Niti Aayog working to integrate MSMEs with supply chains

The government plans to introduce a comprehensive policy for micro, small and medium enterprises (MSMEs) that will provide for easier credit, including collateral free loans and reduced documentation, to help them integrate with the large supply chains. The NITI Aayog, which is working on the plan, has held discussions with industry and states in this regard, said people aware of the matter.

The plan includes identification of products in sectors drawing benefits under Production-Linked Incentive (PLI) scheme which could be developed and supplied by local MSMEs through a dedicated vendor development programme.

"MSMEs have to become part of the domestic supply chain through preferential treatment. The government is exploring ways to incentivise the sector to become competitive, both in quality and pricing of the products," a senior government official told ET.


Sops including collateral free credit financing at reduced rate of interest and reduced documentation could be considered part of the policy, said the official, who did not wish to be identified.

The policy is expected to address some of the pressing challenges holding back the integration of MSMEs with the formal sector. including restricted credit flow through collaterals, high rate of credit, too much documentation and lack of bandwidth for capacity expansion, said the official.

"The need is to quickly identify constraints and come up with focused policies to make MSMEs qualify for global supply chain," said an industry representative, who did not wish to be identified.