MSMEs can play a crucial role in making India a global manufacturing hub

Authored by Dr Sanjay Bhardwaj, Associate Partner, Government, Infrastructure and Development sector Advisory Services

While better access to funding, upskilling and use of modern technology can help MSMEs, there is a need to identify to root causes of the problems across sectors to fill the necessary gaps. Only then MSMEs can take a lead at a global level.

India aspires to rank among the world’s leading producers and manufacturers of raw materials and  goods, respectively. The uphill yet achievable task depends a lot on the country’s small businesses— called Micro, Small, and Medium Enterprises (MSMEs). These businesses are offering remarkable  innovation, generating jobs, and assisting in exporting Indian goods to foreign nations. But more is  needed to help India achieve its goal. 

The 2024–25 annual report from the Ministry of Micro, Small, and Medium Enterprises (MSME), Government of India, highlights a strong performance by the sector. The MSME sector increased its contribution to India’s Gross Value Added (GVA) from 27.3% in 2020–21 to nearly 30.1% in 2022–23. This growth reflects the sector’s rising importance in the production of goods and services across the economy.

In the  year 2023–2024, goods made by MSMEs made up 45.73% of all the goods India sold to other  countries. It indicates the increasing role MSMEs play in India’s bilateral trade relations with the rest  of the world. Moreover, they are employment generators too. As per the government’s Udyam  Registration Portal, MSMEs employ more than 25 crore people. Because of this large number,  MSMEs play a crucial role in the ‘Make in India’ plan, which aims to position India as a strong and  self-reliant nation in the manufacturing space. This ranking would also help the country to compete  with other global economies. 

What is India doing differently? 

To make India a global manufacturing hub, the government is focusing on helping MSMEs become  more competitive by supporting them to improve production, sell more goods abroad, and create  jobs. 

Several targeted steps are boosting this growth: 

• Easier access to money: The 2025–26 Union Budget raised loan guarantees for small  businesses from ₹5 crore to ₹10 crore and for startups from ₹10 crore to ₹20 crore. A special  credit card for micro units offers up to ₹5 lakh for daily needs. 
• Wider support through schemes: Programs like the Prime Minister’s Employment Generation  Programme (PMEGP), PM Vishwakarma, and the Scheme of Fund for Regeneration of Traditional  Industries (SFURTI) offer training, funding, and help to traditional artisans and new  entrepreneurs. 
• Government buying from MSMEs: Under the Public Procurement Policy, 25% of goods and  services bought by ministries and CPSEs must come from micro and small enterprises— giving MSMEs steady demand and income. 
• Support for job-rich sectors: Focused plans for industries like footwear, leather, toys, and  food processing are expected to create lakhs of new jobs and boost exports. 
• Help for new entrepreneurs: A ₹10,000 crore Fund of Funds will give loans to five lakh new  business owners, from women to marginalised communities, over five years.
• Tech and digital push: Through the National Manufacturing Mission, MSMEs are being  encouraged to adopt clean and advanced technologies like EV batteries and solar panels. The  CHAMPIONS portal and Udyam Assist are also helping businesses go digital and formal. 
• Future-ready MSMEs: According to NITI Aayog MSMEs must adopt digital tools, AI, and  cluster-based strategies. Stronger supply chains, integration into global value chains (GVCs),  and better access to smart infrastructure are also critical for faster growth. 

These focused efforts are giving MSMEs the tools they need to grow faster, innovate more, and  become globally competitive. 

But challenges remain! 

MSMEs continue to face problems on various fronts. Many don’t use modern technology, have a  shortage of skilled workers, and struggle to get cheap loans.  

India’s apex think tank, NITI Aayog, says that India’s part in global trade chains is growing but still  lower than that of nearby countries. To help MSMEs grow stronger and compete with the world,  there are a few important things that can be done. First, the workforce employed across MSMEs  needs better on-job training. Many of them do not have the right skills for modern machines and new industries like electronics or clean energy – an aspect that leading global manufacturers such as  China have already looked at and worked on increasing the resource pool for the required jobs. If the  government and private companies work together to give more job-based training, small businesses  can become more productive and grow faster. 

Second, instead of just giving loans based on how much money a business needs, the focus should  be on how much it produces. If a small business performs well and increases its output, it should be  rewarded with more support. This will encourage businesses to be more efficient. It is also important  to group similar businesses together in one area—called clusters—so they can share machines,  training, and marketing help. This will lower their costs and improve quality. 

Finally, MSMEs need easier rules to follow. Many businesses still find it hard to register, get licences,  or deal with taxes. Faster and easier accessibility of funds from nationalised banks and the operators in  in the non-banking segments can also work wonders for MSMEs. Additionally, more MSMEs should  be trained or incentivised for using digital, smart tools like online commerce, payment apps, and  cloud software. This would ensure growth. The government can also study different sectors to  understand the very nature of their problems and root causes to provide the right kind of help. All of this  will make MSMEs stronger and more ready to lead the country on the world stage. 

This Article was featured on Manufacturing Today on 31 May 2025. Read here