NITI Aayog's Policy Framework for Medium Enterprises

Comprehensive Analysis & Strategic Recommendations

Prepared by: Sumit Sir  

Executive Summary

NITI Aayog has released a comprehensive report titled "Designing a Policy for Medium Enterprises" proposing strategic interventions to support India's medium-sized enterprises. The report addresses critical challenges faced by these firms, including limited access to affordable credit, higher interest rates, and insufficient R&D support.

Key Insight: Medium enterprises represent only 0.3% of registered MSMEs but contribute significantly to employment (89 people per entity) and account for 81% of all MSME R&D investment.

Policy Context & Timing

This proposal comes after the Union Budget 2025 expanded the definition of medium enterprises:

Parameter	Previous Definition	New Definition (2025)
Turnover	Rs 50-250 crore	Rs 100-500 crore
Investment	Rs 10-50 crore	Rs 25-125 crore

Current Challenges Facing Medium Enterprises

4%Higher interest rates compared to large firms

0.3%Of total registered MSMEs

89Average employees per medium enterprise

81%Share of MSME R&D investment

Primary Challenges Identified:

1. Credit Access Issues: Medium enterprises receive significantly fewer priority sector loans compared to micro enterprises and face higher interest rates.

2. Testing Infrastructure: Limited access to affordable, sector-specific testing facilities increases operational costs and certification delays.

3. Skilled Labor Shortage: India's skilled labor availability at 55% lags behind South Korea (88%), USA (85%), and Japan (81%).

NITI Aayog's Strategic Recommendations

1. Concessional Credit Scheme

Proposal: Dedicated financing scheme under MSME Ministry

Features:

• Loans capped at Rs 25 crore
• Maximum Rs 5 crore per request
• Medium enterprise credit card with pre-approved limit up to Rs 5 crore
• Interest rates aligned with market rates

2. R&D Enhancement Strategy

SRI Fund Allocation: Reserve 25-30% of Self-Reliant India Fund exclusively for medium enterprises

Fund Details:

• Total allocation: Rs 50,000 crore (Rs 10,000 crore from Centre + Rs 40,000 crore from private equity)
• Investment since 2021: Rs 4,885 crore in MSMEs
• Adopt EU-type funding mechanism for R&D gap identification

3. Quality Testing Infrastructure

Extension of MSE-CDP: Expand Micro & Small Enterprises Cluster Development Programme to include medium enterprises

Benefits: Access to shared testing infrastructure, reduced operational costs, faster certification

4. Skill Development Initiatives

Digital Integration: Real-time skill mapping via MSME Sampark Portal

Training Programs:

• Expand Entrepreneurship and Skill Development Programme (ESDP)
• Introduce subsidized, customized training aligned with technology trends
• Focus on formal employment transition

Global Comparison

India's skilled labor availability comparison:

Country	Skilled Labor %
South Korea	88%
United States	85%
Japan	81%
India	55%

Policy Impact Analysis

Expected Outcomes:

Economic Growth: Enhanced competitiveness of medium enterprises in global markets

Employment: Transition from informal to formal employment, with better skill development opportunities

Innovation: Increased R&D investment and technological advancement

Export Competitiveness: Improved quality testing and certification processes

Key Stakeholder Perspectives

Suman Bery, NITI Aayog Vice Chairperson:

"Focussing on skilling and medium enterprises together is crucial. We need to make the transition from informal employment, typically associated with micro and small enterprises, to formal employment, associated with the medium enterprise sector. It is with formal employment that firms get an incentive to invest in the training of their workforce."

Implementation Framework

The report emphasizes a coordinated approach involving multiple ministries and agencies:

• MSME Ministry: Credit scheme implementation and skill development
• NITI Aayog: Policy coordination and monitoring
• Financial Institutions: Concessional lending mechanisms
• Industry Clusters: Testing infrastructure development

Conclusion & Strategic Importance

NITI Aayog's comprehensive policy framework for medium enterprises represents a strategic shift towards recognizing the unique position of medium-sized firms in India's economic ecosystem. By addressing credit access, R&D support, quality testing, and skill development simultaneously, this policy aims to unlock the significant potential of medium enterprises to drive economic growth, employment generation, and export competitiveness.