Strengthening India's Medium Enterprises: The Missing Middle in MSME Policy

India’s MSME (Micro, Small, and Medium Enterprises) sector is a powerhouse of the economy, contributing nearly 29% to GDP, 40% to exports, and employing over 60% of the workforce. However, a closer look reveals a troubling imbalance—medium enterprises account for only 0.3% of all registered MSMEs. Despite their small share, these firms are pivotal: they generate 40% of MSME export income and exhibit higher innovation capacity than their micro and small counterparts.

Yet, policy support for medium enterprises remains fragmented and under-optimized. Acknowledging this, the recent policy framework proposes a six-pronged strategy to catalyze the growth of medium enterprises, aiming to transform them into key drivers of industrial resilience, innovation, and employment

1. Tailored Financial Initiatives: Bridging the Capital Gap

Medium enterprises often require larger and more flexible capital than micro and small units, but financial schemes rarely differentiate by enterprise size. A dedicated financing mechanism is proposed, including:

Concessional rate loans via a Medium Enterprise Financing Scheme.

A sectoral approach to credit risk assessment.

Pre-approved credit cards with limits up to ₹5 crore.

This initiative targets the chronic working capital shortage faced by medium firms and encourages formalization through institutional credit.

2. Technology Integration: Building SME 4.0 Competence

The policy advocates for converting existing MSME Technology Centres (TCs) into "India SME 4.0 Competence Centres", focusing on:

Advanced manufacturing

Digital automation

AI and robotics

This transition is critical as global supply chains become increasingly tech-driven. Without significant tech adoption, India’s medium enterprises risk being outcompeted both domestically and internationally.

3. R&D Promotion: Making Innovation a Pillar of Growth

Medium enterprises, with their manufacturing intensity and export orientation, must become centres of innovation. The policy suggests a three-tier governance framework:

An Expert Committee to set research priorities.

A Research Funding Management Committee to disburse R&D grants.

A Project Review Committee to track outcomes.

This approach aligns with the need for cluster-specific innovation and complements initiatives like the Self-Reliant India Fund by earmarking funds for medium enterprise R&D.

4. Testing and Cluster-Based Quality Infrastructure

Extending the MSE-CDP (Micro and Small Enterprises – Cluster Development Programme) to include medium enterprises can ease access to:

Quality assurance labs

Product certification

Regulatory compliance

This is particularly important in high-growth sectors like textiles, pharmaceuticals, and engineering, where adherence to global standards is non-negotiable for export success.

5. Customized Skill Development: Addressing Talent Deficits

To remain competitive, medium enterprises need tailored skilling programs that address regional and sectoral workforce gaps. The policy calls for:

Mapping enterprise-level skill needs.

Developing customized courses under the ESDP (Entrepreneurship and Skill Development Programme).

Advanced management and domain-specific training modules.

This initiative targets the mismatch between industrial demand and current skilling outputs, which hinders productivity and innovation.

6. Centralized Portal: Unified Access to Schemes and Resources

A major operational pain point is the lack of consolidated access to information. A new sub-portal within Udyam tailored for medium enterprises is proposed, offering:

Basic enterprise information

Application processes for support schemes

Market research and sectoral insights

Such a portal will reduce information asymmetry, lower transaction costs, and promote higher scheme uptake among medium enterprises.

A Strategic Push for India’s Industrial Backbone

Medium enterprises are the “missing middle”—too large for micro-level support yet too small to compete with corporates without tailored interventions. The current policy landscape tends to focus on the extremes, leaving medium firms in a policy blind spot. This proposed framework from the NITI Aayog Report on Medium Enterprises represents a critical rebalancing—not by adding new schemes, but by realigning existing resources and capacities to the specific needs of medium enterprises.

With coordinated implementation, this policy could unlock a powerful engine for export growth, job creation, and industrial innovation, propelling India’s long-term economic resilience.

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