What are the challenges faced by the Micro, Small and Medium Enterprises in India? Discuss the steps taken by the government to address the same.

What are the challenges faced by the Micro, Small and Medium Enterprises in India? Discuss the steps taken by the government to address the same.


  • Introduce with the importance of MSMEs in India.
  • Explain the key challenges faced by MSMEs in India.
  • Highlight key steps taken by the government to address the same.
  • Conclude appropriately
Model Answer :

The significance of Micro, Small and Medium Enterprises in the Indian economy is attributed to the fact that they contribute nearly 45% of industrial output, 40% of exports and have a huge employment generation potential. Despite this significance, the MSMEs face numerous challenges today.

The key challenges are:

  • Access to Capital:It is the most challenging barrier as most MSMEs are unable to offer collateral and don’t have a credit history, this results into denial for the credit or charging of high interests rate by the financial institutions.
  • Poor Infrastructure:Lack of adequate infrastructure like connectivity to hinterlands, delayed and costly electricity connections, poor logistics sector etc dwarfs the growth of MSMEs.
  • Lack of Modern Technology: Limited communication networks, low-level production technologies, lack of adequate intellectual property rights regime in India, etc have resulted in a poor state of technology assimilation in the MSMEs.
  • Export Challenges:Stiff competition form MSMEs of countries like Thailand, Mexico etc clubbed with a slowdown in global demand are key challenges. Also, procedure and supporting infrastructure for export are a challenge.
  • Others: Getting timely statutory clearances, supply chain management, lack of skilled manpower etc are challenges for the MSMEs.

To overcome the challenges the government has initiated:

  • Technology Upgradation and Quality certifications to ensure Zero Defect and Zero Effect practices in the manufacturing process. The government will provide 50-80% subsidy based on the ratings by the empanelled Credit Rating Agencies.
  • ASPIRE,i.e A Scheme for promoting Innovation, Rural Industry & Entrepreneurship with the objective of promotion of innovation, entrepreneurship and Agro-Industry organisation of the MSMEs and monetary grant for acquiring plant and machinery.
  • Credit Linked Capital Subsidy for Technology Upgradation provides 15% subsidy for additional investment up to ₹ 1 cr for technology upgradation by MSMEs.
  • Marketing Assistance Schemefor the organisation of international exhibition and marketing promoting activities for the MSMEs
  • Entrepreneurship Skill Development Programmesare being organised regularly in ITIs , Polytechnics and other technical institutions to nurture the talent of youth.
  • SFURTI,i.e. Scheme of Fund for Regeneration of Traditional Industries with the key objective of organising the traditional industries and artisans into clusters, making them competitive and provide economy of scale.

There are many other schemes undertaken to cater to the challenges faced by the MSMEs. It is important for the Indian economy that MSMEs overcome the challenges faced and reap the opportunities available across the sectors.

Subjects : Economy