World MSME Day: Global trade risks weigh on MSMEs; industry seeks competitiveness-focused reforms

Ahead of World MSME Day 2026, industry representatives called for a policy shift towards improving the competitiveness of micro, small, and medium enterprises (MSMEs), emphasising that Indian small businesses need easier access to finance, technology, market opportunities, and faster payments to successfully navigate an increasingly fragmented global trading environment. They pointed out that the current geopolitical situation, supply chain disruptions, and changing compliance rules are challenging these smaller businesses, and any policy support should now focus on improving their productivity, use of technology, and access to market to keep them competitive globally.

According to Anil Bhardwaj, Secretary General of the Federation of Indian Micro and Small & Medium Enterprises (FISME), the global business environment is undergoing a structural transition rather than a temporary disruption. “The first challenge is to deal with global trade uncertainty and market access risks. The world trading system is becoming increasingly fragmented due to geopolitical tensions, tariff measures, supply chain realignments, CBAM-type green regulations, quality standards, and growing protectionism,” Bhardwaj says.

He says smaller firms often lack the resources to quickly adapt to changing export regulations and compliance requirements, making it harder for them to integrate into global value chains.


Currently, India has around 87.8 million MSMEs, of which about 97% are micro, 2.7% are small, and 0.3% are medium enterprises, as per government data.

Bhardwaj says the current global situation should not be viewed as a temporary crisis but as a period of structural transition, where Indian MSMEs will be tested by a combination of external shocks and domestic competitiveness challenges. Rising costs of raw materials, energy, logistics, finance, technology adoption, compliance, and skilled manpower continue to squeeze MSME margins, he points out.

He says larger companies are better placed to absorb such costs through economies of scale, while smaller businesses operate on much thinner margins. He also cautions that protectionist measures on raw materials, including quality control orders (QCOs) and safeguard duties, could reduce the competitiveness of Indian MSMEs.

“Despite legal provisions, delayed payments remain one of the biggest constraints for MSME growth. In times of global uncertainty, large buyers tend to conserve cash, worsening payment cycles for smaller suppliers,” Bhardwaj says. In some cases, prolonged payment delays can even lead to business closures, he adds.

According to Bhardwaj, India needs to improve the competitiveness of its MSMEs by ensuring access to competitively priced raw materials, launching a technology upgradation mission, and strengthening payment discipline through mandatory reporting by large buyers. He also advocates recognising industry associations as delivery partners for building MSMEs’ capabilities in carbon accounting, sustainability reporting, quality certification, and product traceability.

“The future of India does not lie in becoming a low-cost economy but a high-productivity economy. India’s MSME policy framework must evolve from protection, subsidies and compliance relief towards productivity, innovation, market access and enterprise capability building,” he says.

H.P. Kumar, Advisor, MSME Committee, PHD Chamber of Commerce and Industry (PHDCCI), and former Chairman and Managing Director of National Small Industries Corporation (NSIC), says one of the biggest challenges is access to initial funding for new business ventures across the MSME sector. “Initial capital expenditure, or what I call start-up funding, is the most essential requirement for the growth of business enterprises, particularly MSMEs.”

Kumar clarifies that he is not referring to technology start-ups under the government’s start-up ecosystem, but to all those first-generation manufacturing and service enterprises, including village industries, home-based businesses, and other traditional MSMEs that generate large-scale employment.

He says banks generally require an operating track record before extending credit, making it difficult for first-generation entrepreneurs to access finance. “A new entrepreneur has to prove performance before getting adequate credit. But without funding, the business itself cannot start,” he explains.

Kumar says improving access to first-time business finance is critical because new MSMEs remain one of India’s largest sources of employment generation, particularly in rural and semi-urban areas. He suggests introducing a government-backed credit guarantee scheme with a 100% guarantee for new MSME ventures so aspiring entrepreneurs can secure funding without an established business history.

He also calls for reviving financial support for technology upgradation, saying many MSMEs lack the capital required to modernise machinery and improve productivity after the discontinuation of the earlier capital subsidy scheme. “MSMEs need funding for technology upgradation to become quality-conscious and internationally competitive,” Kumar says.

According to Kumar, marketing support also needs a significant boost. He says larger allocations are needed for overseas trade fairs, exhibitions, buyer-seller meets and vendor development programmes to help MSMEs showcase their products and access new domestic and international markets. He also identifies delayed payments, rising raw material prices, logistics costs and higher labour expenses as persistent challenges for the sector.