NITI Aayog Flags Uneven MSME Gains Under PLI Schemes, FISME Seeks Policy Support

(MENAFN- KNN India) New Delhi, Nov 13 (KNN) The Production Linked Incentive (PLI) schemes have boosted investment, production and exports, but benefits for Micro, Small and Medium Enterprises (MSMEs) remain uneven due to constraints in scale, technology, finance and market access, according to a NITI Aayog's Impact Assessment of PLI Schemes report.

MSME Participation Varies Across Sectors

The pharmaceuticals PLI scheme recorded positive outcomes in investment, production, exports and employment. While larger firms reported stronger gains, MSMEs saw moderate growth in sales, production and employment. Investment consistently exceeded targets, but export growth remained uneven, with larger firms outperforming smaller players.

The Telecom and Networking Products PLI scheme supported domestic manufacturers, multinational companies and MSMEs. MSME sales grew steadily between FY2022-23 and FY2024-25, even after excluding two major firms. Exports recovered after a slowdown in 2023, while employment improved in FY2024-25. However, investment growth moderated.

In food processing, the PLI scheme attracted over Rs 9,207 crore in investments by March 2026. Larger firms recorded stronger gains, particularly in ready-to-eat foods and processed fruits and vegetables.

However, MSMEs producing innovative and organic products saw uneven sales, subdued exports and limited job creation. Millet-based products performed better, with both large firms and MSMEs recording growth in sales and exports.

Eligibility Criteria Pose Challenges for MSMEs

The report highlighted that high investment and turnover thresholds under some PLI schemes have restricted MSME participation.

In the medical devices sector, minimum sales and investment requirements limited the entry of smaller start-ups and MSMEs. Although the government later introduced a separate category with lower eligibility thresholds, initial benefits remained concentrated among larger firms.

The textiles PLI scheme also faced hurdles due to high investment and turnover requirements, strict HSN-based product classification and mandatory new-company formation.

The government subsequently lowered investment thresholds, expanded HSN code coverage and removed the new-company requirement. The impact of these changes is expected to emerge more clearly in the coming years.

Drones and White Goods Show Positive Outcomes

The PLI scheme for drones and components ran for three financial years, with incentives linked to domestic value addition.

To promote MSME and start-up participation, annual turnover eligibility thresholds were set at Rs 2 crore for drone manufacturers and Rs 50 lakh for component manufacturers. Incentives for individual beneficiaries were capped at 25 per cent of the annual outlay.

In the white goods sector, the scheme supported investments across 18 states, 47 districts and 158 locations. Participation by domestic and multinational companies, alongside 26 MSMEs, helped expand the industrial ecosystem.

Report Calls for Stronger MSME Integration

The assessment noted that although PLI schemes primarily target investment and manufacturing scale, they could create opportunities for MSMEs through stronger supply-chain linkages.

Rising production by large manufacturers could boost demand for components, intermediate goods, logistics and specialised services, enabling MSMEs to join multi-tier manufacturing networks. This could also facilitate technology transfer, market access and supplier ecosystem development around manufacturing clusters.

However, MSMEs continue to face challenges in accessing finance, technology, skilled manpower and domestic and international markets.

The report said lessons from PLI implementation could inform complementary measures to support MSME growth and their integration into domestic and global value chains.

Federation of Indian Micro and Small & Medium Enterprises (FISME) underlined that NITI Aayog's assessment of PLI schemes demonstrated that performance-linked incentives could stimulate investment and industrial scale.

According to FISME the PLI scheme in its current shape has excluded MSMEs due to high investment criteria- a fact also endorsed by the NITI Aayog Report.

“Going forward the next challenge is to ensure that the resulting manufacturing expansion also creates opportunities for existing MSMEs to grow through a combination of fiscal and non-fiscal support measures. India needs an industrial policy that rewards enterprises not merely for remaining small, but for becoming larger, more productive and internationally competitive.” FISME added.

They propose that the next PLI impact assessment should measure how many MSMEs have graduated to higher enterprise-size categories as a consequence of PLI-linked business opportunities.

(KNN Bureau)

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