– Tanisha Saxena
In 2025, the single biggest challenge facing MSMEs isn’t access to capital or market linkages—it’s the transition from traditional business practices to a digital-first economy. “For decades, business operations relied on physical paperwork,” said National President IIA, Shri Neeraj Singhal. “Today, nearly everything is digitally integrated. The challenge is that any delay in adopting digitalization becomes a roadblock in itself.”
But digitalization is a double-edged sword. While it enables efficiency, connectivity, and financial inclusion, the pace of adoption varies widely. Many business owners struggle to navigate government portals or make full use of digital tools available to them. “It’s not just a lack of awareness—it’s information overload,” Shri Singhal explained. “MSME owners are bombarded with information from multiple sources, some of which is incomplete or misleading. This leads to frustration and disengagement.”
This gap is evident in government-backed digital initiatives. While platforms exist to streamline business operations, many entrepreneurs remain unaware of their benefits or find them too cumbersome to use. “At a recent MSME conference, I met business owners who didn’t even know about the government resources available to them,” Shri Singhal noted.
The Disconnect Between Policy and Execution
Government policies aimed at bolstering MSMEs often fail in execution. “Many policies exist on paper but aren’t effectively implemented at the grassroots level,” Shri Singhal said. While new-generation bureaucrats—particularly younger IAS officers—bring a progressive mindset to the table, systemic inefficiencies continue to slow the reform process.
One of the biggest blind spots is the distinction between ease of doing business and ease of doing manufacturing. The former is frequently emphasized in global rankings, favouring service-based economies, while the latter—critical for a country like India—receives far less attention. “Germany ranks among the top economies despite a lower ease-of-doing-business ranking because it prioritizes manufacturing,” Shri Singhal pointed out. “India needs to adopt a similar approach—simplifying regulations, rationalizing taxation, and ensuring policy implementation at the grassroots level.”
Land Ownership and Industrial Growth
Beyond digitalization, another fundamental issue throttling MSME expansion is land ownership. “Government landowners should not remain government landowners indefinitely,” Shri Singhal remarked. Historically, land policy in India has been shaped by colonial-era structures, where vast tracts were controlled by a few. The post-independence abolition of the Zamindari system was a step toward equitable distribution, but the concentration of land—particularly in urban and industrial zones—remains a roadblock for new businesses.
“Why don’t we see industries in India that have lasted 200 or 400 years, as we do in other countries?” Shri Singhal asked. “After 1947, we missed the opportunity to develop long-lasting industrial legacies. How many micro and small enterprises have successfully transitioned into second and third-generation businesses? The data would be telling.”
Shri Singhal proposed a radical idea: “We have moved toward ‘one tax, one nation’—why not apply the same principle to land policies? Just as we reformed the Indian Penal Code (now Bharatiya Nyaya Sanhita), we must also modernize land regulations. Uniformity is the need of the hour.”
The Skilled Labor Dilemma
Even as India’s MSME sector expands, a persistent challenge remains—finding skilled labour. “For years, MSMEs have collaborated with Industrial Training Institutes (ITIs), but the quality of training is not always up to industry standards,” Shri Singhal admitted. “Many workers receive training in small workshops rather than formal institutions.”
A skilled labour shortage not only stunts industrial growth but also perpetuates job insecurity. The churn is constant—workers gain experience and quickly move to better opportunities. “Recent education policy reforms have introduced hands-on training, which is a step in the right direction. But real skill development requires long-term mentorship, not five-day workshops.”
One senior bureaucrat once declared that India needs to train 1.4 million skilled workers. But the question remains—can this be achieved through short-term programs? “We need to assess whether such efforts are genuinely building expertise or merely creating superficial qualifications,” Shri Singhal warned.
For MSMEs looking beyond India’s borders, trade fairs and expos provide a vital gateway to international markets. “If you look at Germany and China, they dominate global trade fairs—from packaging to paper manufacturing,” Shri Singhal noted. “Their commitment to these platforms has solidified their leadership in global supply chains.”
India is working to build a similar ecosystem. By actively participating in trade fairs, MSMEs gain exposure, explore technology transfers, and establish partnerships. However, their ability to leverage such platforms hinges on overcoming domestic regulatory challenges first.
A Call for Long-Term Thinking
India aspires to become a developed nation by 2047, but its MSME sector remains at a crossroads. While digitalization, land policy, and skill development present formidable challenges, they also offer opportunities for transformation—provided the right policy interventions take hold.
“Our decisions should reflect a long-term vision, not short-term political cycles,” Shri Singhal emphasized. “Taxation and finance are just components of the ecosystem—they’re not the ecosystem itself. What we need is a holistic strategy that addresses everything from raw material sourcing to labour laws.”
The road ahead for MSMEs is complex, but one thing is clear: India’s ability to support and sustain these enterprises will determine whether it can truly achieve its economic ambitions.
