Niti Aayog Report Highlights Challenges for Enhancing MSME Competitiveness in India

Union Budget 2025-26 Focus: The Union Budget recognises MSMEs as one of the key drivers of India's development, alongside agriculture, investment, and exports.

Challenges in Enhancing the Competitiveness of MSMEs

1. Formalisation: Around 90% of the informal sector comprises MSMEs (ILO, 2023).
2. Access to Finance: MSMEs face an ₹80 lakh crore credit gap due to limited access to formal loans and high-risk perception (CRISIL).
3. Skill Gaps: A 3.9% decline in knowledge-based hiring (from approximately 13%) presents a challenge for growth and innovation in MSMEs (WIPO, 2023).
4. Data Gaps:
   • Limited reliable data on MSMEs, especially regarding jobs, exports, etc., hampers effective policymaking.
   • Even the UDYAM database lacks detailed insights, further restricting informed decision-making.
5. Other Issues: MSMEs face challenges such as low product variety, outdated technology, and a lack of medium-sized firms, leading to the "missing middle" in manufacturing.

Ways to Improve Competitiveness of MSMEs

1. Finance Accessibility: Improve access to finance by reforming the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), supporting NBFCs, and easing state-level subsidy norms.
2. Skilling: Align training programs with industrial needs, focusing on financial literacy and business skills for MSME owners.
3. Data: Upgrade the UDYAM portal with detailed, cluster-wise, and state-level data to aid in better policymaking.
4. Technology & Innovation: Develop targeted policies for small firms and strengthen Institutes for Collaboration (IFC) to foster innovation.