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Medium enterprises (MEs), a vital yet under-recognized segment of India’s MSME ecosystem, have long faced significant challenges, especially in accessing affordable and timely credit. Though they constitute only about 0.3% of registered MSMEs, medium enterprises contribute nearly 40% of MSME exports, highlighting their critical role in India’s industrial growth and global trade competitiveness.

Significance of Medium Enterprises in the Indian Economy

The MSME sector as a whole contributes around 29% to India’s GDP and employs over 60% of the workforce. However, while micro and small enterprises dominate in number (97% and 2.7% respectively), medium enterprises represent a minuscule share by count but a disproportionately large share in exports and innovation. Medium enterprises have a turnover range of ?100–500 crore and investment in plant and machinery between ?25–125 crore, as per the revised FY26 classification norms announced in the Union Budget 2025-26.

Credit Gap and Financing Challenges

NITI Aayog’s 2025 report, Designing Policy for Medium Enterprises, reveals a credit deficit of approximately $10 billion faced by medium enterprises. This gap stems from institutional biases and structural constraints. Unlike micro units that benefit extensively from priority sector lending, medium enterprises receive fewer such loans and face borrowing costs about 4% higher than those for large companies. Moreover, out of 18 government MSME schemes, only 8 specifically target medium enterprises, which receive less than 18% of total scheme funds (?5,442 crore overall). The absence of dedicated working capital schemes exacerbates liquidity issues, limiting growth and scale-up prospects.

NITI Aayog’s Key Policy Recommendations

• Working Capital Financing Scheme: A sector-specific loan scheme, administered by the Ministry of MSME, is proposed to provide medium enterprises with working capital loans capped at ?25 crore, with individual requests up to ?5 crore. Loans would be linked to enterprise turnover and offered at concessional interest rates, addressing their substantial capital needs.
• Medium Enterprise Credit Card: To meet immediate liquidity requirements—such as payroll, inventory, and equipment maintenance—a credit card facility with a pre-approved limit of ?5 crore is recommended. This facility would follow market interest rates but include a repayment grace period.
• Expedited Credit Disbursal via Retail Banks: Leveraging local retail banks for faster fund distribution under MSME ministry supervision aims to reduce bureaucratic delays and enhance timely access to credit.
• Technology and Skilling Initiatives: The report advocates transforming existing MSME technology centres into ‘India MSME 4.0 Competence Centres’ tailored to sectoral and regional demands, spanning industries like engineering, electronics, and specialized manufacturing. It also proposes incorporating medium enterprise-specific modules into entrepreneurship training and skilling programmes to bridge labour skill mismatches.
• Digital Access and Compliance Support: NITI Aayog recommends creating a dedicated sub-portal within the Udyam platform that facilitates scheme discovery, compliance guidance, and AI-powered navigation to help medium enterprises efficiently access government resources.

Broader Structural Challenges

Apart from financing, medium enterprises face low adoption of advanced technologies, limited R&D support, inadequate sector-specific testing infrastructure, and a disconnect between training programmes and industry needs. These gaps impede innovation and scalability.

Strategic Importance and Policy Outlook

NITI Aayog emphasizes that medium enterprises have the potential to be major employment generators and innovation drivers if provided focused policy attention and financial support. Drawing lessons from global examples like Germany’s Mittelstand and Italy’s fashion industry, the report envisions India’s medium enterprises evolving into globally competitive firms over the next decade.

The medium sector’s formal labour structure also makes it key to transitioning India’s economy from informal to formal. Therefore, a coordinated and inclusive policy framework focusing on finance, technology, skill development, and digital infrastructure is vital to unlock this segment’s full potential and enhance India’s industrial competitiveness, export growth, and self-reliance.