Niti Ayog Publishes "Enhancing MSME Competitiveness in India"

This report is structured into four key chapters, each designed to deepen our understanding of India’s Micro, Small and Medium Enterprises ( MSMEs) competitiveness. The exploration begins by examining the challenges faced by Micro, Small, and Medium Enterprises (MSMEs) and progresses toward a detailed analysis of competitive frameworks, cluster dynamics, and policy effectiveness. Each chapter builds upon the previous one, culminating in robust recommendations for strengthening MSME competitiveness. The opening chapter “Understanding MSMEs Challenges for Enhancing Competitiveness” delves into the array of challenges confronting MSMEs—ranging from financial constraints and technological gaps to skill shortages and regulatory hurdles. By thoroughly examining these barriers, the chapter lays a foundation for identifying key areas that require strategic intervention. Overcoming these challenges is pivotal for creating an environment where MSMEs can thrive and compete effectively. Building on the insights from the first chapter, the second chapter “Competitiveness Framework – MSMEs and the Path to Prosperity ” introduces a competitiveness framework rooted in cluster theory. This framework charts a path to prosperity by emphasizing the role of collaborative ecosystems, where enterprises, suppliers, and institutions work in synergy. By leveraging these clusters, MSMEs can enhance efficiency, spur innovation, and respond more adeptly to market demands, thus gaining a competitive edge. The third chapter “Understanding MSMEs Competitiveness in India Using Clusters Approach”. The cluster approach is employed to comprehensively understand the performance and dynamics of Small and Medium Enterprises (SMEs) within the Indian economy. Periodic Labour Force Survey (PLFS) data indicates that 74.3 percent of workers engaged in proprietary and partnership enterprises are involved in the non-agriculture sector. This information is instrumental in comprehending the nature of employment within these enterprises and highlights the significance of activities in informal sector. Understanding SMEs’ performance from PLFS data allows for a more nuanced analysis of their contribution, employment patterns, and overall impact on the informal sector. This, in addition to UDYAM registration portal, can contribute to filling the gaps in understanding the MSMEs. The UDYAM portal data reveals that a significant proportion, specifically 81 per cent, of MSMEs operate as proprietorships, with 80 per cent falling into the Microenterprise category. Recognizing the prevalence of such ownership structures, it becomes crucial to analyze and assess the performance of these enterprises collectively, which the cluster approach facilitates.