NITI Aayog plans policy for medium-size firms to aid their growth

The NITI Aayog is formulating a policy to help medium enterprises become large companies, shedding their current inhibition about losing incentives meant for micro, small and medium enterprises (MSMEs).

 

“The government schemes mostly fit micro and small enterprises, while medium enterprises are missing out. We need a policy that encourages these medium enterprises. Why should we have only 10 Indian multinationals? Why not 100?” a government official asked.

 

Another government official said the key is to allow MSMEs to have tailored solutions so that medium enterprises, especially export-import (exim) traders, can be integrated more meaningfully into global value chains, separate from the distinct needs of micro enterprises.

 

Chief Economic Advisor (CEA) in the finance ministry, Anantha Nageswaran, in December last year, criticised India’s historical policies for MSMEs, arguing that they have stifled growth by keeping enterprises small.

 

“Our policies have robbed MSMEs of the mindset and incentives to grow. We must remove this fear of growth and enable them to thrive,” he said.

 

Nageswaran said MSMEs should shed their fear of growth and transform across scales — from micro to small, from small to medium, and from medium to large enterprises.

 

“Deregulation and threshold-based concessions should be linked to economic activity, not rigid metrics, to encourage growth,” he added.

 

The 2025-26 Union Budget raised investment and turnover limits for MSMEs by 2-2.5x. For example, investment and turnover limits for medium enterprises have been raised to ₹125 crore and ₹500 crore, respectively.

 

Currently, over 10 million registered MSMEs employ 75 million people, generate 36 per cent of manufacturing, and contribute 45 per cent of exports.

 

The 2024-25 Economic Survey called for deregulation, referring to MSMEs as Mittelstand (German for SMEs or middle class).

 

“Systematic deregulation is as critical, if not more, than investments in infrastructure and incentives to encourage innovation and create a viable Mittelstand, i.e., India’s SME sector. The focus on Mittelstand has played a pivotal role in the economic success of countries like Germany, Switzerland, Japan, and Singapore. These nations have leveraged the strength of their Mittelstand to drive innovation, foster high-quality manufacturing, and create a robust export economy,” the Survey noted.

 

The Survey highlighted Mittelstand’s ability to impact the economy substantially, provided it is given the right support.

 

“With deregulation, India’s Mittelstand can help states weather economic shocks, enable India to realize its manufacturing aspirations, attract long-term investments, and encourage growth. Such growth would be sustainable and ‘employment-sensitive’, i.e., enhancing workers’ long-term welfare,” the Survey said.