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Loans and R&D Boost for Medium Enterprises in India
Concessional loan scheme for medium-sized firms
Context: In a significant move to strengthen India’s medium-sized enterprises, NITI Aayog has proposed a dedicated concessional loan scheme and a host of policy reforms to help these firms become more competitive, especially in exports and innovation.
Medium Enterprises Face Higher Capital Costs
- The report titled “Designing a Policy for Medium Enterprises” underscores the financial challenges unique to medium enterprises.
- Unlike micro or large businesses, medium firms in India face higher capital costs and limited access to priority sector lending.
- The average interest rate for these businesses is reportedly 4% higher than for larger companies, despite their critical role in employment and innovation.
- To address this, the report recommends launching a concessional credit scheme under the Ministry of Micro, Small, and Medium Enterprises (MSME).
Key Proposals
- Loans capped at ₹25 crore with a per-request ceiling of ₹5 crore
- Launch of a Medium Enterprise Credit Card with a pre-approved limit up to ₹5 crore
- Interest rates aligned with market norms to enhance credit accessibility
Expanded Definition Brings More Firms into the Fold
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- The policy proposal follows the revised definition of medium enterprises in the Union Budget 2025.
- The new thresholds — ₹100–500 crore in turnover and ₹25–125 crore in investment — are up from the earlier limits of ₹50–250 crore and ₹10–50 crore respectively.
- This expansion aims to include more firms under the “medium” classification, thereby increasing their access to targeted schemes.
- Despite comprising only 0.3% of India’s 6 crore MSMEs, medium firms:
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- Employ an average of 89 people per entity, compared to 19 for small and 6 for micro enterprises
- Account for 81% of MSME investment in research and development (R&D)
Push for R&D and Testing Infrastructure for Medium Enterprises
- Recognising the innovation potential of medium firms, the report calls for reserving 25-30% of the ₹50,000 crore Self-Reliant India (SRI) Fund for medium enterprise R&D projects.
- The SRI Fund, launched in 2021, has so far invested ₹4,885 crore into MSMEs.
Strengthening R&D
- Adopting an EU-style funding model, where the government identifies priority research gaps and invites project proposals from medium enterprises
- Ensuring medium enterprises receive exclusive access to national R&D funds
- On the quality testing front, the report noted that medium firms face hurdles due to:
- High costs of private testing centres
- Delays in certification
- Limited access to sector-specific, affordable testing infrastructure
- To solve this, it proposes extending the Micro and Small Enterprises Cluster Development Programme (MSE-CDP) to medium enterprises, enabling them to benefit from shared quality testing and certification infrastructure.
Skilling for Formal Employment and Productivity Growth
- The report also highlights the need to link skill development with formal employment, especially since medium enterprises are more likely to offer formal jobs than micro or small businesses.
- India’s skilled labour availability currently stands at just 55%, compared to: 88% in South Korea, 85% in the United States and 81% in Japan.
- To bridge this gap, the report recommends:
- Real-time skill mapping via the MSME Sampark Portal
- Expansion of the Entrepreneurship and Skill Development Programme (ESDP)
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- Subsidised and customised training programs aligned with emerging technology trends
With medium enterprises emerging as a vital engine for employment, R&D, and exports, the NITI Aayog report offers a timely blueprint to empower this segment. By improving access to credit, scaling R&D investments, enhancing testing infrastructure, and aligning skilling efforts with formal employment, India can unlock the full potential of its medium business sector.
