Relevance: GS2: Sec2

1. Importance of MSMEs:

• India has around 6.18 crore MSMEs.
• Out of these:
  • 6.09 crore are micro enterprises
  • 7.44 lakh are small enterprises
  • Only 70,000 are medium enterprises
• The sector contributes significantly to employment and economic growth.

2. Structural Issue – Missing Middle:

• There’s an institutional and structural gap in the medium segment.
• The number of medium-sized firms is fewer than large firms, which hinders the growth trajectory.
• Transition from micro/small to medium is poor – only 1,835 micro-enterprises became medium in 2023-24.

3. Regulatory Burden and Policy Hurdles:

• Medium-sized enterprises face the heaviest burden of regulation, unlike larger firms.
• Regulatory overreach, accounting burdens, and lack of ease in compliance are major deterrents.

4. Skilling and Technology Gaps:

• The sector suffers from a lack of tech upgradation and skilling.
• Many entrepreneurs are unaware or lack access to digital tools, R&D, and innovative ecosystems.

5. Budgetary Reforms:

• Union Budget 2025-26 revised definitions:
  • Small enterprise: Up to ₹50 crore investment and ₹250 crore turnover.
  • Medium enterprise: Beyond ₹50 crore and up to defined thresholds.
• These revised limits aimed to make categorization more realistic and growth-friendly.

6. New Initiatives and Suggestions:

• T-X-DCE (Technology x Direct Conversion Enablement) initiative is a new attempt to push micro and small firms to grow.
• Collaboration with industry bodies and AICTE to bring in domain experts and managers to mentor and support MSMEs.
• NITI Aayog’s new platform will address ease of registration, credit access, and policy simplification.

7. Key Concern:

• “If you don’t have enough medium companies, how will you get the large ones?” — The transition gap must be addressed to ensure sustainable industrial growth.

Conclusion:
The MSME sector is a backbone of Indian industry, but suffers from a missing middle, regulatory issues, and underinvestment in skills and innovation. Policy reforms must now focus on enabling micro and small firms to scale up while ensuring ease of doing business for medium enterprises.

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