‘Designing a Policy for Medium Enterprises’: NITI Aayog-ASCI’s Report Calls for Further Support

New Delhi: A policy blueprint aimed at bolstering India’s medium-sized businesses has been released recently. The Administrative Staff College of India (ASCI), with support from NITI Aayog, has released a comprehensive study titled “Designing a Policy for Medium Enterprises”.

This NITI Aayog-backed report highlights the critical yet often overlooked role played by medium enterprises in India’s economy and proposes a suite of targeted policy interventions to unlock their full potential.

Medium Enterprises: High Impact, Low Attention

Even though medium enterprises comprise just 0.3 per cent of India’s total registered Micro, Small and Medium Enterprises (MSMEs), their contribution to exports, employment and innovation is disproportionately high.

The report reveals that MEs account for nearly 40 per cent of MSME export earnings and 81 per cent of the sector’s R&D investment. On average, each ME employs around 89.14 individuals, compared to just 5.7 in micro and 19.1 in small enterprises.

“Medium enterprises are the most productive and globally competitive segment of the MSME sector, yet they remain underserved by current policy frameworks,” the report stated.

Challenges Holding Back Medium Enterprises

Despite their strength, MEs face several systemic hurdles. These key challenges include:

Limited access to finance: Only one major government scheme, the Self-Reliant India Fund, offers direct financial support to medium enterprises.

Poor scheme awareness: Just 10 per cent of surveyed MEs had availed of any of the 18 central MSME schemes, largely due to low awareness and bureaucratic hurdles.

Low technology adoption: 82 per cent of respondents reported not using advanced digital technologies like Industry 4.0-artificial intelligence (AI) or IoT.

Skilled manpower shortages: Many enterprises struggle to recruit trained workers or access relevant skill development programs.

Regulatory compliance burden: A lack of clarity and digital integration in compliance processes hampers business expansion and formalisation.

Key Recommendations: A Targeted Policy Architecture

The report calls for a dedicated, ME-specific policy framework and offers six major policy recommendations:

Dedicated Financial Support: Proposes a new credit scheme for MEs with fast-track approvals, concessional interest rates and loan limits up to Rs 10 crore. It also suggests introducing a business credit card with a pre-approved Rs 5 crore limit

Technology Integration: Recommends upgrading existing Ministry of MSME Technology Centres into “India ME Competence Centres” focusing on industry-specific innovation, especially in sectors like ESDM, fragrance and flavour, and sports goods.

Boost to R&D: Suggests creating a dedicated R&D funding mechanism with a three-tier governance structure and reserving a portion of the Self-Reliant India Fund exclusively for ME projects.

Cluster-Based Testing Infrastructure: Calls for integrating medium enterprises into the existing MSE-Cluster Development Programme to facilitate product testing and certification based on sectoral concentration across states.

Customised Skilling Programs: Advocates for mapping skill needs at the regional cluster level and tailoring Entrepreneurship Skill Development Programs (ESDPs) specifically for medium enterprises.

Digital Information Portal: Proposes a sub-portal within the Udyam platform dedicated to medium enterprises, providing centralised access to schemes, compliance support and market research tools.

Policy Gaps and Underfunding

The study also highlights a skew in public funding: of the Rs 5,442 crore allocated to the MSME sector in 2022–23, only 17.81 per cent was earmarked for schemes accessible to MEs.

It stated: “68 per cent of the funds are allocated to only two schemes – PMEGP (50 per cent) and PM Vishwakarma (18 per cent), both of which are not meant for Medium Enterprises. Interestingly, the percentage share of the total funds allocated to schemes that are available for Medium Enterprises is only 17.81 per cent.”

This imbalance, according to the report, could create a threshold effect, discouraging small enterprises from growing into the medium category to continue availing preferential support.

Future Roadmap

With India aiming to become a $5 trillion economy, the report asserts that the medium enterprise segment must be a policy priority.

Even a 20 per cent increase in the number of medium enterprises could yield an additional 12 lakh jobs, Rs 28,000 crore in R&D investment and Rs 5,42,544.96 crore in forex earnings.

It is understood that MEs are poised to be the new engines of innovation, exports and employment. However, the report then noted that what they need is not more schemes, but smarter and targeted support.

With the report now released, it is expected to form the basis for future policymaking and discussions with ministries like the Ministry of MSME, the Ministry of Finance, as well as the Ministry of Skill Development and Entrepreneurship.

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