Strengthening of MSMEs is Essential in Times of War
By Dr. Jayantilal Bhandari
In the context of growing tensions with Pakistan and global economic uncertainties, strengthening Micro, Small and Medium Enterprises (MSMEs) across India has become critically important. When the supply chain is disrupted during war-like situations, locally based MSMEs play a vital role in quickly producing food, medicine, and defense items at affordable costs.
On May 7, Prime Minister Narendra Modi instructed various ministries, including the Ministry of Industry and MSME, to operate at full strength to prepare for possible conflict scenarios. This directive highlights the central role of MSMEs in maintaining supply chains and supporting national security.
Amid heightened tensions with Pakistan and tariff pressures from the US, the recent 90-day pause on the 26% tariff by the US offers temporary relief. However, many Indian MSME exporters still face challenges such as renegotiation of contracts, delays in payments, and demands for deeper discounts. Strategic governmental support is therefore crucial.
During his National Civil Service Day address, PM Modi emphasized that India’s MSMEs have a historic opportunity to integrate into the global supply chain despite challenges. To boost the sector, the government is fast-tracking its Rs 2,250 crore Export Promotion Mission and increasing collateral-free loans. For FY 2025-26, MSME lending is targeted at Rs 17.5 lakh crore—20% higher than the previous year.
MSMEs are now focusing on innovation, competitiveness, capacity building, and research. With 5.93 crore registered MSMEs employing over 25 crore people and contributing 30% to the country’s GDP, their importance cannot be overstated. In 2024-25, MSMEs accounted for Rs 12.39 lakh crore in exports—46% of India’s total export value.
The 2025-26 Budget has introduced several initiatives to strengthen the MSME sector, including the Udyam Registration Portal, PM Vishwakarma Yojana, PMEGP, SFURTI, and the Public Procurement Policy. These programs aim to promote entrepreneurship, formalize informal businesses, and increase employment. Investment and turnover limits for MSME classification have also been raised.
Despite a 26% tariff from the US—less than China (245%), Bangladesh (37%), and Sri Lanka (44%)—some Indian MSME products may gain a comparative advantage. However, it's critical to upgrade MSME capabilities, streamline operations, and enhance policy support to face such challenges effectively.
Steps like improving infrastructure, expanding logistics support, offering low-interest loans, reviving interest equalization schemes, and enlarging credit guarantee programs can stabilize MSMEs financially. Simplifying the GST system and expanding Production-Linked Incentive (PLI) schemes will also benefit export-oriented MSMEs.
Adoption of digital technologies and a focus on high quality production can enhance India’s MSME competitiveness globally, especially in the US market. Innovation can drive a new phase of growth in the sector.
Optimism is high following US Treasury Secretary Scott Bastard’s statement that the proposed Bilateral Trade Agreement (BTA) with India is nearing completion. If finalized, India could become the first country to sign such a deal with the US, providing a major boost to Indian MSMEs.
With the ongoing war-like situation, MSMEs are expected to rise to the occasion and fulfill their national responsibility by maximizing efficient production. Timely and strategic support from the government will ensure that MSMEs become not only the backbone of the economy but also a pillar of national resilience.