Subsidy on power tariffs, etc. Some of the
flagship schemes Intellectual Property Rights (IPR) scheme, Industrial Promotion Subsidy
(IPS), Interest subsidy, etc.
For instance, IPR Scheme provides financial assistance up to Rs. 2 lacks will for domestic
patent applications, and up to Rs. 10 lacs for international patent applications.
BOX 4.1: STAKEHOLDERS STATEMENT
Maharashtra’s Women Policy 2024 is a unique initiative focused on promoting entrepreneurship and innovation among women, especially marginalized groups. It emphasizes skill development, access to financial services, and rebranding Self-Help Groups (SHGs) as engines of economic growth. The policy offers institutional and funding support for women-led producer associations, promotes SHGs in government schemes, and provides training in branding and marketing, empowering women entrepreneurs and strengthening their economic role.
-Director Maharashtra Chamber of Commerce, Industries and Agriculture
Major challenge for the MSMEs is the availability of skilled labor, mainly due to a
mismatch between the skills needed and those possessed by the workforce. Many
companies struggle to find the right talent that aligns with their requirements.
-Survey by the Federation of Indian Chambers of Commerce and Industry
(FICCI), 2023
Medium enterprises face several key challenges, including limited access to credit
due to collateral issues, low adoption of technology, inadequate infrastructure
etc.
-Maharashtra Economic Advisory Council 2023
MSME Policy Landscape60
Designing a Policy for Medium Enterprises Tamil Nadu has 15 MSME-related schemes, but only 46% cater specifically to medium
enterprises, providing a variety of incentives such as reimbursements for quality certification
costs and infrastructure development support etc. Some of the flagship schemes include
the Back-ended Interest Subsidy for MSMEs, offering 3% interest subvention on term loans
for technology up-gradation and modernization, as well as the Credit Guarantee Fund
Trust Scheme and 25% of the cost under generator subsidy scheme.
BOX 4.2: BEST PRACTICES – TAMIL NADU – SAP 2016
Tamil Nadu Plots/ Sheds Allotment Policy, 2016
Developed plots/shed in the Industrial Estates are being allotted on outright sale basis / lease / rental basis to MSMEs by advertising the details of vacant plots / sheds in the official website of TANSIDCO. On receipt of application requesting allotment of plots / sheds, Screening Committee meeting is convened to select eligible applicants after an interview. In case of a greater number of eligible applicants are found in places where the number of plots is limited, then the allotment is done through drawing of lot in the presence of applicants.
Uttar Pradesh has 19 schemes related to MSMEs and about 84% of these schemes are applicable to medium enterprises, offering a wide range of incentives such as Interest subsidy, Land Use Conversion Fee Waiver, Reimbursements for industrial parks, Subsidy for Standard QualityCompliance etc. Some of the flagship schemes are One District One Product (ODOP), Marketing Development Assistance Scheme, Promoting Leadership and Enterprise for Development of Growth Engines (PLEDGE) etc.
For example, ODOP scheme provides different trainings across the value chain of ODOP
product for that respective district and it targets skilled and unskilled artisans for training
under different modules and certification and provides for a free advanced toolkit free to
trained artisans.
BOX 4.3: BEST PRACTICES – UTTAR PRADESH – PLEDGE
SCHEME
Promoting Leadership and Enterprise for Development of Growth Engines (PLEDGE), scheme by Uttar Pradesh government aims to promote the development of private industrial parks across the state. Under this scheme, private developers can establish parks on 10-50 acres of land, with 75% of the area reserved for MSMEs. Developers are responsible for land allocation, infrastructure development, and maintenance. The scheme offers 100% stamp duty exemption for private developers and women entrepreneurs acquiring industrial land in these parks. SIDBI will provide financial assistance to address funding gaps for setting up these parks.
MSME Policy Landscape 61
Designing a Policy for Medium Enterprises Gujarat has 16 MSME related schemes and all these are applicable to medium enterprises.
These schemes offer a wide range of incentives like Interest subsidy on Term Loan, Subsidy
on technology up-gradation, Subsidy on patent registration, Subsidy on consumption of
Energy and Water, Assistance for sick enterprises etc. Some of the flagships schemes are
Rehabilitation of sick enterprises, Gujarat MSME Export Promotion Scheme, Assistance for
Technology Acquisition etc.
For instance, Assistance for Common Environment Infrastructure scheme offers 75%
assistance maximum amount of 80 lakhs for infrastructural development.
BOX 4.4: BEST PRACTICES – GUJARAT – REHABILITATION
OF SICK ENTERPRISES
Rehabilitation of sick enterprises is one of the unique schemes by government of Gujarat and it is applicable to all categories. Reimbursement of rent is again for all categories adding to motivate the industries to move from micro to small to medium.
West Bengal has around 11 schemes related to MSMEs and only 50%of these schemes are applicable to medium enterprises, offering a range of incentives such as Capital Investment Subsidy, Interest subsidy on Term Loan, Subsidy for Energy Efficiency, Subsidy on Stamp Duty and Registration Fee, Subsidy for Water Conservation/ Environment Compliance etc. Some of the flagship schemes are Banglashree, Incentive scheme for Industrial parks etc.
For instance, Banglashree scheme offers various incentives to medium enterprises such
as interest subsidy of 25% on term loans, 100% waiver of electricity duty, 75% subsidy on
stamp duty, 30% subsidy on SGST, welfare workforce assistance, 50% subsidy for patent
registration.
Telangana has implemented 10 MSME related schemes, with 80% of them designed for
medium enterprises. These schemes provide incentives such as land conversion subsidy,
seed capital assistance, subsidy on quality certification etc. Some of the flagship initiatives
are T- Pride, T-Idea.
For instance, T-Pride for SC/ST entrepreneurs provides a variety of incentives for medium
enterprises, including 100% reimbursement of stamp duty and transfer duty on land
purchases, among others. In contrast, T-Idea provides a reimbursement of interest subsidy
of 4% for spinning activity and 6% for industries involved in composite activities i.e.,
spinning, and weaving/knitting, specifically for technology up-gradation.
MSME Policy Landscape62
Designing a Policy for Medium Enterprises BOX 4.5: BEST PRACTICES – TELANGANA – STATE SCHEMES
TG–iPASS (Telangana State Industrial Project Approval and Self-Certification System)
is a single window clearance system that reduces the complexity for businesses.
The portal enables self-certification of compliance with statutory requirements,
minimizing the need for frequent inspections and manual checks. It also guarantees
clearances within a specified timeframe, typically 15 days, ensuring that businesses
can start their operations or expand their ventures without unnecessary delays.
Revenue-based financing for MSMEs: The Government of Telangana will run a
pilot program for revenue-based financing for MSMEs. As per the model, MSMEs
can access credit based on future sales, reducing upfront burdens and making
funding more accessible, especially for women-led ventures. The pilot project will
help the Government assess if MSMEs in the state are interested in such routes
for finance. The pilot will also help the Government identify interventions that the
Government can make to encourage more revenue-based financing.
The government will offer technical support and guidance to help MSMEs enhance
their financial planning and adopt standard book-keeping practices. To achieve this,
state will engage third party experts to provide practical and accessible assistance
to MSMEs across the state. It will also produce training videos in Telugu to teach
basic-book keeping skills, helping MSMEs better manage working capital and access
formal credit.
Creation of raw materials directory: government plans to develop a
comprehensive directory of raw materials needed across the state, along with a
list of verified suppliers who meet quality control standards.
Details of all the schemes, as stated above are given in the Annexure II.
4.3 GAPS IN THE POLICY ECOSYSTEM
1.Limited support for Medium Enterprises: Most of these schemes and other
support mechanisms are geared more towards micro and small categories. There
are very few schemes that are applicable to ME. Even where the support and
incentives are applicable for all the categories – micro, small and medium there
is no focus specific to medium enterprises.
2.Concerns of Small Enterprises Regarding Transition to Medium Enterprises:
Mature and larger small enterprises often perceive that transitioning to medium
enterprise status will result in increased taxes, higher electricity costs, and greater
complexities in GST and other compliance requirements. To navigate these
challenges, some entrepreneurs opt to establish additional units, potentially
registered under the names of family members.
3.Lack of Interest subsidy scheme for medium enterprises: Most schemes related
to interest subvention primarily target micro and small enterprises, with few
MSME Policy Landscape63
Designing a Policy for Medium Enterprises providing similar support for medium enterprises. Currently, there are no policies
or government initiatives in place that offer interest subsidies specifically for
medium enterprises across the country. For instance, Telangana’s Pavala Vaddi,
a sub-component of the T-IDEA scheme, is designed for MSMEs but it applies
only to micro and small but not medium enterprises.
4.Lack of Facilitation Councils (FCs) to medium enterprises: The scope of FCs
is limited to micro and small enterprises, leaving medium enterprises aside. And
most states have only one FC which is insufficient to handle the high volume of
cases, leading to delays and backlogs.
As has been enumerated in Chapter 3, there are a few factors inhibiting the growth
of MEs. This chapter further identifies gaps in current policy initiatives. It can also be
deduced that very few schemes exist that specifically cater to the needs of Medium
Enterprises. With a targeted push, Medium Enterprises can increase their already significant
contribution to Innovation, Export, and Employment. In the following chapter we identify
some International Best Practices, that can be aligned with the Indian perspective to
strengthen the role of Medium Enterprises in the country’s economic landscape.
MSME Policy Landscape64
Designing a Policy for Medium Enterprises International Best Practices65
5
INTERNATIONAL
BEST PRACTICES CHAPTER 5
INTERNATIONAL BEST
PRACTICES
In this chapter, we explored international best practices and examples from countries such
as Canada, Singapore, Germany, and Japan. We highlighted how these nations support
Medium Enterprises (MEs) in areas like innovation, access to skilled labour, access to
technology, awareness of various schemes, and access to working capital.
Example 1: Awareness of Schemes/Compliance: Canada’s BizPaL and Singapore’s GoBusiness Licensing Portal
Canada’s BizPaL centralized the permit application process across all government levels, significantly reducing time spent on regulatory tasks. Singapore’s GoBusiness Licensing Portal integrated over 20 government agencies, offering AI-driven recommendations for licenses and compliance requirements
82
.
1.Canada’s Innovation, Science, and Economic Development (ISED) – BizPaL:
URL: https://www.bizpal.ca
USPs:
®Cross-Government Integration: Centralized access to permits and licenses
from federal, provincial, and municipal levels.
®Personalized Application: Tailored recommendations based on business
type, location, and needs.
®Simplified Navigation: A step-by-step guide for businesses to ensure they
apply for the relevant permits and licenses.
82 https://licence1.business.gov.sg/feportal/web/frontier/home
66International Best Practices 2.Singapore’s GoBusiness Licensing Portal URL: https://www.gobusiness.gov.sg
USPs:
®Integration of 20+ Government Agencies: A single platform for applying to
multiple agencies for licenses and government schemes.
®AI-Driven Recommendations: Personalized recommendations for schemes,
licenses, and compliance based on business details.
®Compliance Reminders: Automated reminders for license renewals and
regulatory updates, ensuring businesses remain compliant.
Example 2: Access to Advance Technologies: Germany’s Industry 4.0, Japan’s
Connected Industries, South Korea’s Manufacturing Innovation 3.0, and China’s
Made in China 2025
International Best Practices67
Designing a Policy for Medium Enterprises Germany’s Industry 4.0 initiative launched SME 4.0 Competence Centers, offering small and
medium-sized enterprises (SMEs) access to resources and expertise. This support led to
a 40% increase in the adoption of digital tools
83
. Japan’s Connected Industries promoted
collaboration through the IoT Acceleration Consortium, resulting in wider use of IoT. China’s
initiatives promoted the adoption of robotics and AI by offering tax incentives, thereby
enhancing industrial competitiveness.
Some more country-specific example:
Table 5.1: International Best Practices for Technology Adoption
Country
Name of the
Scheme
Key Features/Support Provided to
Medium Enterprises
Germany
Industry 4.0
Initiative
SME 4.0 Competence Centers: These centers provide
medium enterprises with access to experts, resources,
and best practices for adopting digital tools and smart
manufacturing. They offer training, workshops, and consulting
services on implementing Industry 4.0 technologies.
Innovation Grants: Financial assistance to medium enterprises
for R&D, technology integration, and process digitization.
Public-Private Partnerships: Government encourages
collaboration between academia, industry, and government
institutions for sharing knowledge and fostering innovation.
European
Union
Horizon Europe &
Digital Europe
Innovation and R&D Funding: Under Horizon Europe,
medium enterprises can receive grants to fund digital
transformation projects, including integrating Industry 4.0
technologies like AI, big data, and automation.
Skills Development Programs: Training programs for workers
in medium enterprises to enhance their understanding of AI,
IoT, and big data usage in manufacturing.
Digital Innovation Hubs (DIHs): DIHs act as local support
networks to help medium enterprises with innovation
testing, access to advanced technology infrastructure, and
expert consultancy.
83 i. https://www.aws-institut.de/en/research/mittelstand-4-0-kompetenzzentrum/
ii. https://www.imw.fraunhofer.de/en/press/press-releases/press-release--medium-sized-businesses-4-0---
competence-center-e.html
International Best Practices68
Designing a Policy for Medium Enterprises Country
Name of the
Scheme
Key Features/Support Provided to
Medium Enterprises
United
States
Advanced
Manufacturing
Partnership (AMP)
& Manufacturing
USA
- Manufacturing USA Institutes: Medium enterprises gain
access to 14 specialized institutes that focus on different
cutting-edge technologies like additive manufacturing,
robotics, and smart materials. These institutes provide shared
R&D facilities, knowledge transfer, and workforce training
opportunities. Small Business Innovation Research (SBIR):
This program offers funding specifically for medium and
small enterprises to develop and commercialize innovative
technologies. It provides financial support for research,
prototyping, and market readiness of smart manufacturing
tools. Workforce Training: Programs that offer skills training
for employees on advanced manufacturing and digitalization
to better prepare for Industry 4.0 environments.
Japan
Connected
Industries
SME-Specific Support: The government provides funding,
consultation services, and resources tailored to help medium
enterprises integrate advanced technologies such as IoT, AI,
and cloud computing into their manufacturing processes.
IoT Acceleration Consortium: A public-private initiative
to promote shared IoT infrastructure and R&D to benefit
SMEs in their digital transformation. Medium enterprises
can collaborate with large corporations to accelerate tech
adoption.
Public-Private Collaboration: Collaboration between SMEs,
universities, and large corporations is encouraged for
fostering innovative industrial applications and improving
smart manufacturing solutions.
China Made in China 2025
- Tax Incentives and Subsidies: The Chinese government
provides tax reductions and subsidies to medium enterprises
that adopt Industry 4.0 technologies, including robotics, IoT,
and smart manufacturing systems.
Robust R&D Funding: The strategy includes significant
investments in research and development for advanced
technologies such as AI, automation, and industrial robotics,
helping medium enterprises upgrade their manufacturing
capabilities.
Specialized Industrial Zones: The creation of specific
industrial zones that provide infrastructure, technical
support, and tax benefits for medium enterprises aiming
to implement smart manufacturing and digital solutions.
International Best Practices69
Designing a Policy for Medium Enterprises Country
Name of the
Scheme
Key Features/Support Provided to
Medium Enterprises
Singapore
Smart Industry
Readiness Index
(SIRI)
SIRI Tool: A free assessment tool that helps medium
enterprises evaluate their Industry 4.0 readiness. The
tool offers an analysis of current processes and provides
recommendations for improving digital
integration and operational efficiency.
Industry Transformation Maps (ITMs): These sector- specific
blueprints outline strategies for integrating Industry 4.0
technologies in key industries, providing medium enterprises
with a roadmap for digital transformation.
Government Grants: Several grant schemes are available
to medium enterprises to support technology adoption,
including the Enterprise Development Grant
(EDG) and Productivity Solutions Grant (PSG). These
grants help businesses invest in digital solutions and smart
manufacturing systems.
South
Korea
Manufacturing
Innovation 3.0
Subsidies for SMEs: The South Korean government offers
financial support to medium enterprises that adopt smart
manufacturing systems, particularly in integrating robotics,
AI, and IoT.
Workforce Training Programs: Government-backed
programs offer training to employees in medium enterprises
to upgrade their skills in using advanced technologies like
robotics, AI, and data analytics for smart manufacturing.
Public-Private Partnerships: Encouragement of collaboration
between the government, private industries, and academic
institutions to foster innovation in manufacturing processes
and to promote smart manufacturing technology adoption
across the sector.
Example 3: Access to Skilled Manpower: Australia’s Industry Skills Fund, Singapore’s
SkillsFuture, and Canada’s Job Grant (CJG)
Australia’s Industry Skills Fund provided $476 million to support upskilling, leading to an
improvement in worker retention
84
. Singapore’s SkillsFuture program enabled continuous
91 International entrepreneurial capabilities: The role of networks in the small multinational
enterprise, http://shura.shu.ac.uk/24195/learning, while Canada’s Job Grant covered 50-
84https://opea.net.au/industry-skills-fund-isf/#:~:text=The%20Government%20will%20provide%20$476.0,Australian%20Apprenticeships%20Mentoring%20Programme;
https://www.aph.gov.au/~/media/Committees/eet_ctte/estimates/add_1617/Education/Answers/SQ17-
000196-Att-1.pdf
International Best Practices70
Designing a Policy for Medium Enterprises 100% of training costs, leading to greater engagement in training programs
85
.
Key features of the program
Table 5.2: International Best Practices for Addressing Skill Gap
Country
Scheme/
Programme
FundingKey Features
Australia
Industry
Skills Fund
(ISF)
The Government will provide
$476.0mn over four years to
establish the Industry Skills
Fund (ISF) to support the
training needs of small to
medium enterprises which
the national training system
cannot readily meet.
Industries targeted include health
and biomedical products; mining,
oil and gas equipment technology
and services; and advanced
manufacturing, including defence
and aerospace. Delivered through
a co-contribution model.
SingaporeSkillsFutu re
The government provides
Skills-Future Credit (new and
top- up) to all Singaporeans
that does not expire. Course
fee funding and absentee
payroll for employers who
sponsor employee training.
For Individuals (Early-Career)
For Individuals (Mid-Career) For
Students For Employers For
Training Providers
Canada
Canada Job
Grant (CJG)
Canadian government funding
program -Receive up to 50-
100% in Grants for Employee
Training.
Designed to reduce the costs
of providing third-party skills
training to new and existing
employees. Launched in 2014, the
CJG allocates upwards of $194M
annually to support the upskilling
of new and existing employees so
that they can perform learn new
skills and become more valuable to
their organization.CJG maintains a
provincial stream for each province
and territory,
E-
Academy
Turkey—
KOSGEB provides distance training
on entrepreneurship; an effective,
easy and flexible entrepreneurship
training without time and space
constraints by E- Akademi
Programme. Entrepreneurship
Support Programme, with
preferential treatment for
women, youth and handicapped
entrepreneurs
85https://www.bmeaningful.com/blog/2019/02/use-the-canada-job-grant-to-cover-50-100-of-employee-
training-costs/
International Best Practices71
Designing a Policy for Medium Enterprises Example 4: Support for R&D/Innovation: Israel’s Magnet Program, South Korea’s
SME Technology Innovation Program, and China’s Spark Program
Israel’s Magnet Program provided grants covering up to 66% of R&D costs, driving a
50% increase in innovation projects
86
. South Korea’s SME Technology Innovation Program
covered a significant portion of R&D costs, leading to a substantial increase in patent
filings, while China’s Spark Program supported rural innovation by providing customized
funding for enterprises.
Key features of some country-specific programs:
Table 5.3: International Best Practices for Promoting InnovationKey
Features
Scheme/ProgrammeFundingKey Features
South
Korea
SME Technology
Innovation Program
The central government
funds 50% of the program,
and local governments
fund 25%.
If the program is successful,
the government receives
30% of its contribution
back as a technology fee
over five years.
UK Future Fund
High-growth UK-based
companies with between
GBP 125 000 and GBP
5 million and matching
funding from private
investors
Targeted support is
channelled to the most
R&D-intensive SMEs in the
form of grants and loans.
Malaysia InnoCERT
SMEs that demonstrate
strong innovation practices
receive the InnoCERT
certification, which
enhances their credibility
and visibility in both
domestic and international
markets.
The program motivates
Malaysian SMEs to innovate
continuously and leverage
new technologies
China Spark
Supports R&D efforts
by providing financial
assistance to companies
engaged in developing new
technologies, patents, and
innovative products.
Various technical projects
were supported depending
on criteria like small
investment, use of rural
resources, quick benefits
and appropriateness of the
technology for the rural
areas etc.
86 https://innovationisrael.org.il/en/programs/magnet-consortiums/#about_route Government Support for
Commercial R&D: Lessons from the Israeli Experience
https://www.nber.org/system/files/chapters/c10786/c10786.pdf
International Best Practices72
Designing a Policy for Medium Enterprises Key
Features
Scheme/ProgrammeFundingKey Features
Magnet Israel
Grants covering up to 66%
of the total R&D costs for
approved projects
The program encourages
the formation of R&D
consortia, where companies
from various sectors, along
with research institutions
and universities, collaborate
to develop cutting-edge
technologies.
Example 5: Access to Working Capital: Brazil’s BNDES Giro and France’s Mid- Term
Financing Scheme
Brazil’s BNDES Giro provided emergency working capital loans, helping businesses remain
operational, while France also supported companies with asset-based loans, contributing
to lower bankruptcy rates.
Key features of some country-specific programs:
Table 5.4: International Best Practices for Access to Working Capital
Funding
Key
Features
Mode of Support
Emergency
Working
Brazil
BNDES Giro: Temporary financing scheme for emergency working
capital: Under this finance is offered through the national development
bank. It allows them to apply at their own retail bank’s local branch in
person and receive an immediate decision, that if positive will arrange
for a wire transfer within 24 hours. Maximum loan amount of 20% of
gross revenue, up to R$ 70 million (~€ 16 million) a year, and R$ 20
million (€ 4,5 million) per request.
France
Mid Term Financing: Provision of asset loans intended for VSEs, MSMEs
and mid-cap companies with at least 12 months of balance sheets.
Allows financing a cash requirement related to cyclical difficulty, a
temporary fragile situation or a working capital requirement that
does not allow normal operating condition. Financing ceiling: €10,000
to 300,000. Term: 7 years, including 2 years of deferred capital
amortization.
International Best Practices73
Designing a Policy for Medium Enterprises Funding
Key
Features
Mode of Support
Fiscal
Support for
Transitioning
Enterprises
Germany
KfW Bank offers “KfW Entrepreneur Loan”, which provides funding
for companies in their growth phase, allowing them to access capital
even as they transition between categories such as small to medium.
Tax incentives related to R&D and investment in technology are not
tied to the size classification but are available to all enterprises that
meet certain criteria. Thus, transitioning from small to medium does
not automatically disqualify a business from these benefits.
Australia
“Small Business Investment Company (SBIC)” program is designed to
assist small businesses in transitioning to medium-sized enterprises.
It provides access to capital, tax incentives, and co-investment
opportunities that are not lost when a business grows.
Example: After transitioning from small to medium, Australian
businesses can continue to access the “Instant Asset Write-Off
program”, which allows them to immediately deduct the cost of
eligible assets.
Insights gained from the above global best practices can provide a roadmap for enhancing
support for MEs in India.
International Best Practices74
Designing a Policy for Medium Enterprises Recommendations 75
RECOMMENDATIONS
6 CHAPTER 6
RECOMMENDATIONS
UNLOCKING THE POTENTIAL OF MEDIUM ENTERPRISES FOR
ECONOMIC GROWTH
Medium enterprises play a pivotal role in driving economic growth, contributing significantly
to employment generation, industrial output, and exports. However, several structural and
operational challenges hinder their full potential. To address these gaps, a targeted and
well-structured policy approach is essential. The recommendations in this chapter draws
on identified challenges, stakeholder consultations, and gaps in the current policy
ecosystem, supported by a comprehensive review of best practices from both developing
and developed countries. The focus is on financial access, technological integration, R&D
promotion, skill development, and policy facilitation to create an enabling ecosystem
for medium enterprises in India.
The recommendations outlined below are based on identified challenges, stakeholder
consultations, and global best practices. The focus is on financial access, technological
integration, R&D promotion, skill development, and policy facilitation to create an enabling
ecosystem for medium enterprises in India.
Our findings indicate that MSME’s require support in:
90
1. Facilitating Financial Access and working capital support
2. Supporting Technology Integration and industry 4.0 adoption in Business
Operations.
3. Strengthening R&D and Innovation Ecosystem
4. Enhancing support for cluster-based testing and quality certification
5. Need for a Centralized Digital Portal for Medium Enterprises
6.1 FACILITATING FINANCIAL ACCESS AND WORKING
CAPITAL SUPPORT
Medium enterprises require higher working capital than micro and small enterprises,
yet they lack dedicated financing mechanisms to support their liquidity needs. While
initiatives like the Self-Reliant India (SRI) Fund aim to provide equity-based support, there
is no specific intervention for addressing the working capital financing needs of medium
enterprises as various existing programs such as Mudra Loan, PMEGP, CGMSE primarily
focus on micro and small enterprises.
90 Land Issue has not been taken up for the purpose of providing recommendations because land is a state
subject. However, some of the best practices of states have been included in Chapter 4.
76Recommendations Since at present Micro and Small Enterprises are allowed to get all non-tax incentives
for up to 3 years after upgradation to higher category, it is proposed that these benefits
mentioned below be given to those that have consistently remained in the medium category
for at least three continuous years. This ensures that the support is targeted at stable
and genuinely growing medium enterprises.
Intervention for Working Capital
Medium enterprises typically have significantly higher capital requirements than micro and
small enterprises. While the Government of India has established initiatives such as the
Self-Reliant India (SRI)
91
Fund to bridge this gap, there is currently no dedicated scheme
for addressing the working capital needs of medium enterprises.
The 2017 Prabhat Kumar Committee report also highlighted the need for revising the
classification of NPA for banks lending to MSMEs by extending the 90-day limit set by
RBI for classifying overdue payments as NPAs to 180 days. This shall be instrumental in
alleviating the pressure being faced by medium enterprises, thereby allowing them to
prioritise operational activities over servicing loan instruments.
Another important critical issue is regarding the support for small enterprises transitioning
to medium enterprises. Many small businesses face credit shortages during this critical
growth phase, which often discourages them from making the transition. Although there is
a mechanism that allows micro and small enterprises that transition to medium enterprise
status to continue availing the benefits previously received for a period of three years.
92
Global Best Practices
Singapore has topped direct government spending for MSMEs at 8.9%
93
of GDP
during the pandemic, including wage subsidies, working capital loans and specific
grants for sectors most impacted. Canada spends nearly 6.6% of GDP on MSMEs.
In contrast, India spends 0.08% of its GDP
94
on the MSME sector that generates
29% of the country’s GDP. Canada offers structured MSME financing, with sector-
specific loan caps and subsidized interest rates.
Recommendations
A. Working Capital Financing Scheme for Medium Enterprises
Introduce a dedicated financing scheme under the Ministry of MSME, allowing medium
enterprises to avail loans at concessional rates. This scheme should provide loans of up
91 SRI Fund essentially functions as ‘Fund of Funds’ channeling capital through private equity firms to eligible
MSMEs with high growth potential. Through a combination of government contribution and private equity
investments, it consists of a total corpus of Rs. 50,000 crores.
92Source: PIB 20th July 2023 – Delay in projects
93HYPERLINK “http://theglobaleconomy.com/”TheGlobalEconomy.com HYPERLINK “http://www.
theglobaleconomy.com/Singapore/Government_size/”(www.theglobaleconomy.com/Singapore/
Government_size/
94 Nominal GDP or GDP at current prices for the year 2022-23 is estimated at Rs. 269.50 lakh crore. MSME
Budget 2022-23 is 22137.95 crore, which is 0.08% of GDP.
Recommendations 77
Designing a Policy for Medium Enterprises to acertain percentage of gross revenue, depending upon the sector of the unit (i.e.
manufacturing or service), capped at `25 crore, with a maximum of `5 crore per request.
In line with India’s vision of becoming ‘Atmanirbh ar’ and boosting its manufacturing
capabilities and exports, it is advisable to promote medium enterprises in manufacturing
by easing their access to working capital. This is because medium enterprises
contribute significantly to t he MSME sect or’s GDP and export. By providing easier
accessto work ing capital, these enterprises can scale up operations, improve
productivity , and contribute even more to India’s manufacturing growth, which is
expected to reach $1 trillion by 2025-26.
B. Emergency Credit Line (Medium Enterprise Credit Card)
For emergency needs, a credit card with a pre-approved limit of up to `5 crore, may
be introduced. This facility will allow enterprises to manage urgent expenses, such as
payroll, inventory procurement, and equipment repairs, in case the loan disbursement
longer than usual. The credit card’s interest rates should align with the market rate of
interest.Another benefit of these kind of initiatives is that it provides collateral-free credit
for smaller amoun ts tomeet operational requirements. Ensure that credit card interest
rates align with market rates while allowing a grace period for repayment.
Loan at subsidized
interest rate up to a
certain percentage
of gross revenue,
capped at ` 25 crore
Credit Card with
pre-approved
limit of ` 5 crores
Expected Impact
Ensures immediate access to capital, reducing financial distress and improving
liquidity management.
Strengthens business continuity, allowing enterprises to scale without funding
bottlenecks.
6.2 TECHNOLOGY INTEGRATION AND INDUSTRY 4.0
ADOPTION.
While large corporations have the required resources to invest in cutting-edge technologies,
and small enterprises often benefit from targeted Government schemes, medium
enterprises fall into a policy gap, where they do not qualify for small enterprise benefits
but also lack the resources and expertise to adopt advanced AI, IoT, automation, and
smart manufacturing solutions independently. The absence of structured support has
made technology adoption slow and fragmented. Additionally, global supply chains are
evolving rapidly, with an increasing focus on automation, digital integration, and smart
manufacturing. Medium enterprises must upgrade their capabilities to meet international
Recommendations78
Designing a Policy for Medium Enterprises standards and participate in global value chains. Failure to do so could result in reduced
market access, lower productivity, and an inability to scale.
While initiatives like MSME Champions and Udyog Bharat are in place to support technology
upgrades 82% of medium enterprises have yet to incorporate advanced technologies into
their operations.
Tool Rooms and Technology Centres established by the Government of India provide a
strong foundation for technological development and skill enhancement which can be built
upon using their infrastructure for adoption of Industry 4.0 technologies among medium
enterprises.
Government of India’s initiative to establish 20 new Technology Centres (TCs) and 100
Extension Centres (ECs) under the scheme “Establishment of New Technology Centres /
Extension Centres” marks a significant stride towards empowering the MSME sector and
skill seekers across the nation. The scheme was approved by the Cabinet Committee on
Economic Affairs (CCEA) on November 1, 2018. These TCs and ECs will provide critical
services such as technology support, skilling, incubation, and consultancy to MSMEs and
skill seekers.
GLOBAL BEST PRACTICES
Germany’s SME 4.0 Competence Centers provide targeted technological
support to medium enterprises. They offer digital transformation training to
help businesses adopt automation and IoT. Financial incentives encourage
investment in smart manufacturing solutions. This approach strengthens SMEs,
making them globally competitive.
China’s Smart Factory Initiative helps medium enterprises adopt AI-driven
manufacturing for efficiency. It promotes AI, data analytics, and automation to
optimize production processes. Government support includes policy incentives
and technology partnerships. This initiative enhances innovation and boosts
China’s global manufacturing leadership.
Recommendations
A. India SME 4.0 Competence Centres
Leverage the existing Technology Centres (TCs) under the Ministry of MSME and revamp
them into “India SME 4.0 Competence Centres.” These Competence Centres ensures cost-
effective implementation, maximized resource utilization, and streamlined support for
medium enterprises.
These new TCs can be designed to act as competence centres that will cater to various
industries, including General Engineering, Fragrance and Flavour, Electronics Systems
Design and Manufacturing (ESDM), Sports, and other sectors based on regional and
industry-specific demands. This targeted approach will ensure alignment with industry
Recommendations 79
Designing a Policy for Medium Enterprises needs, making the services offered by these centres highly relevant and impactful. By
equipping MSMEs with cutting-edge tools and fostering a culture of innovation, the centre
will aim to create future-ready enterprises capable of competing in global markets. The
integration will ensure these centres become innovation hubs for MSMEs, equipping them
with the tools and knowledge needed to adopt Industry 4.0 technologies and drive growth.
These centres should provide:
AI & IoT labs, AR/VR workstations for training including innovation
ecosystems.
Rapid prototyping facilities, including 3D printing and smart manufacturing hubs.
Capacity building and Training.
Consultancy services, Incubation and Start-Up support for digital transformation.
B. Hub-and-Spoke Model for Outreach
TCs and ECs may operate in a Hub-and-Spoke Model. Each TC (Hub) should act as a
centralized node for cutting-edge facilities. Extension Centres (Spokes) ensure outreach
in underserved areas. The SME Competence Centres’ resources can flow seamlessly.
Collaboration with IITs, NITs, and other technical institutes will help to foster R&D projects
and internships.
C.Phased Implementation Strategy
Pilot Phase: Test SME Competence Centre components in select Technology
Centres (TCs) and assess MSME readiness.
Full Integration: Expand to all 20 TCs, leveraging the Hub-and-Spoke model via
100 Extension Centres (ECs).
Continuous Improvement: Monitor adoption rates, MSME growth, and training
participation, updating programs with emerging technologies.
Recommendations80
Designing a Policy for Medium Enterprises Expected Impact
The initiative is expected to significantly accelerate the adoption of Industry 4.0
technologies among medium enterprises, fostering a more digital and data-driven
manufacturing ecosystem. Through targeted interventions such as skill development,
technology demonstrations, and access to smart manufacturing solutions, these enterprises
will be better equipped to integrate advanced automation, IoT, AI-driven analytics, and
digital twin technologies into their operations. This will lead to increased efficiency, reduced
downtime, and enhanced production quality, ensuring that medium enterprises remain agile
and resilient in an evolving industrial landscape.
Furthermore, by enabling participation in digital supply chains, the initiative will enhance
the global competitiveness of medium enterprises. With improved data integration, real-
time monitoring, and seamless connectivity with international buyers and suppliers, Indian
manufacturers will be able to meet stringent global quality standards and compliance
requirements. This transformation will not only open new export opportunities but also
position India as a preferred manufacturing hub, aligning with the broader vision of ‘Make
in India’ and ‘Atmanirbhar Bharat’ for a self-reliant and technologically advanced industrial
sector.
6.3 STRENGTHENING R&D AND INNOVATION
ECOSYSTEM
Being more export orientated and having larger presence in manufacturing sector,
investment on R&D is a compulsion rather than a choice for the medium enterprises.
India has established a set of schemes to provide R&D support to MSMEs. As for example
The Technology Centre Scheme (TCS) provides services such as product development,
prototyping, and consultancy in the areas like Aerospace, Automotive, electronics, IT and
General Engineering. However, a very few Medium Enterprises take the benefit of the
scheme. The untapped potential of Medium Enterprises to innovate can be realized by
creating a research promotion cell.
Global Best Practices
The EU’s Horizon 2020 Program provides competitive grants to SMEs for
industry-led R&D. It encourages innovation by funding projects in advanced
manufacturing and digital transformation. These grants help SMEs develop
cutting-edge technologies and enhance market competitiveness. The program
strengthens collaboration between businesses, researchers, and technology
providers.
South Korea’s SME Innovation Fund connects universities and MSMEs for joint
research initiatives. It fosters innovation by facilitating knowledge exchange and
technology development. Government-backed funding supports collaborative
projects in smart manufacturing and Industry 4.0. This approach enhances
SMEs’ capabilities, driving industrial growth and global competitiveness.
Recommendations 81
Designing a Policy for Medium Enterprises Recommendations
A. Establishment of an MSME Research & Innovation Fund
The Self-Reliant India (SRI) Fund has an allocation of Rs. 10,000 crores from the
Government of Indiaand Rs. 40,000 crores fro m Private Equity/Venture Capital Funds,
totaling Rs. 50,000 crores in equity support for MSMEs with high growth potential. Since
the laun ch of the Fund in 2021, a total of Rs. 4,885 crores has been invested in MSMEs,
including the Government of India’s share of Rs. 529.40 crore.
Forthis intervention, funds from the SRI Fund may be utilized by reserving 25-30% of
the GoI’s share (i.e. Rs. 2500-2800 crores) for focusing exclusively on financing Medium
Enterprise projects in this regard.
Adopt EU type funding mechanism in which the government after due process will identify
a set of major R&D gaps and invite proposal from the Medium Enterprises to bridge
those gaps. A competition amongst the Medium Enterprises will improve the quality of
proposals and thegovernment will through this mech anism en sure that the R&D is aligned
to national priorities.
B.Three-Tier Governance Mechanism
Create a three-tier mechanism of managing the funding process and monitoring
and reviewing the progress of projects is required. At the apex level there should be a
“Expert Com mittee” con sisting of expert bodies that will chalk out the research
agenda for the near future and for the long-term future. This council will identify areas of
research tha t will enable the entire country to become globally competitive. This council
may have member s of industry , industrial res earch organ ization , research institutions,
academic institutions (technical as well as management) and officials from variou s
Ministries.Below this will be the Research Funding Management Committee that will
call for R&D proposals from medium enterprises based on identified gaps and national
priorities. And finally the Project Review and Monitoring Committee will monitor the
performance and progress of these R&D initiatives.
Expected Impact
The initiative will boost domestic R&D investment, reducing dependence on foreign
technologies. By encouraging industry-led research, it will drive the development
of indigenous solutions. This will enhance technological self-reliance and foster a
robust innovation ecosystem. Strengthening local capabilities will position India
as a leader in advanced manufacturing.
Creating high-value innovations will significantly improve global competitiveness.
Cutting-edge developments in automation, AI, and smart manufacturing will
enhance product quality and efficiency. These advancements will open new
export opportunities for Indian industries. A strong innovation culture will ensure
sustained growth in the global market.
6.4 ENHANCE SUPPORT FOR CLUSTER-BASED TESTING
AND QUALITY CERTIFICATION
Cluster-wise testing facilities are crucial for medium enterprises in India because they
enable easier access to quality assurance, product certification, and regulatory compliance,
Recommendations82
Designing a Policy for Medium Enterprises especially in sectors like manufacturing, pharmaceuticals, and textiles. Medium Enterprises
often produce at a larger scale than small enterprises, making it vital to maintain consistent
quality standards to compete in both domestic and international markets. Establishing
testing facilities within industry clusters helps reduce logistical costs, accelerates time-
to-market, and ensures that Medium Enterprises can meet stringent export standards,
enhancing their global competitiveness. This intervention will present an opportunity to
implement targeted support. Establishing these cluster-wise testing facilities could serve
as an effective starting point to enhance the capabilities and competitiveness of Medium
Enterprises.
Medium enterprises face significant challenges in quality assurance, product certification,
and regulatory compliance, particularly for export markets. Limited access to affordable,
sector-specific testing facilities forces them to rely on distant or private testing centres,
increasing operational costs, certification delays, and barriers to global market entry. The
absence of cluster-based testing infrastructure further hampers competitiveness, slows
innovation, and limits adherence to international quality standards.
Currently, the MSE-CDP focuses on micro and small enterprises only, offering shared
facilities and infrastructure to enhance their productivity and competitiveness. Medium
enterprises often operate on a larger production scale, making it imperative for them to
maintain stringent quality standards.
The establishment of testing facilities under the MSE-CDP also aligns with the government’s
broader objectives of promoting Make in India and boosting exports. Medium enterprises,
being the bridge between small-scale industries and large corporations, hold the potential
to drive innovation and contribute to a robust supply chain. Including them in the MSE-CDP
ensures a more inclusive approach, addressing a significant gap in the policy landscape
while maximizing the impact of existing resources.
Global Best Practices
Japan’s JIS Standards & Testing Network ensures product quality through
government-backed certification. It helps industries meet global standards,
boosting market acceptance
Singapore’s Enterprise SG Testing Hubs provide sector-specific labs for MSME
compliance. They accelerate product certification, enhancing global trade
readiness..
Recommendations
A. Expand MSE-CDP to Include Medium Enterprises
Modify MSE-CDP guidelines to extend support to medium enterprises, ensuring inclusivity.
Medium enterprises, being the bridge between small-scale industries and large corporations,
hold the potential to drive innovation and contribute to a robust supply chain. Including
them in the MSE-CDP ensures a more inclusive approach, addressing a significant gap in
the policy landscape while maximizing the impact of existing resources.
Recommendations 83
Designing a Policy for Medium Enterprises B. Establish Sector-Specific Cluster-Based Testing Facilities
To ensure the effective and sustainable operation of these testing facilities, the following
operational framework should be integrated into the MSE-CDP. These facilities will provide
essential services such as quality testing, product certification, and regulatory compliance,
all of which are vital for the growth and competitiveness of medium enterprises.
Design the testing facilities based on the specific requirements of the identified sectors. For
instance, testing facilities in a textile cluster will focus on fabric durability, dyeing processes,
and quality standards, while those in a pharmaceutical cluster will provide support for drug
formulations, stability testing, and compliance with regulatory standards. Utilize MSE-CDP’s
existing infrastructure for cluster development to create these testing centers, reducing
implementation time and ensuring synergies with ongoing cluster-related activities.
C. Identification of predominant sectors in each State which has potential for
high medium enterprise concentration.
We can begin by identifying the predominant sectors in each state and then investigate
to determine the concentration of Medium Enterprises within those sectors. Focus on
identifying the strongest sectors in each state that have the potential for high medium
enterprise concentration. For example, Maharashtra leads in textiles, pharmaceuticals,
chemicals, and automobile engineering, while Gujarat excels in textiles, dairy products,
and auto components.
Table 6.1: Sector-Specific Concentration of MSMEs in Six States
States
Sectors
1 2 3 4 5 6
Maharashtra Textiles Pharma Chemicals AutomobileEngineering Leather
UP
Food
Products
Hosiery and
Garments
Metal
Products
Cotton
textiles
Ceramics
Wool, Silk,
Synthetic
Fibre
Tamil Nadu Coir Automobile
Food
Processing
Textiles Leather
Precision
Engineering
Gujarat Textile
Dairy
Products
Chemicals
Agro-based
Industries
Auto
Component
Engineering
West
Bengal
Jute Leather Textile Handicraft
Food
Processing
Printing and
Publishing
Telangana
Pharma
& Life
Science
Defense
and
Precision
Electronics
Food
Products
IT Services -
Establish cluster wise testing facilities as a core component of MSE-CDP.
These facilities will provide essential services such as quality testing, product
certification, and regulatory compliance, all of which are vital for the growth and
competitiveness of medium enterprises.
Recommendations84
Designing a Policy for Medium Enterprises Develop sector-focused testing labs offering quality certification, regulatory
compliance, and R&D support.
Design the testing facilities based on the specific requirements of the identified
sectors. For instance, testing facilities in a textile cluster will focus on fabric
durability, dyeing processes, and quality standards, while those in a pharmaceutical
cluster will provide support for drug formulations, stability testing, and compliance
with regulatory standards.
Utilize MSE-CDP’s existing infrastructure for cluster development to create these
testing centers, reducing implementation time and ensuring synergies with
ongoing cluster-related activities.
Good Practice: CIPET Chennai
The CIPET (Central Institute of Petrochemicals Engineering & Technology) in Chennai
provides a range of testing services primarily focused on the plastics and petrochemicals
sectors. The Institute has established several best practices for cluster testing facilities,
which can be beneficial for Medium Enterprises.
A. Adopt Public-Private Partnerships (PPPs) for Co-Funding
The co-financing model leverages both government funding and industry contributions
to drive innovation. By sharing financial responsibility, it ensures sustainable investment
in advanced manufacturing and R&D. This approach encourages industries to actively
participate in technology adoption and upskilling. It also enhances accountability, ensuring
efficient utilization of resources for long-term growth.
Engaging the private sector and industry bodies strengthens infrastructure, technology,
and expertise. Collaboration with businesses accelerates the deployment of cutting-
Recommendations 85
Designing a Policy for Medium Enterprises edge solutions in manufacturing. Industry partnerships facilitate knowledge-sharing, skill
development, and access to global best practices. This synergy fosters a competitive
ecosystem, driving sustained industrial advancement.
B. Enhance Certification & Compliance Support
Offer subsidized testing services for MSMEs, particularly export-oriented
enterprises. It is also suggested to Implement fast-track certification with digital
tracking and automated compliance tools.
Provide tailored equipment for each cluster based on the industries present. For
example, textile testing labs should be equipped with fabric durability testers,
and pharmaceutical clusters may require stability chambers for drug testing.
Ensure that testing facilities are equipped with digital tools for easier certification
processes, including real-time tracking, reporting, and automation to reduce
manual work and improve efficiency.
C. Capacity Building and Skill Development
Create training modules to educate medium enterprises on how to effectively use these
testing facilities. This should include how to prepare products for testing, understand
certification requirements, and interpret results. Train the staff responsible for operating
the testing facilities, including laboratory technicians and quality assurance officers. This
will help maintain high standards of testing and customer service.
Expected Impact
Faster certification processes will minimize delays, ensuring quicker market entry
for exporters. This will strengthen export readiness by helping industries meet
global regulatory requirements efficiently. Streamlined approvals will enhance
India’s reputation as a reliable manufacturing hub.
Lower operational costs will make local testing more accessible to industries.
Reducing dependence on distant facilities will cut logistics expenses and speed
up compliance. This will encourage more businesses to adopt quality certification
without financial strain.
Stronger global competitiveness will come from improved adherence to
international quality standards. Enhanced certification frameworks will build trust
in Indian products worldwide. This will open new market opportunities and drive
industrial growth.
6.5 CUSTOMIZED SKILL DEVELOPMENT FOR MEDIUM
ENTERPRISES
Medium enterprises in India play a critical role in driving innovation and economic growth,
especially in sectors like manufacturing, IT, and services. However, the fast-evolving landscape
and technological demands require these enterprises to continually upskill their workforce
to maintain competitiveness. While the Indian government has launched initiatives like the
Skill India Mission and the Entrepreneurship & Skill Development Programme (ESDP) to
support skill development, there are several challenges that limit their effectiveness for
medium enterprises.
Recommendations86
Designing a Policy for Medium Enterprises The availability of skill development courses tailored specifically for medium enterprises
is limited, contributing to a significant mismatch between the skills required and the
courses offered. There is also limited availability of subsidized and customized programs
specifically designed for Medium Enterprises.
The absence of structured online learning opportunities and effective coordination between
central, state, and local agencies adds to the complexity, resulting in delayed and inefficient
implementation of skill development initiatives. For medium enterprises to succeed in
a globalized market, there is a clear need for a tailored, data-driven approach to skill
development that can align with industry needs and ensure a competitive, skilled workforce.
Global Best Practices
Canada’s Canada Job Grant (CJG): Offers tailored provincial-level training
programs aligned with industry needs, providing co-funding for skills
development.
Singapore’s Skills Future Initiative: Provides a comprehensive framework
that categorizes courses by career stage (early-career, mid-career, employer-
focused), ensuring continuous skill development.
Turkey’s e-Academy: An online training platform providing subsidized
courses, enhancing accessibility for SMEs across regions.
Australia’s Industry Skills Fund (ISF): A co-contribution model for training,
shared between government, industry, and employers, facilitating skills
development.
Recommendations
A. Skill Mapping for Medium Enterprises in India
Recommendations 87
Designing a Policy for Medium Enterprises Enhancing the MSME Sampark Portal with real-time data will help medium enterprises
address skill gaps efficiently. By providing live updates on industry-specific training needs,
it will enable businesses to upskill their workforce strategically. This will ensure a stronger
alignment between industry demands and employee capabilities, improving productivity.
Offering detailed insights into training providers and relevant courses will enhance
accessibility for medium enterprises. With a streamlined platform, businesses can identify
and enroll in specialized programs with ease. Greater transparency will drive higher
participation in skill development, strengthening competitiveness in global markets
B. Expansion of the ESDP Scheme
The expansion of the Entrepreneurship and Skill Development Programme (ESDP)
Scheme can play a crucial role in strengthening the capabilities of medium enterprises by
addressing their specific skill development needs. Currently, the scheme comprises three
key components: the Entrepreneurship cum Skill Development Programme (E-SDP), a six-
week intensive training program; the One Week Advanced ESDP programmes that provide
specialized knowledge in key industry areas; and the One Week Advanced Management
Development Programmes (MDP), which focus on managerial and leadership skills. To make
the ESDP scheme more impactful for medium enterprises, its scope can be broadened to
incorporate targeted skill development initiatives that align with emerging industrial trends
and technological advancements.
The proposed expansion should focus on customized training modules for medium
enterprises, addressing their unique challenges in adopting Industry 4.0, automation, and
digital manufacturing. The scheme should integrate sector-specific upskilling programs
covering areas such as smart manufacturing, supply chain digitization, quality control, and
export readiness. Additionally, partnerships with technology hubs, research institutions,
and industry associations can be established to offer hands-on training and real-world
exposure. A dedicated online learning platform can be introduced to provide flexible, on-
demand training solutions for enterprises looking to enhance workforce capabilities without
disrupting daily operations. By expanding the ESDP scheme in this direction, medium
enterprises will be better equipped to compete in both domestic and global markets,
fostering innovation and sustainable growth. The proposed expansion of the ESDP scheme
should include the following:
Recommendations88
Designing a Policy for Medium Enterprises emehcSPDSEfonoisnapxE
•
•
Identify regions and clusters with a high concentration of medium enterprises and
collaborate with educational institutions (e.g., IITs, NITs) and Technology
Centers(TCs) to expand the reach of trainingprograms.
Identifying the targeted i ndustries to provide customized skilldevelopment courses
(as identifi ed under Australia’s ISF) wi llbe helpful.
Regions/Clusters/
Industries based
training
• Ensuring tec hnology-linkedskilldevelopment is crucial so that enterprises
are not leftwith a shortage of skilledworkers when adopting new
technologies.
• Provide cluster-based training facilities, offer advanced courses, and
deliversector-specifictraining aligned with emerging industry trends
Technology-linked skill
development
• The identifiedskillneeds in specificregions and cluster-based training
requirements should be supplemented with advanced courses, andsector-
specifictraining should bedelivered in a way that is aligned with emerging
industry trends.
Training aligned with
emerging industry
trends
•
•
Online learning provides affordable and flexible training options that
minimize disruption to operations.
The foundational entrepreneurship skills can be developed through
e-courses, helping to broaden the program'saccessibility and impact
Online Training
Program
Identify Regions/Clusters
C. Curriculum Development and Customisation
Develop and diversify curricula for sector-specific and advanced skill courses, including
technology adoption, product design, and marketing. CJG of Canada maintains a provincial
stream for each province and territory, which should be followed in India because different
states have different sectors of medium enterprises, requiring different skill sets.
Since Medium Enterprises are more export-oriented, design export-oriented, sustainable
products and lifecycle-specific programs to address different growth stages of medium
enterprises.
Like Singapore’s SkillsFuture initiative, categorize courses based on target audiences,
such as individuals (early-career, mid-career), students, and employers, offering a wide
range of relevant courses. For Medium Enterprises, categorizing courses based on target
audiences is essential due to their larger and more diverse workforce, which demands
specialized training at different career stages. Unlike MSEs, which have limited personnel
and simpler organizational structures, Medium Enterprises require tailored skill development
to enhance role-specific competencies and leadership development across various levels
of the organization.
Curricula for Sector-
Specific
Categorize courses based
on target audiences
Curricula for Online
Training Program
•Technology Adoption,
Product Design, and
Marketing
•Best Practice: CJG of
Canada
•Categorize courses
based on target
audiences, such as
individuals (early- career,
mid-career), students,
and employers
•Best Practice:
Singapore's Skills
Future initiative
•Lecture videos,
interactive course
content,
entrepreneurship
e-books
•Best Practice: Turkey's
e-Academy program
Recommendations 89
Designing a Policy for Medium Enterprises D. Introduce Subsidized & Incentive-Based Training Programs
Subsidized training programs can still be beneficial for medium enterprises, although they
may not be as critical as for MSEs. Medium enterprises often have more financial resources,
but subsidies can encourage them to invest more heavily in continuous skill development
for their workforce, especially in specialized or advanced areas. Subsidies can also make
training more accessible for employees at all levels, fostering a culture of upskilling and
ensuring competitiveness in the market.
01
02
03
Subsidized Online Training
Programmes for
Marginalized Group
Absentee Payroll for
Employers Who Sponsor
Employee Training
Skill Credit
Introduce training vouchers, skill credit (as provided by SkillsFuture in Singapore),
and incentives and grants (similar to CJG of Canada) to increase participation in skill development initiatives. Options such as providing grants, course fee funding, and absentee payroll for employers who sponsor employee training on a co-contribution basis (co-contribution model of ISF Australia, Singapore’s SkillsFuture, Canada’s CJG) between
center, state, and industry can be explored.
Additionally, online training programs can be offered at a subsidized rate, and free of cost
for marginalized groups (as provided in Turkey’s e-Academy).
Expected Impact
Enhanced workforce capabilities: Addressing skill gaps will improve efficiency,
productivity, and innovation within medium enterprises.
Increased global competitiveness: Provides essential skills for export-readiness
and compliance with international standards.
Improved adoption of technology: Promotes digital skills and advanced
manufacturing capabilities, leading to a more modernized workforce.
Wider participation in skill development: Financial incentives and subsidies
will make training more accessible and foster a culture of upskilling across
organizations.
Recommendations90
Designing a Policy for Medium Enterprises 6.6 NEED FOR A CENTRALIZED DIGITAL PORTAL FOR
MEDIUM ENTERPRISES
Medium Enterprises in India face significant barriers in accessing timely and relevant
information related to government programs, compliance requirements, and financial
assistance. Currently, there is no centralized platform that consolidates this vital information,
leading to confusion, inefficiency, and missed opportunities. As a result, these enterprises
often struggle to navigate the complex ecosystem of resources available to them. They
may face delays in accessing government schemes, compliance requirements, and financial
support, impeding their growth and competitiveness.
A lack of a streamlined system also complicates application processes and prevents medium
enterprises from making full use of available resources, further limiting their potential to
expand, innovate, and become more export ready.
By creating a centralized portal that integrates essential information on scheme availability,
compliance guidelines, and financial support, the proposed platform aims to empower
Medium Enterprises with the knowledge and tools they need to navigate the complex
ecosystem. Features such as AI-enabled assistance, real-time updates, and a user- friendly
interface will enhance accessibility and facilitate a smoother application process.
Medium Enterprises will benefit from accessing information, applications, and support
schemes tailored specifically for them through a single, centralized platform embedded
within a system they already recognize and use.
Global Best Practices
Singapore’s Business Grants Portal: The portal integrates government grant
opportunities, compliance requirements, and financial assistance in a unified
platform. It also features AI-powered tools that help businesses identify
relevant grants and track application statuses.
Australia’s Business.gov.au: This portal serves as a one-stop-shop for
Australian businesses, offering resources on regulations, funding, and advice.
It also integrates real-time compliance updates and application status
tracking.
Recommendations
A. Creation of a Centralized Sub-Portal for Medium Enterprises
It is recommended related to creation of a centralized, user-friendly, and credible platform
as a sub-portal of the Udyam Portal specifically designed for Medium Enterprises,
consolidating key information across multiple areas. Such a platform is necessary to provide
streamlined access to vital resources, including details on available schemes, compliance
requirements, financial assistance options, regulatory updates, and market opportunities.
The MSME portal should serve all enterprises, with a distinct link catering to the unique
needs of Medium Enterprises. By adding it to the Udyam’s database infrastructure, the
sub-portal can efficiently access existing data, minimizing redundancy and improving ease
of access for enterprises. Creating a sub-portal ensures smoother interoperability with
Recommendations 91
Designing a Policy for Medium Enterprises Udyam’s database, avoiding technical complexities and offering a unified interface for
stakeholders.
The centralized platform should:
Be regularly updated
with real-time
information.
Provide easy access
to all central, state,
and ministry-level
schemes.
GPT assistance with
Generative AI for
eligible schemes.
Offer tools for MEs
to track applications
and compliance
status.
Key Features:
Single Source of Information: A unified platform offering detailed information on
government schemes, financial options, and compliance guidelines for Medium
Enterprises.
AI-enabled Assistance: A Generative AI chatbot will be integrated into the portal
to provide personalized assistance, scheme filtering assistance and answer queries
in real time.
Real-time Updates: The portal will be updated regularly with the application
status, latest schemes, amendments, and industry insights to ensure businesses
are equipped with current information.
User-Friendly Interface: A simplified, intuitive interface that guides Medium
Enterprises through various processes, including scheme applications, compliance
tracking, and market analysis
Table 6.2: The comparison between proposed portal and existing portal of
MSMEs are given in below table:
Particulars
Proposed
Portal
NSWS
My
Scheme
Udyam
Registration
Portal
Schemes availability (Central, State &
Other Ministry)
Yes Yes YesYes
Online forms for direct filing and
applying of schemes
Yes Partially NoNo
e-filing–DSC or Aadhar OTPYes Yes No Yes
Pre-filled Tax ReturnsYes No NoNo
Online Tracking MechanismYes Yes No No
Approving authority accessYes Yes No Yes
Helpline 24x7Yes Yes No No
Artificial Intelligence Enabled Yes No NoNo
Chat-BotYes No NoNo
Mobile ApplicationYes Yes No No
Connected to Udyam Server for pre-
filled data
Yes No NoYes
Recommendations92
Designing a Policy for Medium Enterprises B. Proposed Key Modules of the Portal
B.1. Basic Information Module:
Scheme Information: Detailed information on central and state government
schemes, including eligibility criteria and benefits.
Compliance Requirements: Pre-filled data on Income Tax and GST compliance,
along with guidance on other regulatory requirements.
Financial Assistance: Information on loans, grants, and subsidies from various
government and private institutions.
Generative AI Model: Large Language Model (LLM) for enterprises to probe and
seek guidance on available schemes and their eligibility.
B.2. Process Module:
Regulatory Compliance Tracking: Pre-filled forms for regulatory compliance
(licenses, clearances) and real-time notifications for filing deadlines.
Automated Compliance Updates: Regular updates on changes in tax laws,
environmental regulations, and labor laws.
Integrated Document Management: Digital repository for managing compliance-
related documents such as tax returns, certifications, and licenses.
Compliance Support via AI-Chatbot: Real-time AI support for navigating
compliance processes and sector-specific regulations.
B.3. Market Research Module:
Identify Growth Opportunities: Market analysis and competitor insights using
GenAI to help businesses identify growth areas.
Access Financial Resources: Information on financing options such as bank loans,
venture capital, and government grants.
Explore Export Potential: Guidance on entering new markets, including sector-
specific regulations and logistics.
C. Technological Integration
AI-Driven Personalization: The portal will use AI algorithms to analyse the business profile
of each ME and provide tailored scheme recommendations.
Chatbot for Real-Time Assistance: An AI chatbot will offer step-by-step guidance on
navigating compliance procedures, applying for schemes, and availing financial support.
Mobile App Integration: The platform will include a mobile application to provide Medium
Enterprises with seamless access to information and real-time notifications.
Expected Impact
Improved Access to Information: A single, centralized source for all relevant data
will help Medium Enterprises easily access government schemes, financial support,
compliance guidelines, and market opportunities.
Recommendations 93
Designing a Policy for Medium Enterprises Increased Participation in Government Programs: Simplified application processes
and clear guidelines will encourage more Medium Enterprises to participate in
government schemes and utilize available resources.
Enhanced Export-Readiness: By providing access to market insights and export
resources, the portal will support Medium Enterprises in expanding to international
markets.
Reduced Compliance Burden: Pre-filled compliance forms and automated
tracking will simplify the regulatory process and ensure timely adherence to legal
obligations.
Efficiency in Operations: Streamlining the process for applying to schemes and
tracking compliance will save time and reduce the operational burden for Medium
Enterprises.
Fostering Innovation and Growth: Providing access to resources like R&D hubs,
financial support, and export tools will empower Medium Enterprises to innovate
and grow in a competitive global market.
Recommendations94
Designing a Policy for Medium Enterprises Annexures 95
ANNEXURES ANNEXURE I
MOMSME SCHEMES
S.No. Schemes Guidelines
1 MSME Champions
https://dcmsme.gov.in/CLCS_TUS_Scheme/MSME%20I
nnovative%20Scheme%20Guidelines.pdf
https://www.dcmsme.gov.in/schemes/clcs-tus/LEAN-
Operational-Guidlelines.pdf
https://zed.msme.gov.in/uploads/Subsidy_Women.pdf
2
Raising and Accelerating
MSME Performance
(RAMP)
https://www.nimsme.org/news-article/raising- accelerating-
msme-performance-ramp-scheme
3
International Cooperation
(IC) Scheme
https://ic.msme.gov.in/IC_APP/WriteReadData/GuideLi
ne/Final%20and%20approved%20IC%20Scheme%20Gu
idelines-2021.pdf
4
Assistance to Training
Institutions (ATI)
Scheme
https://msme.gov.in/sites/default/files/PDF%20REVISE
D%20ATI%20GUIDELINES%20English%201.9.2016%20%
281%29.pdf
5
Technology Centres
Scheme
https://dcmsme.gov.in/CLCS_TUS_Scheme/new-
Technology-Centers/Scheme_Guidelines.aspx#:~:text=by%20
these %20Centres-,Guidelines,the%20vacant%20built%20
up%20spaces.
6
Marketing Assistance
Scheme
https://msme.gov.in/sites/default/files/MASCHEME-
New-18112014.pdf
7
Promotion of MSME in
NER and SIKKIM
https://www.dcmsme.gov.in/schemes/Revised_Guideli nes_
on_31May2022.pdf
8
Self-Reliant India (SRI)
Fund
https://dcmsme.gov.in/Final%20SRI%20Operating%20
Guidelines%20%20approved%20by%20Minister%20%2
017%2008%202021.pdf
9
Credit Guarantee
Scheme for Micro
& Small Enterprises
(CGTMSE)
https://www.cgtmse.in/Default/ViewFile/?id=1673390
907997_CGTMSE%20-%20Scheme%20Document%20
CGS%20I_updated%20 as%20on%20Jan%2010,%202023.
pdf&path=Page
10
Procurement and
Marketing Support
(PMS) Scheme
https://dcmsme.gov.in/OM%20&%20PMS%20Scheme %20
Guidelines.pdf
96Annexures S.No. Schemes Guidelines
11
Prime Minister’s
Employment Generation
Programme (PMEGP)
https://www.kviconline.gov.in/pmegp/pmegpweb/doc s/pdf/
PMEGPscheme.pdf
12
Entrepreneurship
Skill Development
Programme (ESDP)
Scheme
https://msmedi.dcmsme.gov.in/Manuals/Approved%2
0ESDP%20Guidelines_new.pdf
13
A Scheme for Promotion
of Innovation, Rural
Industries and
Entrepreneurship
(ASPIRE)
https://aspire.msme.gov.in/WriteReadData/Document File/
ASPIRE_NEW.pdf
14
Scheme of fund
for regeneration of
traditional industries
(SFURTI)
https://sfurti.msme.gov.in/WriteReadData/Circular/SF URTI_
NEW.pdf
15
Micro & Small
Enterprises Cluster
Development
Programme (MSE-CDP)
Scheme
https://www.dcmsme.gov.in/schemes/New- Guidelines.pdf
16
National SC-ST Hub
Scheme
https://www.scsthub.in/sites/default/files/NSSH_Guid
elines_o.pdf
17 Coir Vikas Yojana
https://msme.gov.in/sites/default/files/Revised_Operation_
Guidelines_of_CVY.pdf
18
Khadi Gramodyog Vikas
Yojana
https://msme.gov.in/sites/default/files/
RevisedoperationalGuidelinesofGVY.pdf
19
PM Vishwakarma–
Enabling Artisans and
Craftspeople to Build
Enterprises
https://jrgbank.in/tenders/PM%20VISHWAKARMA-
SCHEME%20GUIDELINES.pdf
Annexures 97
Designing a Policy for Medium Enterprises ANNEXURE II
STATE SCHEMES:
Telangana
S. NoScheme NameGuidelines
1
T-IDEA (Telangana State Industrial
Development and Entrepreneur
Advancement) Incentive Scheme,
2014
https://industries.telangana.gov.in/Librar
y/2015INDS_MS77.pdf
2
T –PRIDE(Telangana State
Programme for Rapid Incubation
of Dalit Entrepreneurs Incentive
Scheme)
https://industries.telangana.gov.in/Librar
y/2015INDS_MS78.pdf
3
Telangana State Industrial Project
Approval and Self-Certification
System (TS-iPASS)
https://ipass.telangana.gov.in/viewpdf.as
px?enc=olSBrXl6rl1gh1Zl/gAtCIkxOo/1mE
K3ZEGdedYO3dbgHlf+VSWFL6LVs+mm8R
g6nTRHe7ixLA1Uzvt6vtEOd7yNOlXTsEGt9
qK4Uv6FedkHCt/kkWVR29+JYNYHIZscBFb
Jdq58wnda+4yAdpgLl0kO7S3ylF5rB2c2iH
YP+7tg9EjvNHByfVEvNylEWGg+UoSdX02 uK/
fnSHrc+5C7QINOmv0Fbs9y8Mef1uZRoL8=
4
Scheme for economic development
of ST entrepreneurs
https://startup.telangana.gov.in/wp-content/
uploads/2021/06/cmstei_schem e_details.pdf
5 Self Employment Scheme
https://industries.telangana.gov.in/
selfemployment.aspx
6 Bank linked schemeshttps://tsmfc.in/schemeinfo.php?id=5
7 Suvidha Incubation
https://www.msmekipathshala.com/web
kype/assets/pdf/SCHEMES%20OF%20DIF
FERENT%20STATE%20GOVERNMENTS%2
0/SCHEMES%20DETAIL%20OF%20
TELANGANA%20STATE.pdf
8 T-Fund (Telangana Innovation Fund)
https://www.startupindia.gov.in/content/ dam/
invest-india/Templates/public/state_startup_pol
icies/Telangana-Innovation-Policy-Issued-GO.
Annexures98
Designing a Policy for Medium Enterprises S. NoScheme NameGuidelines
9
The Telangana Handloom Weavers
Thrift Fund Saving and Security
Scheme (THWTFSSS) “Nethannaku
Cheyutha”.
https://www.msmekipathshala.com/web
kype/assets/pdf/SCHEMES%20OF%20DIF
FERENT%20STATE%20GOVERNMENTS%2
0/SCHEMES%20DETAIL%20OF%20
TELANGANA%20STATE.pdf
10
Common fiscal incentives for all
companies
https://www.msmekipathshala.com/web
kype/assets/pdf/SCHEMES%20OF%20DIF
FERENT%20STATE%20GOVERNMENTS%2
0/SCHEMES%20DETAIL%20OF%20
TELANGANA%20STATE.pdf
Maharashtra
S.No Scheme NameGuidelines
1
Industrial Promotion
Subsidy (IPS)
https://maitri.mahaonline.gov.in/PDF/I ndustrial%20Promotion%20Subsidy%2 0(IPS)%20under%20Industrial%20Policy%2-%20modification%20under%20Goods%20and%20Services%20Tax%20(GST)% 20regime.pdf
2
Interest Subsidy
Incentive
https://maitri.mahaonline.gov.in/PDF/Package%20Scheme%20of%20Incentiv es%20-%202019.pdf
3
Exemption from
Electricity Duty
https://maitri.mahaonline.gov.in/PDF/Package%20Scheme%20of%20Incentiv es%20-%202019.pdf
4
Waiver of Stamp
Duty
https://maitri.mahaonline.gov.in/PDF/ Package%20Scheme%20of%20Incentives%20-%202019.pdf
5 Power tariff Subsidy
https://maitri.mahaonline.gov.in/PDF/Package%20Scheme%20of%20Incentiv es%20-%202019.pdf
6
Additional Incentives
for Strengthening
MSMEs
http://di.maharashtra.gov.in/_layouts/ 15/doistaticsite/English/investors_guide_psi.html
West Bengal
S.No Scheme NameGuidelines
1
Bhabisyat Credit
Card Scheme
https://wbmsme.gov.in/sites/default/fi les/cms/circularpdf/bhabishyat_credit_card.pdf
2
Karma Sathi
Prakalpa
https://wbxpress.com/files/2021/01/1825-MSMET.pdf
3 Banglashree Scheme
https://www.wbsidcl.in/assets/content s/incentive_scheme_4420_msmet-09112023.pdf
4
Interest Subsidy on
Term Loan (IS)
https://msme.icai.org/wp-content/uploads/2022/12/West- Bengal-1.pdf
Annexures 99
Designing a Policy for Medium Enterprises S.No Scheme NameGuidelines
5
Textile Incentive
Scheme
https://msme.icai.org/wp-content/uploads/2022/12/West-
Bengal-1.pdf
6 Finance Clinic https://wbmsmet.gov.in/ki_ies_finclncs
7
Incentive Scheme
2020 for approved
Industrial Park
https://wbmsme.gov.in/sites/all/themes/anonymous/pdf/
SAIP%202020_Notifi cation.pdf
8
Rural
Entrepreneurship
Hub
https://wbmsme.gov.in/sites/all/themes/anonymous/pdf/reh_for_
website.pdf
9 Silpa Disha
https://msme.icai.org/wp-content/uploads/2022/12/West-
Bengal-1.pdf
10 Silpa Sathi https://silpasathi.wb.gov.in/msme_Incentives
11
State Capital
Investment Subsidy
https://wbmsme.gov.in/sites/all/theme s/anonymous/pdf/
SAR_642_MS MA T_Department_Revenuey_31.07.2020_pdf
Uttar Pradesh
S.No Scheme Name Guidelines
1 ODOP Scheme https://abhinavpahal.nic.in/uploads/0d7X2fcBcYODOP.pdf
2
Common Facility
Centre (CFC)
Scheme
https://odopup.in/site/writereaddata/siteContent/201904171130237521cfc_s cheme.pdf
3
Marketing
Development
Assistance Scheme
https://epbupindia.in/Home/MDA
4
Skill Development
and Toolkit
Distribution Scheme
https://odopup.in/site/writereaddata/s iteContent/201905081050489239odop-sceam.pdf
5
Uttar Pradesh Chief
Minister Youth
Self Employment
Scheme
https://up.nic.in/news/launch-of-mysy- mukhyamantri-yuva-swarojgar-yojana- portal-for-directorate-of-industries- and-enterprise-promotion-government-of-uttar-pradesh/
6
Scheme for
Promoting
Establishment of
Private Industrial
Parks 2017
https://invest.up.gov.in/wp-content/themes/investup/pdf/Private- Industrial-Park_Scheme.pdf
7 Land Incentives
https://msme.icai.org/wp-content/uploads/2021/06/UP-MSME- Policy.pdf
8
Land Use
Conversion
https://msme.icai.org/wp-content/uploads/2021/06/UP-MSME- Policy.pdf
Annexures100
Designing a Policy for Medium Enterprises S.No Scheme Name Guidelines
9
Special Purpose
Vehicles (SPV)
Formation
https://msme.icai.org/wp-content/uploads/2021/06/UP-MSME-
Policy.pdf
10
Stamp Duty
Exemption
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
11
Employee Provident
Fund (EPF)
Reimbursement
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
12
Capital Interest
subsidy
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
13
Infrastructure
interest subsidy
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
14
Industrial quality
development
subsidy
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
15
Land conversion
waiver
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
16
Electricity charges
reimbursement
https://invest.up.gov.in/uttar-pradesh- micro-small-medium-
enterprises-promotion-policy-2022/
17
A Small, Medium
Enterprise Venture
Capital Fund
(SMEVCF)
https://invest.up.gov.in/wp-content/themes/investup/pdf/
Medium-Small-Micro-Enterprise-brochure.pdf
18
Vishwakarma Shram
Samman Yojna
https://upid.ac.in/vishwakarma-shram-samman-yojana-vssy/
Gujarat
S.No Scheme/Policy NameGuidelines
1
Gujarat Industrial Policy
2020
https://ic.gujarat.gov.in/documents/co mmondoc/2020/Industrial-Policy2020.pdf
2
Gujarat MSME Export
Promotion Scheme
https://slbcgujarat.in/wp-content/uploads/2021/04/Compendiu m-of-schemes-and-guidelines-for-MSME-sector-Final.pdf
3
Assistance of Capital
Investment Subsidy
https://slbcgujarat.in/wp-content/uploads/2021/04/Compendiu m-of-schemes-and-guidelines-for-MSME-sector-Final.pdf
4
Assistance for Interest
Subsidy forManufacturing &
Service Sector
https://slbcgujarat.in/wp-content/uploads/2021/04/Compendiu m-of-schemes-and-guidelines-for-MSME-sector-Final.pdf
Annexures 101
Designing a Policy for Medium Enterprises S.No Scheme/Policy NameGuidelines
5
Assistance for Quality
Certification (ERP
Assistance)
https://slbcgujarat.in/wp-content/uploads/2021/04/
Compendiu m-of-schemes-and-guidelines-for-MSME-
sector-Final.pdf
6 Net SGSTReimbursement
https://msme.icai.org/wp-content/uploads/2022/12/
Gujarat.pdf
7
Assistance for Quality
Certification (Quality
certification)
https://msme.icai.org/wp-content/uploads/2022/12/
Gujarat.pdf
8
Financial Support to MSMEs
in ZED Certification
https://ic.gujarat.gov.in/documents/co mmondoc/2023/
Draft%20ZED%20Guideline.pdf
9 EPFReimbursement
https://msme.icai.org/wp-content/uploads/2022/12/
Gujarat.pdf
10
Assistance in
implementation
ofInformation and
Communication Technology
https://ic.gujarat.gov.in/documents/commondoc/2023/
Draft%20ICT%20Guid eline.pdf
11
Assistance for Technology
Acquisition
https://ic.gujarat.gov.in/assistance-for-technology-
acquisition.aspx
12
Assistance for Patent
Registration
https://msme.icai.org/wp-content/uploads/2022/12/
Gujarat.pdf
13
Assistance for saving in
consumption ofEnergy and
Water
https://msme.icai.org/wp-content/uploads/2022/12/
Gujarat.pdf
14
Rehabilitation ofSick
Enterprises
https://imd.gujarat.gov.in/Document/2016-7-29_650.pdf
15 power connection charges
https://msme.icai.org/wp-content/uploads/2022/12/
Gujarat.pdf
16 reimbursement of rent
17
Assistance for raising
Capital through SME
Exchange
https://ic.gujarat.gov.in/documents/pagecontent/
Sme%20Final%20Guideline_ 24-10-2017-gen.pdf
Tamil Nadu
S.No Scheme NameGuidelines
1
Grant of Quality
CertificationReimbursement of
Charges (Qcert)
https://www.msmetamilnadu.tn.gov.in/pdf/msme_e_35_2019.pdf
2
Promotion of Energy Audit
and Conservation of Energy
(PEACE)
https://msmeonline.tn.gov.in/incentive s/pdf/peace_ea_cye.pdf
Annexures102
Designing a Policy for Medium Enterprises S.No Scheme NameGuidelines
3
New Entrepreneur Cum
Enterprise Development
Scheme (NEEDS)
https://www.dictiruchi.in/needs.pdf
4
Unemployed Youth
Employment Generation
Programme (UYEGP)
https://msmeonline.tn.gov.in/uyegp/p df/uyegp_
go_66.pdf
5
Annal Ambedkar Business
Champions Scheme (AABCS)
https://msmeonline.tn.gov.in/uyegp/p df/uyegp_
go_66.pdf
6
MSME Skill Training and
EmploymentScheme
https://msmeonline.tn.gov.in/uyegp/pdf/uyegp_
go_66.pdf
7
Subsidy for Fund Raising from
SMEExchange
https://www.msmeonline.tn.gov.in/incentives/html_
cye_sme.php
8
Incentive for Patent
Registration/ Trade
Mark Registration /
GeographicalIndications
https://www.msmeonline.tn.gov.in/inc entives/html_
cye_ipr.php
9
Reimbursement of Stamp Duty
&Registration Charges
https://www.msmeonline.tn.gov.in/incentives/html_
cye_stamp.php
10 Pay Roll Subsidy
https://www.msmeonline.tn.gov.in/incentives/html_
cye_pay.php
11 Power Subsidy-LTPT
https://www.msmetamilnadu.tn.gov.in/new-schemes.
php
12 Generator Subsidy
https://www.msmetamilnadu.tn.gov.in/new-schemes.
php
14 Subsidy for Fund Raising
https://www.msmetamilnadu.tn.gov.in/new-schemes.
php
15
BACK–ENDED INTEREST
SUBSIDY
https://www.msmetamilnadu.tn.gov.in/beis.
php#:~:text=Back%2Dended%20i nterest%20
subsidy%20of,Fund%20Trus t%20Scheme%20
(CGTMSE).
Annexures103
Designing a Policy for Medium Enterprises Designing a
POLICY FOR MEDIUM
ENTERPRISES
Designing a Policy for Medium Enterprises