May, 205
GIST OF KURUKSHETRA
MICRO, SMALL & MEDIUM ENTERPRISES
DELHI CENTRE:
Vivekananda House: 6-B, Pusa Road, Metro Pillar No. 111, Near Karol Bagh Metro, New Delhi-110060 | Phone: 8081300200
Mukherjee Nagar: 1422, Main Mukherjee Nagar Road, Near Batra Cinema, New Delhi-110009 | Phone: 8081300200
JAIPUR CENTRE: Plot No. 6 & 7, 3rd Floor, Sree Gopal Nagar, Gopalpura Bypass, Jaipur-302015 | Ph. 9358200511
PRAYAGRAJ CENTRE: 31/31 Sardar Patel Marg, Civil Lines, Prayagraj, Uttar Pradesh - 211001 | Phone: 9958857757
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CHAPTER 1- MSMES EMPOWERED BY SCIENCE AND TECHNOLOGY
Importance of MSMEs
• MSMEs (Micro, Small and Medium Enterprises) are crucial for economic growth, employment
generation, export contribution, rural development, and inclusive growth in India.
• They enable equitable distribution of income and provide livelihood opportunities, especially in rural
and semi-urban areas.
• There is a growing need to integrate MSMEs with scientific and technological advancements to convert
publicly funded R&D into viable products and processes.
Science & Technology Interventions for MSMEs
• Government schemes provide MSMEs with resources in research, innovation, and technology,
enhancing their global competitiveness and recognition.
• MSMEs are emerging as hubs of indigenous technological innovation in fields like energy-efficient
electronics, electric bikes, drone technology, healthcare devices, and cleantech.
Key Science & Technology Initiatives
Common Research and Technology Development Hub (CRTDH)
• CRTDH, launched by Department of Scientific and Industrial Research (DSIR) in 2014-15, fosters
innovation in MSME clusters by linking industry, academia, and government. It offers R&D
facilities, testing labs, design centers, pilot plants, and prototype development.
• Currently, 18 CRTDHs operate in sectors including electronics, renewable energy, affordable healthcare,
environmental technology, and advanced materials, focusing on creating an ecosystem for innovation and
commercialization.
CSIR Mega Innovation Complex for MSMEs
• The CSIR Mega Innovation Complex for MSMEs, established in Mumbai in January 2025 by CSIR,
offers world-class incubation labs, technical support, scientific infrastructure, and networking
spaces. It facilitates collaboration among MSMEs, startups, CSIR labs, deep-tech firms, and public
research institutions, providing advanced scientific expertise and business development services.
NIDHI-Technology Business Incubator (NIDHI-TBI) Programme
• It was launched by the Department of Science and Technology under the NIDHI umbrella, supports
high-risk, high-potential tech startups through incubators in educational and research institutions.
• It provides infrastructure, mentorship, legal, financial, and IP consultancy to help startups rapidly
commercialize innovations and create employment aligned with national priorities.
NIDHI-Inclusive Technology Business Incubator (NIDHI-ITBI)
• NIDHI-ITBI promotes innovation and entrepreneurship in emerging startup ecosystems, focusing on
rural, tier-2, and tier-3 cities with an emphasis on social inclusion—women, geographical diversity, and
differently-abled individuals.
• It provides grants for proof of concept, prototyping, and early-stage development while building local
innovation networks connecting academia, investors, and industry.
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Centre for Rural Enterprise Acceleration through Technology (CREATE)
• CREATE, established in Leh, promotes rural industrialization and MSME growth in challenging
terrains like Ladakh by providing training and development for local products such as pashmina
wool, essential oils, and bio-processing, aiming to improve productivity, quality, economic capacity, and
livelihoods in remote areas.
Expansion of Technology Development Centers
• The Ministry of MSME runs 33 Technology Development Centers across sectors, aiding MSMEs in
design, manufacturing, skill development, and access to advanced technologies. New centers are being
developed under a Build-Operate-Transfer (BOT) PPP model to expand reach, offering services like
job work, precision production, and specialized tool manufacturing.
Scheme for New Technology Centers and Extension Centers
• It aims to establish 20 Technology Centers and 100 Extension Centers on a hub-and-spoke model,
bringing advanced technologies like AI, AR, VR, IoT, and Robotics to grassroots and remote areas.
• So far, 25 Extension Centers have been commissioned, training over 72,000 trainees and supporting
1,440 MSMEs.
Overall Impact
• Science and technology interventions are enhancing MSMEs’ competitiveness, innovation, and global
recognition by fostering an ecosystem that drives innovation, employment, rural upliftment, and
inclusive growth. Consequently, the MSME sector is evolving from basic economic units into innovation
hubs and key drivers of sustainable development in India’s economy.
CHAPTER 2- NAVIGATING THE FUTURE OF MSME FINANCES
Importance of MSMEs in the Economy
• MSMEs (Micro, Small, and Medium Enterprises) are vital to economic growth, acting as engines for
multifaceted industrialization, especially in backward and rural regions.
• Globally, MSMEs constitute about 90% of businesses, generate 60-70% of employment, and contribute
nearly 50% of GDP.
• In India, there are 6.23 crore registered MSMEs as of April 2025, employing 26.66 crore people.
• MSMEs contribute about one-third of India’s GDP and over 45% of exports.
• The sector spans multiple industries: food processing, textiles, auto components, hospitality, manufacturing
(including space components for Chandrayaan).
• Around 70% of MSMEs are in services, with micro-enterprises dominating the sector.
Evolving Definition of MSME
• From April 1, 2025, MSME definitions were expanded, doubling turnover limits and increasing
investment ceilings 2.5 times.
• Earlier classifications were based solely on investment; since 2020, MSMEs are defined using dual
criteria: investment and turnover.
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• The government simplified registration through Udyam Registration Portal (URP) and Udyam Assist
Platform (UAP), making it easier for smaller enterprises to formalize.
• Formalization increased MSME registrations from 1.65 crore (April 2023) to 6.23 crore (April 2025).
• Top states with maximum MSME registrations include Maharashtra, Uttar Pradesh, and Tamil Nadu.
Strengthening MSMEs: Government Initiatives
• MSME growth depends on skill development, affordable finance, technology adoption, marketing, and
infrastructure.
• The 2025 Budget enhanced MSME classification thresholds to prevent penalizing growth and to include
larger enterprises in MSME benefits.
• This broadening promotes inclusivity, competitiveness, and growth.
MSME Finance Framework
• MSMEs are a key segment of Priority Sector Lending (PSL), with banks required to allocate 40% of
Adjusted Net Bank Credit (ANBC) to PSL and 7.5% specifically to Micro Enterprises.
• RBI targets 20% year-on-year credit growth to MSEs and increased lending accessibility.
• Loans up to ₹10 lakh to MSEs are collateral-free.
• RBI is considering a move to remove foreclosure charges on floating-rate loans to enable MSMEs to
switch lenders and benefit from lower interest rates.
Credit Guarantee Scheme (CGS)
• CGS protects lenders from borrower defaults by providing guarantees via Credit Guarantee Fund Trust
for Micro and Small Enterprises (CGTMSE).
• The guarantee limit increased from ₹5 crore to ₹10 crore from April 2025.
• Guarantee coverage varies: up to 90% for women-owned enterprises, 85% for SC/ST entrepreneurs,
80% for enterprises in North-East and J&K, and 75% for others.
• Since 2000, CGS has given 71 lakh guarantees worth ₹4.27 lakh crore; in just 2023-2025, 44 lakh
guarantees worth ₹5.02 lakh crore were given.
• The reduction of guarantee fees by 50% in 2023 greatly boosted scheme uptake.
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Key Schemes Supporting MSMEs
• Prime Minister’s Employment Generation Programme (PMEGP):
Focuses on self-employment via micro-enterprises in non-farm sectors.
Provides up to 95% bank finance with subsidies up to 35%.
Assisted over 10 lakh enterprises, generating 83 lakh jobs.
• Pradhan Mantri Mudra Yojana (PMMY):
Offers collateral-free loans for income-generating activities.
Disbursed over 51.67 crore loans worth ₹32.61 lakh crore since 2015.
• PM Vishwakarma Scheme:
Launched in 2023 to support traditional artisans with skill upgradation, toolkits, digital incentives,
and concessional loans.
Nearly 30 lakh beneficiaries registered within 18 months; 4 lakh loans sanctioned.
Offers loans up to ₹3 lakh at concessional 5% interest, with government subvention.
• Self Reliant India Fund:
Set up under Atmanirbhar Bharat with ₹10,000 crore government contribution plus ₹50,000 crore
private equity.
Provides equity support to growth-oriented MSMEs through venture capital.
Key Takeaways
• MSMEs are critical for inclusive growth, employment, and exports in India.
• Recent policy reforms have broadened the definition of MSMEs, enabling more enterprises to avail
benefits.
• Access to affordable and collateral-free finance, combined with credit guarantees, is boosting MSME
growth and formalization.
• Government schemes like PMEGP, PMMY, and PM Vishwakarma provide comprehensive support
from credit to skill enhancement.
• Upcoming RBI guidelines on foreclosure charges can further improve credit flexibility for MSMEs.
• The expansion of the Credit Guarantee Scheme reflects the government’s commitment to easing
financing constraints for MSMEs.
CHAPTER 3-TECHNOLOGY ADOPTION BY MSMES IN INDIA
Micro, Small and Medium Enterprises (MSMEs) play a pivotal role in India’s economic landscape. With over
4 crore enterprises employing nearly 18 crore people and contributing around 30% to the GDP and nearly 50%
to exports, MSMEs are often termed as the engine of inclusive growth. However, despite their importance,
the sector continues to struggle with technological backwardness, severely hampering their productivity,
innovation, and global competitiveness.
Current State of Technology in MSMEs
The MSME technology ecosystem in India remains fragmented, underdeveloped, and underperforming.
Many MSMEs operate with outdated machinery, lack in-house R&D capabilities, and are unable to
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commercialize innovations. While government-supported R&D and innovation programmes exist, the absence
of structured linkages between MSMEs and technology institutions results in poor absorption and integration
of new technologies at the enterprise level.
Key Challenges in Technology Adoption
• Financial Constraints: Limited access to affordable credit, high capital costs, and thin operating margins
discourage long-term investments in new technologies or machinery.
• Lack of Awareness and Digital Literacy: Many MSME owners and workers are unaware of relevant
technologies and their benefits. Low digital literacy further hinders the adoption of digital tools and
platforms.
• Limited Market Intelligence: Inadequate access to data on consumer behavior, demand patterns, and
global market trends restricts innovation and competitiveness.
• Skill Gaps and Workforce Limitations: There is a shortage of professionals skilled in emerging
technologies like AI, automation, and data analytics. Additionally, limited hands-on training hampers
workforce upskilling.
• Obsolete Equipment and Low Productivity: Due to the high cost of modern machinery, many MSMEs
depend on outdated or second-hand equipment, affecting efficiency and product quality.
• Inadequate Infrastructure: Poor internet access, unreliable power supply, and lack of digital infrastructure
in rural and semi-urban areas pose significant barriers to technology adoption.
• Misalignment and Complexity of Tech Solutions: Many off-the-shelf technologies are not tailored to
MSME needs, and limited in-house capacity prevents effective customization and integration.
• Low Penetration of Emerging Technologies: Advanced solutions like AI, IoT, AR/VR, 3D printing, and
Industry 4.0 remain underutilized due to high costs, complexity, and lack of awareness.
Emerging Technologies and their Impact on MSMEs
Technology Potential Challenges
AI & Automation Boost efficiency, streamline operations Job displacement, skill mismatch
IoT & Smart Real-time data, predictive maintenance High infra requirements
Manufacturing
3D Printing Rapid prototyping, customization High setup cost, material limitations
AR/VR Better customer experience, product design Lack of awareness, investment
Green Tech Sustainability, global market access High cost, lack of eco-materials
Government Interventions
• MSME Technology Centres (TCs): Provide tools, product development support, and skill training
through 15 new centres established under the World Bank-aided TCSP.
• ZED Certification Scheme: Promotes Zero Defect Zero Effect manufacturing by encouraging high-
quality production with minimal environmental impact.
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• PRISM Scheme: Supports grassroots innovation and facilitates the commercialization of ideas by
individuals, startups, and MSMEs.
• Extension Centres (ECs): 100 ECs are being set up to deliver Technology Centre services to last-mile
MSMEs across the country.
• CGTMSE: Eases access to credit by offering collateral-free loans to micro and small enterprises through
credit guarantees.
• Digital MSME Scheme: Facilitates adoption of cloud computing and ICT tools to enhance competitiveness
and digital readiness.
• MSME Champions Portal: Acts as a one-stop platform for grievance redressal, access to government
schemes, and real-time advisory support.
Way Forward
• Strengthening the Technology Ecosystem: Establish industry-academia linkages and sector-specific
innovation hubs to co-develop and adopt scalable tech solutions for MSMEs.
• Ensuring Access to Affordable Finance: Promote fintech and alternative lending platforms, along with
subsidized credit lines focused on technology upgradation.
• Capacity Building and Skill Development: Upskill the workforce in digital technologies, smart
manufacturing, and green processes while expanding tool rooms and skilling centers, especially in
backward regions.
• Upgrading Infrastructure: Enhance internet connectivity, power reliability, and digital infrastructure in
rural and semi-urban areas to support industrial growth.
• Promoting Green and Sustainable Manufacturing: Offer subsidies for green technology adoption and
introduce certification and branding for eco-friendly MSMEs to boost market competitiveness.
Conclusion
Technology adoption is no longer a luxury but a necessity for the survival and growth of MSMEs. While various
government initiatives have laid the foundation, a more targeted, inclusive, and collaborative approach is
required to overcome existing bottlenecks. By enhancing access to finance, building digital infrastructure,
upskilling the workforce, and fostering innovation ecosystems, India can unlock the full potential of its MSME
sector and make it globally competitive in the digital era.
CHAPTER 4- REVITALIZING INDIAN MSMES
The Union Budget 2025–26 marks a pivotal shift in India’s development trajectory by placing Micro, Small,
and Medium Enterprises (MSMEs) at the core of economic transformation.
• Recognized as one of the four critical pillars alongside agriculture, exports, and private investment,
MSMEs are vital to India’s industrial and employment landscape.
• With over 6.3 crore registered enterprises employing more than 25 crore people and contributing 45.73%
to India’s total exports in FY 2023–24, MSMEs are the second-largest employment generator after
agriculture and play a central role in decentralized industrialization.
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Revised Classification: Enabling Growth Without Fear
• A cornerstone reform in the Budget is the upward revision of MSME classification thresholds to address
the “fear of graduation.” Micro Enterprises can now invest up to ₹2.5 crore with turnover limits raised to
₹10 crore.
• Small Enterprises can invest up to ₹25 crore with turnover up to ₹100 crore, while Medium Enterprises
can go up to ₹125 crore in investment and ₹500 crore in turnover.
• This 2.5x increase in investment and 2x rise in turnover thresholds is designed to help enterprises scale
without losing fiscal and institutional benefits, thereby bridging the “missing middle” in the industrial
ecosystem.
Credit Empowerment: Strengthening Financial Access
• Credit access has received a substantial boost through the expansion of the Credit Guarantee Fund Trust
for Micro and Small Enterprises (CGTMSE).
• The credit guarantee cover for micro and small enterprises has been doubled from ₹5 crore to ₹10 crore,
unlocking ₹1.5 lakh crore in credit over five years. For innovation-driven startups, the guarantee cap has
been raised to ₹20 crore with reduced fees for loans in 27 priority sectors.
• Export-oriented MSMEs can now access term loans up to ₹20 crore under a strengthened guarantee
regime, advancing India’s global competitiveness.
• Additionally, the launch of a customized MSME Credit Card for Udyam-registered micro units—offering
up to ₹5 lakh credit support—will facilitate digitized, collateral-free working capital access, with 10 lakh
cards to be issued in the first year.
Startup and Inclusive Entrepreneurship Push
• To stimulate grassroots innovation and inclusive growth, the Budget proposes a ₹10,000 crore Fund of
Funds to nurture startups across sectors, especially in Tier-2 and Tier-3 cities.
• A dedicated scheme for 5 lakh first-time entrepreneurs from SCs, STs, women, and rural youth will
offer term loans up to ₹2 crore over five years, with added support in the form of seed capital, interest
subvention, technical mentorship, and institutional linkages.
• These measures build upon the Stand-Up India initiative and aim to democratize entrepreneurship across
social and geographic boundaries.
Targeting Labour-Intensive Sectors: Employment and Exports
• Focusing on employment-intensive industries, the Budget introduces schemes to modernize and globalize
sectors like footwear, leather, and toys.
• The Focus Product Scheme for the footwear and leather industry emphasizes design innovation, component
manufacturing, and expansion in the non-leather segment—expected to create 22 lakh jobs and generate
₹4 lakh crore in turnover.
• Similarly, the toy sector will receive dedicated support for cluster development, modernization, and skill-
building, positioning India as a global toy hub.
• A National Institute of Food Technology, Entrepreneurship, and Management will also be established in
Bihar, aiming to boost food processing in eastern India.
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Manufacturing and Clean Tech: Driving Future-Readiness
• Under the newly launched National Manufacturing Mission, MSMEs will receive policy support and
sector-specific strategies to integrate into broader industrial value chains.
• A special emphasis is placed on clean technology manufacturing, with incentives for domestic production
of solar PV cells, EV batteries, wind turbines, and high-voltage transmission equipment.
• These interventions align with India’s green development goals and aim to position MSMEs as key
players in the global clean energy transition, reducing import dependency and enhancing long-term
industrial resilience.
Sustained Fiscal Commitment: Backing Growth with Budgetary Support
• The Budget allocates ₹23,168.15 crore to the Ministry of MSME for FY 2025–26, a moderate rise from
₹22,137.95 crore in FY 2024–25.
• While past years saw fluctuations—such as a drop to ₹17,306.70 crore in the Revised Estimate for
2024–25 and a peak at ₹23,628.73 crore in 2022–23—this year’s allocation underscores consistent policy
backing.
• Importantly, the sector’s Gross Value Added (GVA) increased from 27.3% of GDP in 2020–21 to 30.1%
in 2022–23, indicating growing economic resilience and impact.
Export-Led Growth and Global Integration
• MSMEs have emerged as a major force in India’s export performance. Their exports grew from ₹3.95
lakh crore in 2020–21 to ₹12.39 lakh crore in 2024–25, with the number of exporting MSMEs rising from
52,849 to 1,73,350 in the same period.
• The sector’s export share also climbed from 43.59% in 2022–23 to 45.79% in 2024–25 (till May 2024).
This surge has been supported by trade facilitation, digital marketplaces, and product standardization,
aligning MSMEs with India’s global trade ambitions.
Conclusion
India’s MSMEs are not just participants in economic development—they are catalysts of inclusive, sustainable,
and globally integrated growth. The 2025–26 Budget sets a transformative roadmap by reinforcing scale,
competitiveness, and accessibility for MSMEs across diverse sectors and geographies. As India progresses
toward its $5 trillion economy goal, MSMEs will remain central to job creation, innovation, and industrial
decentralization.
UPSC Mains Practice Questions-(Around 250 words)
Q1. Discuss the role of MSMEs in India’s economic development. In the light of recent budgetary
announcements, examine how policy measures are addressing the challenges faced by this sector.
Q2. What are the challenges in integrating Indian MSMEs into global value chains (GVCs)? Examine the
effectiveness of recent policy interventions aimed at promoting export-oriented MSMEs.
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