Designing a Policy for Medium Enterprises Report

Syllabus: MSME

Source:  NITI

Context: NITI Aayog has released a landmark report titled “Designing a Policy for Medium Enterprises”, aimed at empowering medium enterprises to become future industrial giants and drive India’s vision for Viksit Bharat @2047.

Summary of the Report “Designing a Policy for Medium Enterprises”:

What are Medium Enterprises?

• Medium Enterprises are defined (as of April 2025) as businesses with:
  • Investment up to ₹125 crores
  • Turnover up to ₹500 crores
• They form 0.3% of MSMEs but contribute 40% of MSME exports, indicating their strategic role.

Sector Overview:

• GDP Contribution: MSMEs contribute 29% to GDP and medium enterprises form a vital manufacturing backbone.
• Employment: Medium enterprises generate 89 jobs per unit on average—more than micro (5.7) or small (19.1).
• Export Impact: Contribute ~₹50,562 crore in forex income annually.
• R&D Investment: Medium enterprises account for 81% of total R&D expenditure by MSMEs.

Analysis of the Report:

• Positive Aspects:

• • High Productivity Units: High per-unit profitability and employment generation rates.
  • Export Engines: 40% of MSME exports come from this 0.3% group.
  • Innovation Focused: Spend more on R&D per unit than micro/small enterprises.
  • Untapped Growth Multiplier: A 20% increase in medium enterprises could generate ~₹5.4 lakh crore extra in forex and create 12 lakh jobs.
  • Strong Case for Policy Realignment: Emphasizes missed potential due to a skewed incentive structure in favour of micro and small enterprises.

• Key Challenges Identified:

• • Low Awareness: Only 10% use government scheme portals and most unaware of tailored support.
  • Finance Gap: No dedicated working capital scheme and over-reliance on personal savings.
  • Tech Backwardness: 82% lack access to Industry 4.0 tools like AI and IoT.
  • Skill Deficit: Existing training doesn’t meet sector-specific enterprise needs.
  • R&D Support Lacking: Absence of central R&D mechanism tailored for medium units.
  • Compliance Complexity: Red tape and fragmented information ecosystem.

Way Ahead:

• Tailored Finance:
  • ₹5 crore credit card facility at market rates.
  • Working capital scheme linked to turnover.
• Industry 4.0 Integration: Upgrade Technology Centres into SME 4.0 Competence Centres.
• Cluster-Based Testing: Add sector-specific facilities under MSE-CDP for medium enterprises.
• Skilling Reform: Custom training linked to region, industry, and growth stages.
• R&D Push: Create 3-tier R&D framework with national-level project funding.
• Digital One-Stop Portal: AI-powered sub-portal within Udyam for scheme discovery, compliance help.

Conclusion:

The NITI Aayog report rightly focuses on a dedicated policy that addresses long-standing gaps in support for this high-impact segment. A focused, innovation-led, and tech-integrated policy approach can turn them into drivers of exports, jobs, and economic growth.

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