Micro, Small and Medium Enterprises (MSMEs) are often called the backbone of the Indian economy, yet they face systemic challenges in credit access, technology adoption, and formalisation. Critically examine the government's policy response in recent years.

Q. Micro, Small and Medium Enterprises (MSMEs) are often called the backbone of the Indian economy, yet they face systemic challenges in credit access, technology adoption, and formalisation. Critically examine the government's policy response in recent years. (15 marks, 250-350 words)

MSMEs contribute about 30.1% of GDP, 35.4% of manufacturing output and 45.73% of exports, making them India's largest employer after agriculture [6]. Policy in recent years has been ambitious in design, but its delivery remains uneven across the three deficits.

Credit access: widened, but skewed - Union Budget 2025-26 raised the credit guarantee cover for micro and small enterprises from ₹5 crore to ₹10 crore, intended to unlock ₹1.5 lakh crore of additional credit over five years [2]. - RAMP (₹6,062.45 crore / USD 808 million, World Bank-assisted) explicitly targets credit, market access and delayed payments [5]. - Critically: guarantee-led lending still favours registered, documented firms; the informal micro tail depends on high-cost credit, and delayed payments persist despite the MSMED Act's 45-day mandate [5].

Technology adoption: platforms ahead of capability - The TEAM Scheme (₹277.35 crore) onboards 5 lakh micro and small enterprises — half women-owned — onto ONDC, using Digital Public Infrastructure instead of costly proprietary systems [4]. - MSME Day 2026 initiatives — PMEGP 2.0, SAMADHAAN 2.0, MSME Global Mart 2.0, and AI-enabled multilingual voice access in 22 scheduled languages — lower the digital entry barrier [1]. - Critically: portals solve access, not absorption; weak managerial skills and thin cluster-level testing and design capacity limit genuine technology upgradation.

Formalisation: registration is not integration - Udyam and the Udyam Assist Platform, auto-populated from GST and income-tax data, have brought several crore enterprises onto a verifiable record. - Classification limits were raised 2.5 times (investment) and 2 times (turnover) from 1 April 2025, removing the incentive to stay artificially small [3]. - Critically: self-declared registration confers visibility, not automatic credit or markets.

The state has built the rails; the deficit now lies in enterprise-level absorptive capacity. Shifting evaluation from registration counts to outcomes — credit disbursed, dues cleared within 45 days, exports per unit — and pairing digital platforms with cluster-level skilling would let MSMEs anchor inclusive growth under Viksit Bharat 2047 [1] and SDG-8.

(~320 words)

Sources: 1. Vice President Presides Over 'MSME Day 2026 – Udyami Bharat', PIB (27 June 2026) — digital initiatives launched, AI/multilingual access, Viksit Bharat framing 2. Budget 2025-26: Fuelling MSME Expansion, PIB — credit guarantee cover raised ₹5 crore to ₹10 crore; ₹1.5 lakh crore additional credit 3. Investment and Turnover Limits for Classification of MSMEs to be Enhanced, PIB (2025) — 2.5× investment and 2× turnover revision 4. The TEAM Scheme leverages Digital Public Infrastructure to empower MSMEs, PIB — ₹277.35 crore outlay, 5 lakh MSEs, ONDC onboarding 5. Cabinet approves USD 808 million for "Raising and Accelerating MSME Performance", PIB — RAMP outlay, World Bank support, delayed-payment and market-access objectives 6. MSME sector accounts for 30.1% of India's GDP, 35.4% of manufacturing and 45.73% of exports, PIB — sectoral contribution data