India’s MSMEs need systems, not more schemes
India cannot achieve its manufacturing ambitions without a robust micro, small and medium enterprises sector. MSMEs contribute roughly 30% of the country’s GDP and offer employment to around three crore people. But Indian MSMEs lag in productivity, exports, and technological depth, and the contrast with European peers is instructive.
European firms operate in a tightly regulated high-cost environments. Labour is expensive, compliance exacting, and competition intense. Yet MSMEs in Germany, Italy, France, and Austria contribute between 45 and 70 per cent of GDP and dominate manufacturing value addition. The difference is not firm size or labour cost. It is the ecosystem in which firms operate.
Europe’s experience shows that when MSMEs are embedded in coherent systems of finance, skills, innovation, clustering, and predictable regulation, they can compete globally from high-cost locations. India’s constraint is not entrepreneurial capacity. It is institutional design.