Government Mandate Drives MSME Growth in Strategic Defence and Space Sectors
The Central government is actively encouraging public sector enterprises to source critical components for India's space and defence industries from micro, small, and medium enterprises (MSMEs). This strategic push is establishing a dedicated growth corridor for small-scale manufacturers, integrating them into the nation's most vital supply chains.
MSMEs Emerge as Key Players in National Security and Space Exploration
Speaking at the Pune International Business Summit, Rajneesh, Additional Secretary of the MSME Ministry, emphasized the transformative role of small businesses. "MSMEs across the country are no longer just peripheral players; they are now key suppliers to the Indian Space Research Organisation (ISRO) and the defence sector," he stated. The summit, a two-day event organized by the Mahratta Chamber of Commerce, Industry and Agriculture (MCCIA), receives support from the MSME Ministry and the World Bank under the Raising and Accelerating MSME Performance (RAMP) initiative.
Data from MCCIA reveals the significant local impact, with Pune alone hosting approximately 600 MSMEs currently supplying components to the defence sector. Rajneesh highlighted specific contributions, noting that the MSME ministry's technology centre in Bhubaneswar manufactured and supplied over 400 critical components for the successful Chandrayaan lunar mission. Similarly, MSMEs and technology centres nationwide played an instrumental role in providing essential parts for the Light Combat Aircraft (LCA) Tejas program.
Procurement Mandate Exceeds Expectations, Delivering Cost Savings
A primary catalyst for this integration is a government mandate requiring public sector enterprises to source a minimum of 25% of their procurement from micro and small enterprises. Rajneesh acknowledged initial industry reluctance but reported overwhelming success. "Current figures show that 46% of procurement by public sector enterprises now comes from MSMEs. This shift occurred because MSMEs not only met strict technical specifications but also reduced procurement costs for PSUs by 20% to 30%," he explained.
MSMEs: Titans of Export and Employment Despite Persistent Challenges
Despite facing global economic headwinds, Rajneesh pointed to India's free trade agreements (FTAs) as a future growth driver for the sector. MSMEs currently account for nearly 45% of India's total exports, which stand at approximately $825 billion (Rs 75 lakh crore). Domestically, the sector remains an economic powerhouse, employing 32 crore people and contributing 31% to the national output.
To bolster this foundation, the government has formalized over 4.5 crore MSMEs, enabling them to access various credit and support schemes. However, significant hurdles persist, including issues with delayed payments, quality control, and the ongoing need for broader formalization.
Addressing the Credit Gap and Advocating for Regional Solutions
Rajneesh also tackled the "high-risk" perception that often discourages banks from lending to small businesses. "Lenders are frequently wary of MSMEs, fearing high non-performing assets (NPAs). However, the data tells a different story: NPA levels in the MSME sector are remarkably low at just 3.4%," he clarified, urging financial institutions to reassess their risk models.
Looking forward, the Additional Secretary called for a move away from uniform national policies. He stressed that because MSMEs face unique challenges depending on their geography—from infrastructure to market access—customized state-specific interventions are essential to unlocking their full potential and sustaining this strategic growth corridor.
