Over the past decade, despite a global pandemic, an economic slowdown, and geopolitical concerns, India has emerged as one of the fastest-growing economies in the world. This is reflected in the country’s high GDP growth rates. The growth of India’s micro, small, and medium enterprises (MSME) segment has been a strong driver of the country’s economic expansion—they contribute 33% to India’s GDP (in 2019) and make up 45% of total exports (in 2023). MSMEs are also a leading employment generator, presently employing 110 million people.
The MSME segment is a cornerstone of India’s vision of becoming the third-largest economy by 2027 and Viksit Bharat by 2047. However, there is a need to address some structural challenges faced by this segment to harness its potential.
Mired in Challenges
Compared to larger corporations, MSMEs have limited access to capital and lesser in-house technical capabilities. It is challenging for them to invest in advanced digitisation and automation. Their dependence on manual operations creates functional challenges around consistent quality control and higher cost of production. Complex regulatory and compliance requirements add further pressure on this segment. The government has already undertaken several policy reforms to ease these challenges. For example, the recently-introduced account aggregator framework will enable easier access to credit.
These challenges can best be navigated through technologies specially curated for MSMEs.
Over the last five years, we have seen several start-ups focused on creating products and solutions to serve MSMEs’ unique needs at cost, and this indicates work for the segment while furthering the ‘Make in India’ initiative. Many large-cap organisations have created business lines dedicated to this segment, with the vision to offer world-class cost-effective technologies.
Digital Solutions
Automation enabled by innovative technologies such as artificial intelligence, blockchain, and machine learning has emerged as a game changer in solving some of the operational challenges. For example, blockchain technology can capture critical shipping-condition data for temperature-sensitive goods or address counterfeiting problems that can arise while goods are in transit.
Energy and operations efficiency is a key area of focus. Several technological interventions can help. For example, smart motion detectors based on passive infrared technology, which turns the lights up only when the space is occupied, can reduce energy consumption by up to 60%. Similarly, plug-and-play Infrared Air-Conditioner Controllers can save on power bills. Digital solutions can help analyse data and detect wear and tear in equipment, reducing maintenance costs and increasing equipment uptime. Automation is helping reduce manual errors, increasing the overall efficiency and productivity.
We recognise the importance of cost optimisation throughout the entire business journey of an MSME. Understanding this pulse, the industry is curating high-value and need-based solutions at the right price point. For instance, several automation solutions in our very own portfolio are designed to help MSMEs reduce errors, and make their operations more efficient, safe, secure, and compliant.
Policy Support
Policy support and government interventions have been pivotal in promoting growth and innovation in MSMEs. The Digital MSME Scheme is promoting the adoption of the latest information communication technology tools. The Zero Defect Zero Effect (ZED) Scheme aims to promote climate-conscious and sustainable operations across MSMEs through waste minimisation and integration of global standards of production. Some areas like ease of financial access and compliance management would benefit from further policy support.
The growing skill deficit in the MSME segment is an area that requires cohesive planning and execution. The segment is poised for an estimated addition of 150 million jobs over the next five years. We are seeing significant action across the spectrum to fill the skilling gap. The National Skill Development Mission is aimed at building the right-skilled workforce for the industry. Several organisations and industry bodies are further complementing the government’s efforts through various initiatives to drive skill development and facilitate formal employment across all demographics. There is a need to further accelerate these efforts to meet the sector’s needs.
Collaborative Action
Government and large corporations need to complement each other to create the right ecosystem for MSMEs. Well-crafted policies will stimulate innovation, streamline regulations, and improve access to financial resources. Fostering cooperation among MSMEs is also essential. Establishing clusters and setting up a platform to share resources, solve problems collectively, and enhance their bargaining power would go a long way.
Large corporations can support MSMEs by integrating them into supply chains, offering technical support, extending credit limits, or establishing financing programmes and providing mentorship.
Our ‘Make in India’ commitment strives to serve the MSME segment and even the industry is constantly upgrading its product portfolio to meet the needs of the MSME customer base. Stakeholders across the spectrum are engaging in close collaborations with customers and this has helped cater to MSMEs across geographies. 
The author is President, Honeywell India. Views are personal