Driving India’s MSME Renaissance: Technology, Innovation and R&D for Global Competitiveness

MSMEs are the backbone of India’s growth, contributing 30% to GDP and half the exports, employing millions. However, most lack back-end processes, integrated supply chain and procurement, with only 15?opting Industry 4.0 technologies.

In the context of current geopolitical turbulence, we need to modernise our industrial base. A comprehensive strategy is needed to infuse technology and R&D across industry and services. A multidimensional thrust—including increased investment, testing and capacity building, regulatory reforms, cluster-driven innovation, and state-level competition— is essential.

• India’s overall R&D expenditure is only 0.66% of GDP, as per the World Bank, well behind developed economies that allocate over 1.5%.
• Weak infrastructure & connectivity: Unreliable electricity, weak digitalisation, unreliable internet, and high implementation costs.
• Limited awareness and access: Many MSMEs are unaware of, or not able to access, government schemes that support technological upgrades.
• Need to expand R&D investment and incentives: Substantially increase public and private R&D investments to at least 1.5% of GDP, supported by states and industry, and apply R&D in a mission mode. Also, widen eligibility for patent box regimes and incentives to cover designs, models, and substantial intellectual property development to fuel innovation and FDI.
• Strengthen industry-academia collaboration: Build more innovation hubs and sectoral research centres, leveraging university capabilities to nurture long-term R&D talent and bridge skill gaps. Joint applied research projects and technical training programmes tailored for MSMEs with government funding.
• Enhance infrastructure and cluster-driven technologies: Upgrade cluster-based infrastructure: reliable power, high-speed internet, and shared modern equipment to ensure tech diffusion. Promote sector-specific “competence centres” drawing lessons from Finland, Sweden, and Germany.
• Financial innovation and digital access: Launch innovation vouchers, direct grants, and soft loans structured for MSMEs; strengthen fund-of-funds models to fill financing gaps across the innovation lifecycle and linkages with IITs, academia, and marginalised regions.
• State-level competition: Foster healthy competition among states with incentives, through robust monitoring with dashboards, global benchmarking,
• Joint R&D Consortia: Japan has pioneered “Kohsetsushi centres”, public R&D hubs where research personnel gain experience and develop technical skills while collaborating on innovation projects.
• Industry 4.0 tech integration: OECD MSMEs adopted Industry 4.0 components such as big data analytics, IoT, AI, and blockchain to improve process efficiency, packaging, and reduce costs.

As they say- "khudi to kar buland itna... .( raise yourself so high...)"

- Authored by Mr Dhanendra Kumar, Advisory Board Member, India SME Forum