Government think tank NITI Aayog has recommended relaxing eligibility criteria for state-level schemes that offer subsidies on capital and interest for loans, aiming to enhance the competitiveness of micro, small, and medium enterprises (MSMEs) across India. In its report titled “Enhancing MSMEs Competitiveness in India,” the NITI Aayog emphasized the importance of easing access to financial assistance throughout the MSME lifecycle.
The report noted that lowering eligibility barriers will better address financing needs, particularly for smaller enterprises that often struggle to meet stringent criteria.
Addressing the Credit Gap and Strengthening NBFCs
While MSMEs have gained improved access to formal credit in recent years, a significant credit gap persists. According to the report, only 19% of MSME credit demand was formally met by FY21, leaving an estimated ₹80 lakh crore unmet.
The NITI Aayog also highlighted the role of non-banking financial companies (NBFCs) in extending credit, especially in remote areas. It recommended that SIDBI support NBFCs through funding initiatives aimed at scaling their operations and improving governance structures.
To further bridge the financing gap, the NITI Aayog suggested reforming the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) by enhancing regulatory oversight and reducing risk premiums for borrowers.
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Need for Skill Development and Technology Upgradation
The report identified a pressing need for accessible skill development initiatives. It highlighted that a large portion of the MSME workforce lacks formal vocational or technical training, which hampers productivity and limits scaling opportunities.
The NITI Aayog also called for tailored policies to support technology upgradation among micro and small enterprises. Challenges such as unreliable electricity supply, weak internet connectivity, and high technology implementation costs were cited as major hurdles.
Despite the existence of state government schemes for technological advancement, the report noted low awareness and access among MSMEs, further emphasizing the need for improved outreach and implementation.
Sector-Specific Challenges and Infrastructure Recommendations
Focusing on key sectors such as textiles and apparel, chemical products, automotive, and food processing, the report detailed sector-specific challenges that limit MSME competitiveness. It pointed to the need for upgrading outdated technologies and enhancing marketing and branding capabilities.
Additionally, the NITI Aayog recommended that states develop MSME-specific infrastructure, including co-working spaces, industrial parks, and shared facilities, to enable scaling and boost competitiveness.
The report concluded with a call for stronger institutional collaboration, targeted services, and policy reforms to unlock the full potential of India’s MSME sector.