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Informist, Monday, May 26, 2025

 

NEW DELHI - Medium-sized enterprises, defined as firms with a turnover of not more than INR 5 billion, require more financial support and better access to working capital, a report by India's top government think-tank, the NITI Aayog, Friday said.

 

The report 'Designing a Policy for Medium Enterprises' said medium enterprises have immense potential and strengths, but need certain interventions to unlock their full potential. "These include improved access to working capital, technology integration in business operations, availability of a conducive R&D (research and development) innovation ecosystem, availability of skilled manpower, and better awareness of schemes," the report said.

 

The Micro, Small, and Medium Enterprises sector contributes 29% to India's GDP, 40% to total exports, and employs over 60% of the workforce. Medium enterprises contribute 40% of MSME exports, showcasing immense untapped potential, the report said.

 

The main challenges medium-sized firms face are related to funding, skilled manpower, lack of awareness of schemes, technology upgradation, barriers to innovation, and land and infrastructure, the report said. "To address these needs, the Government of India has been implementing a wide array of schemes aimed at supporting MSMEs," the report said.

 

However, only a small proportion of these initiatives are tailored specifically for medium enterprises, the report said. Of the 18 central government schemes for the MSME sector, only eight are applicable for the medium-sized enterprises. "If targeted interventions are made in this direction, it will augment the ability of medium enterprises to scale and compete in the global market," the report said.

 

Many medium enterprises struggle to secure the necessary financial resources because of several challenges, including stringent lending criteria, limited access to capital markets, and a lack of collateral, the report said. Interest rates for medium enterprises are 4% higher than those for larger firms, making financing considerably more expensive, it added.

 

To address this, the NITI Aayog report has suggested starting a dedicated financing scheme under the Ministry of MSME, which would allow medium enterprises to avail loans at concessional rates. This scheme should provide loans of up to a certain percentage of gross revenue capped at INR 250 million, with a maximum of INR 50 million per request.

 

An emergency credit line in the form of a credit card with a pre-approved limit of up to INR 50 million, can also be introduced to allow enterprises to manage urgent expenses such as salary payments and equipment repairs, if the loan disbursement takes longer than usual, the report said.

 

The report recommended promoting medium enterprises in the manufacturing sector by easing their access to working capital. "This is because medium enterprises contribute significantly to the MSME sector's GDP and export," the report said. "By providing easier access to working capital, these enterprises can scale up operations, improve productivity, and contribute even more to India's manufacturing growth, which is expected to reach $1 trillion by 2025-26 (Apr-Mar)."

 

Arvind Virmani, member, NITI Aayog, said India needs to start thinking about the use of artificial intelligence to simplify laws, taxes, compliances, and access to credit. "AI can be very neutral," Virmani said at a press conference. "Once you have an integrated system, all the revenues, expenditure, profit will be part of this system. So, credit linked to it will become almost automatic."  End

 

Reported by Shubham Rana

Edited by Vandana Hingorani

 

 

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