India’s medium enterprises: The silent growth engine that needs a voice

India’s economic growth story has long highlighted the contribution of its vast Micro, Small, and Medium Enterprise (MSME) sector. With over 6 crore unincorporated non-agricultural MSMEs and nearly 3.35 crore registered under Udyam, this sector contributes around 29% to the national GDP, 40% to total exports, and employs over 60% of the workforce. However, hidden in plain sight within this powerhouse is a largely neglected category: medium enterprises, which constitute just 0.3% of total registered MSMEs, yet punch far above their weight.

A recent NITI Aayog-supported study conducted by the Administrative Staff College of India (ASCI) titled “Designing a Policy for Medium Enterprises” makes a compelling case for targeted policy action. Drawing on empirical data and stakeholder inputs from six key states, the report sheds light on the strategic role of medium enterprises in exports, research and development, and employment generation, and how India might be risking economic underperformance by ignoring them.

Medium enterprises: Small in numbers, big in impact

While medium enterprises represent only 67,923 units in India, their impact is staggering:

• They contribute 40% of total MSME exports, amounting to over USD 50.56 billion in FY 2022-23.
• On average, each medium enterprise generates Rs. 39.95 crore in foreign exchange income, far outpacing micro (Rs. 1.39 crore) and small (Rs. 8.3 crore) units.
• They are research and development powerhouses, accounting for 81% of total R&D investments within the MSME sector, with each entity investing about Rs. 2.07 crore per year.
• They are also top job creators, employing 89.14 people per unit compared to just 5.7 in micro and 19.1 in small enterprises.

Despite these achievements, medium enterprises are slipping through the cracks of India's policy framework, caught between the high-support micro-small category and the more resourceful large firms, as per the report.

Missed potential and policy blind spots

The report warns of a “threshold effect” where businesses avoid scaling up to retain micro or small status and associated benefits, thereby stifling innovation and job creation. Only 17.81% of MSME scheme funds are available to medium enterprises; most flagship schemes like PMEGP and PM Vishwakarma bypass them altogether.

The consequences are real. And, as the report suggests, if India expanded its medium enterprise base by just 20%, it could unlock:

• Over Rs. 5.42 lakh crore in additional foreign exchange income.
• More than 12 lakh new jobs.
• An R&D injection of Rs. 28,118 crore, crucial for hitting India’s STI Policy R&D target of 2% of GDP.

A blueprint for empowerment

The report does not just diagnose problems, it also offers a detailed policy roadmap:

1. Dedicated Credit Lines: A medium-enterprise-focused financing scheme with fast-track approval and working capital up to Rs. 10 crore.
2. Tech Competence Centres: Revamp existing MoMSME Technology Centres to serve as Industry 4.0 hubs.
3. R&D Support Cell: A three-tier national mechanism to identify R&D gaps and fund medium-enterprise-led innovation using the Self-Reliant India (SRI) Fund.
4. Cluster Testing Labs: Extend the MSE-CDP scheme to medium enterprises for product certification and quality assurance in sectors like auto components and pharma.
5. Customised Skill Programs: Through ESDP and MDP schemes, deliver job-oriented curricula targeting export markets and sustainable manufacturing.
6. A Central Digital Portal: A sub-section of the Udyam portal tailored for medium enterprises with modules for compliance, market insights, and scheme access.

Why India cannot afford to ignore this segment

As India eyes a USD 5 trillion economy, the time is ripe to shift the spotlight from quantity to quality, towards enterprises with higher productivity, export orientation, and innovation capacity.

Medium enterprises, though numerically small, hold disproportionate potential to deliver on India's employment, innovation, and export goals. This report serves as a wake-up call to policymakers; without empowering this middle layer, India’s economic pyramid may remain structurally unsound.

It is not about creating new schemes, the report wisely advises, but optimising the current policy architecture to ensure that the growth engines of tomorrow are not stalled by neglect today.

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