-Sanjay Chavre, Advisor, TAGMA India
MSMEs are the backbone of manufacturing, yet they continue to face obstacles that slow their progress. As government policies and reports promise transformation, the bigger question is whether these recommendations truly reflect on-ground realities. The debate today is not just about bold visions for the future but about practical execution that empowers the people who keep India’s factories running every day.
India’s industrial landscape is at a turning point. As the nation pushes towards ambitious economic goals, the role of micro, small and medium enterprises (MSMEs) has never been more critical. These businesses form the backbone of manufacturing and employment, yet they continue to face structural challenges that hinder their growth. Policy reports and government initiatives often promise transformation, but the real test lies in whether they can deliver solutions that work on the ground. The debate is no longer about vision alone, it is about execution, urgency and listening to those who build and sustain the country’s factories every day.
In April 2025, NITI Aayog released a report aimed at making Indian MSMEs globally competitive. On paper, the document appears impressive, filled with strategies and economic jargon. Yet, it falls short of addressing the harsh realities of the shop floor. The authors, experts in economics and strategy, seem far removed from the daily struggles of factory owners. What emerges is a glossy report that lacks grit and fails to capture the lived experience of running a small manufacturing unit.
The report is filled with terms such as ‘digital onboarding’ and ‘cluster synergy’phrases that sound appealing in seminars but do little to solve the pressing challenges faced by MSMEs. Practical solutions are conspicuously absent. The absence of input from ground-level entrepreneurs makes the recommendations feel detached, as though written from the comfort of air-conditioned offices rather than the dust and heat of factories. Real solutions must be rooted in the realities of production, not abstract theory.
The Payment Problem
One of the most pressing issues for MSMEs is delayed payments from large buyers. The report fails to provide a strong remedy for this persistent problem. What is urgently needed is strict enforcement of the 45-day payment rule, backed by heavy penalties for non-compliance. Countries such as Germany impose severe costs on buyers who delay payments, ensuring cash flow stability for small businesses. India must adopt similar deterrents, coupled with timely dispute resolution mechanisms through executives, courts, tribunals, or mediators. Without assured payments, machines fall silent and workers are left idle.
Another critical gap lies in banking policy. At present, banks extend loans to MSMEs for a maximum of seven years, a period far too short for financing expensive machinery. Repaying such large sums within this timeframe is unrealistic. What MSMEs require are long-term loans of up to 30 years, similar to those available in Japan. Sustainable growth demands long-term money, yet the report remains silent on this essential reform.
The Reserve Bank of India’s lending policies remains outdated and misaligned with the needs of industry. A complete transformation of industrial finance is overdue. Banks, often compared to mother bees profiting from hardworking MSME bees, continue to restrict access to affordable credit. Despite government initiatives, MSMEs are forced to rely on non-banking financial companies (NBFCs), where interest rates range from 14% to 16%. With average net profit margins below 10%, such high borrowing costs make survival nearly impossible.
Expanding Credit Access
The government has announced an increase in credit guarantee cover for micro and small enterprises, raising the limit from INR5 crore to INR 10 crore. This is expected to enable additional credit of INR 1.5 lakh crore over five years. Start‑ups will see their guarantee cover double from INR 10 crore to INR 20 crore, with a reduced fee of 1% for loans in 27 priority sectors. Exporter MSMEs will also benefit from term loans up to INR 20 crore with enhanced guarantee cover. Yet, this remains a drop in the ocean. To truly meet the needs of industry, the limit must be raised to INR 500 crore, the outer threshold defined under the MSME Act. Only then will enterprises have access to credit that matches the scale of their investment.
A new customised credit card scheme promises INR 5 lakh in credit to micro enterprises registered on the Udyam portal. While this is a welcome step, its scope is too narrow. Such facilities must be extended to all MSMEs, with suitably higher credit limits to reflect the realities of modern business.
Removing Barriers to Technology and Exports
Technology adoption is another area where the report falls short. MSMEs want to purchase high‑precision machines to compete globally, but import duties make them prohibitively expensive. The report speaks vaguely of ‘technology adoption’ without addressing the taxes that block progress. Duty waivers on machines not manufactured in India are essential. Without them, Indian firms cannot hope to match the competitiveness of countries such as China, where tools are far more affordable.
Government grants are also needed to support the development of tooling and other products tailored to export markets, particularly those aligned with India’s free trade agreements. The GST revenue generated from such exports could easily offset the cost of these grants, making them fiscally sustainable.
Learning from Global Models
China offers a striking example with its ‘Plug‑and‑Play’ factories. The government builds the sheds and utility connections, leaving business owners to simply install their machines and begin operations. This model saves enormous amounts of money and time for start‑ups. India must adopt a similar approach, backed by world‑class transport and ICT infrastructure.
Germany provides another lesson through its ‘Dual System’ of training. Here, 70% of worker training takes place in factories rather than classrooms. By contrast, the report largely recommends updating school curriculums, which is insufficient. Real skills are forged on the shop floor, and industry groups (not government departments) must lead this effort.
Finance remains the most urgent area for reform. Tooling should be declared a ‘Priority Sector’, compelling banks to lend more readily. Loans must be based on order books rather than collateral, and liberal external commercial borrowings should be permitted under automatic windows. Without such measures, MSMEs cannot upgrade their technology or expand sustainably.
Innovation, too, requires bold fiscal support. R&D is costly and often yields losses in the early stages. India should introduce tax deductions of up to 300% on R&D expenditure, as China did to modernise its industry. Innovation financing must also absorb the risks: failed projects should be written off, while successful ones should feed into a non‑lapsable pool to fund further innovation.
To achieve the ambition of becoming a $5 trillion economy, India must move beyond theoretical reports. The government must listen to practical industry bodies such as TAGMA, whose members live the realities of production every day. Policies must work on the ground, not just in libraries. Only then can India build a truly ‘Viksit Bharat’.
Conclusion
The path to a $5 trillion economy will not be paved by academic prescriptions alone. MSMEs require timely payments to keep machines running, affordable long‑term loans to finance growth, and access to modern technology without punitive import duties. They need government grants to develop export‑worthy products, infrastructure that mirrors China’s ‘Plug‑and‑Play’ model, and training systems inspired by Germany’s factory‑based dual approach. Above all, they need financial reforms that declare tooling a priority sector, allow lending against order books, and incentivise innovation through bold tax deductions and risk‑absorbing grants. Reports may fill libraries, but factories demand solutions that work today. If India is serious about building a truly Viksit Bharat, policymakers must listen to the makers, the entrepreneurs and workers whose daily struggles define the nation’s industrial backbone.
About the Author:
Sanjay Chavre, Advisor – TAGMA India
A respected technocrat and policy strategist, Mr. Sanjay Chavre has been a pivotal figure in the evolution of India’s manufacturing and tooling ecosystem. With decades of experience at the intersection of government and industry, he has contributed to the development of forward-looking policies that promote indigenous technology, strengthen domestic capabilities, and uplift MSMEs within the tooling and precision engineering sectors.
Mr. Chavre has held key roles in various government departments and has been instrumental in formulating and executing initiatives that align with India’s long-term vision for industrial growth and self-reliance. His expertise lies in enabling public-private collaboration, fostering innovation ecosystems, and building frameworks that support sustainable industrial development.
In his current role as Advisor to TAGMA India, he continues to guide efforts aimed at enhancing the global competitiveness of Indian toolmakers. His insights have been vital in positioning the Indian tooling industry as a reliable and technologically advanced partner in the global supply chain
This article was published in TAGMA Times
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