To help medium enterprises emerge as the drivers of innovation, employment, and exports, Niti Aayog has recommended several targeted interventions. These include loans at concessional rates, a working capital financing scheme linked to turnover, and a Rs 5 crore credit card facility to bridge funding gaps.
In a report titled “Designing a Policy for Medium Enterprises”, it suggested that the government conceptualise a scheme that would focus on tailor-made financial tools, technology integration and industry 4.0, cluster-based testing facilities, R&D, skill development. A centralised digital portal for information has also been mooted.
The report underscores key challenges faced by medium enterprises, including constrained access to tailored financial products, as medium enterprises receive fewer priority sector loans compared to micro enterprises. Medium enterprises face a credit demand gap of in excess of $10 Billion (2024).
Niti Aayog report recommended the introduction of a dedicated financing scheme under Ministry of MSME, allowing medium enterprises to avail loans at concessional rates. Loans of up to a certain percentage of gross revenue, depending upon sector (manufacturing or service), capped at 25 crore, maximum of 5 crore per request. Also, a credit card with a pre-approved limit of up to Rs 5 crore and interest rates should align with the market rate of interest.
The report delved into the structural skew in the MSME sector, which contributes approximately 29% to India’s GDP, accounts for 40% of exports, and employs over 60% of the workforce. Despite its critical role, the composition of the sector is disproportionately weighted: 97% of registered MSMEs are micro enterprises, 2.7% are small, and only 0.3% are medium enterprises.
However, this 0.3% of medium enterprises contributes nearly 40% of MSME exports, underscoring their untapped potential as scalable, innovation-led units. Average employment per unit of medium enterprise is greater (89.14 employees per unit) as compared to micro (5.7) and small (19.11) enterprises.
To support medium enterprises, the Niti report suggested upgradation of existing Technology Centers into sector-specific and regionally customized India SME 4.0 Competence Centers to promote the adoption of Industry 4.0 solutions.
Establishment of a dedicated R&D cell within the Ministry of MSME, leveraging the Self-Reliant India Fund for cluster-based projects of national significance. Development of sector-focused testing and certification facilities to ease compliance and enhance product quality.
It suggested alignment of skilling programmes with enterprise-specific needs by region and sector, and integration of medium enterprise-centric modules into existing Entrepreneurship and Skill Development Programmes (ESDP).
It also mooted for creation of a dedicated sub-portal within the Udyam platform featuring scheme discovery tools, compliance support, and AI-based assistance to help medium enterprises navigate resources effectively.