Digital portals alone won’t fix MSMEs without deeper reforms

NITI Aayog’s suggestion for the convergence of support schemes for micro, small and medium enterprises (MSMEs) is quite reasonable. The report, ‘Achieving Efficiencies in MSME Sector through Convergence of Schemes,’ has recommended “a centralised digital portal, integrating schemes, compliance requirements, financial assistance, and market insights... This AI-powered platform will provide real-time guidance, personalised scheme recommendations, and seamless tracking of applications through an interactive dashboard.”

It is good to know that the Prime Minister-headed think-tank favours the deployment of state-of-the-art technology to improve schemes. It says that the proposed portal should include key modules such as scheme information, compliance tracking, financial assistance, and market research. The portal will be predicated upon collaboration with technology research institutions and digital governance bodies.

The report also bats for the convergence of the Scheme for Fund for Regeneration of Traditional Industries (SFURTI) with the Micro and Small Enterprises-Cluster Development Programme (MSE-CDP). It seeks to reallocate the combined budget of both schemes, thereby ensuring that 15-20 per cent of the total budget is earmarked specifically for traditional industries. Other convergences suggested are of skill development programmes, procurement and marketing schemes, and innovation entrepreneurship. The NITI report, in particular, emphasises the need for smoother implementation and greater efficiency, which is a pragmatic approach to ensuring convergence and enhancing the schemes.

The policy and decision makers must also realise that this can happen and the schemes concerned made more efficient only if there is an improvement in overall governance at all levels; this pertains not just to structural economic reforms—which by the way are a sine qua non of healthy economy development—but improvement in other areas as well. Unfortunately, our political masters are least interested in these matters. Just one example: owing to the monumental incompetence of the authorities at all levels, tourism in North India is suffering grievously, as the peak season, winter, has been enveloped in smog.

Administrative capacity remains uneven across states and districts, leading to wide disparities in scheme implementation. Police reforms are essential to ensure contract enforcement, protect enterprises from extortion and harassment, and maintain law and order—conditions without which small businesses cannot thrive. Judicial reforms, particularly the reduction of case backlogs and faster resolution of commercial disputes, are critical for building trust and encouraging entrepreneurship. Administrative, police, and judicial reforms are the need of the hour.

Unfortunately, these deeper governance reforms remain politically neglected. They do not lend themselves to quick wins or populist narratives. As a result, they are rarely central to political debates or electoral campaigns. Instead, the focus tends to remain on announcing new schemes rather than fixing the institutional foundations that would make existing ones work better.

In this sense, the NITI Aayog’s report is both an opportunity and a test. Its recommendations, if implemented sincerely, could significantly improve the effectiveness of MSME support. But without parallel efforts to strengthen governance, reduce discretion, and enhance accountability, even the most sophisticated digital portals and well-designed convergences risk becoming yet another layer in an already crowded policy landscape.

The challenge for India’s policymakers, therefore, is not merely to endorse the report but to act on its deeper implications. Convergence must be seen as part of a broader commitment to governance reform. Only then can the promise of MSMEs as engines of growth and employment be fully realised.