The Indian government is launching a comprehensive digitisation initiative to modernise the country's 72 million micro, small and medium enterprises (MSMEs) through advanced technologies including sensors, artificial intelligence, and data analytics. The ambitious programme aims to help MSMEs meet increasingly stringent global compliance requirements and reduce export rejections by equipping them with essential digital factory tools such as machine monitoring systems, energy management solutions, and shop-floor software.

Pilot Programme Launch in Gujarat

The first pilot project will be implemented in Gujarat under the World Bank-backed Raising and Accelerating MSME Performance (RAMP) scheme, targeting 750 identified manufacturing units. The National Productivity Council (NPC) will oversee the implementation, focusing on capturing real-time information on machine performance, energy consumption, downtime, and maintenance requirements.

The initiative addresses a fundamental challenge faced by many MSMEs: limited visibility into shop floor operations, which often results in low productivity, high energy costs, inconsistent quality, and unplanned downtime. By digitising basic shop floor monitoring, the pilot aims to help unit owners identify hidden productivity losses, stabilise output, reduce energy wastage, and transition from reactive to planned maintenance strategies.

Technology Implementation Framework

The National Productivity Council will empanel startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT) as technology providers. These startups will be responsible for installing and supporting a plug-and-play digital twin solution called the "Shopfloor Insight and Monitoring Kit" on one machine in each participating MSME unit.

The standardised design and subsidised deployment are intended to lower adoption barriers for MSMEs and create a pathway for scaling digital tools across more machines once the benefits become visible. The MSMEs themselves do not require DPIIT empanelment or startup recognition, as they serve as end users of the technology.

Strategic Importance for Indian Economy

The modernisation initiative holds significant importance given MSMEs' substantial contribution to India's economy. These enterprises contribute 30% to the country's gross domestic product and account for 45% of overall exports. The National Productivity Council, which functions under DPIIT, focuses on improving productivity and competitiveness across Indian industry and services.

According to data provided in December through a written reply in the Lok Sabha by minister of state for micro, small and medium enterprises Shobha Karandlaje, approximately 72 million MSMEs were registered in India by the end of November 2025 under the Udyam Registration Portal and the Udyam Assist Platform.

Global Competitiveness Requirements

From a global competitiveness perspective, such technological capabilities are increasingly becoming baseline requirements rather than optional upgrades. Small suppliers in major manufacturing economies including Germany, Japan, South Korea, and China are increasingly required to use machine monitoring, energy management systems, and basic digital twins to meet buyer expectations on quality consistency, traceability, energy efficiency, and sustainability.

Access to real-time production and energy data helps firms respond to buyer audits and compliance checks, including emerging requirements around carbon reporting. For Indian MSMEs, adopting these technologies could improve product consistency, reduce rejection rates, meet tighter delivery timelines, and support integration into global value chains. Improved shop floor data is expected to strengthen buyer confidence and enable repeat export orders, allowing small firms to compete on reliability and quality rather than purely on price.

India's micro, small and medium enterprises are experiencing a significant transformation as they increasingly embrace capital markets for growth funding. This shift is being driven by enhanced execution capabilities, improved governance standards and greater data transparency, according to insights from the latest MSME Economic Activity Index report.

The findings emerged from the January edition of Sumpoorn MSME Conversations, held under the MSME Economic Activity Index – Sumpoorn, an initiative by Jocata, a BillDesk subsidiary, in collaboration with the Small Industries Development Bank of India. The discussion featured Tirthankar Patnaik, Chief Economist at the National Stock Exchange of India, and Narasimhan Venkatesan, Principal Advisor at Jocata.

Remarkable Growth in Capital Mobilisation

The NSE Emerge platform has demonstrated exceptional growth trajectory over the past decade. The platform's performance metrics highlight the scale of transformation occurring within the SME ecosystem.

Simultaneously, NSE's unique investor base has expanded dramatically from 2.7 crore in FY19 to around 12.5 crore, indicating substantial growth in retail participation and broader market accessibility.

Regulatory Framework Strengthens Market Foundation

Regulatory discipline has emerged as a crucial factor in this transition. Tighter norms, including requirements around positive cash flows and promoter lock-ins, have fundamentally shifted SME participation patterns. These measures have moved the focus away from short-term trading activities towards longer-term value creation strategies.

While these enhanced regulatory requirements have moderated the pace of new listings, they have simultaneously contributed to stronger post-listing performance and improved investor confidence. The emphasis on governance and compliance has created a more sustainable foundation for MSME growth in public markets.

Market Readiness and Liquidity Challenges

"Not every MSME is ready for listing," Patnaik observed. "The opportunity is large, but preparation is essential. Even at the upper end of the MSME spectrum, India has more than 35,000 medium-sized enterprises, which points to significant untapped potential."

Despite the growth in market capitalisation, liquidity remains uneven across SME stocks. Venkatesan emphasised that market capitalisation alone does not translate into investor trust. "What builds confidence is liquidity and active participation. As SME-linked products evolve and the market matures, secondary market depth should improve," he explained.

Policy Support and Market Evolution

Several supportive measures are facilitating greater MSME participation in capital markets:

• State governments now offer subsidies to offset listing-related expenses
• Stock exchanges have expanded their outreach efforts
• Enhanced awareness programmes target eligible MSMEs
• Focus on operational, compliance and credibility benefits

However, awareness gaps persist, with many eligible MSMEs remaining unclear about the comprehensive benefits of accessing capital markets.

Future Outlook and Market Potential

The structural changes in household savings allocation present significant opportunities for continued growth. Household savings allocated to equities have risen from approximately 3.00% in FY12 to 15.20% in FY25, indicating a fundamental shift in investment preferences.

Experts emphasise that successful transition from SME platforms to main board operations requires measurable performance, consistent disclosures and reliable data. These elements form the foundation for MSMEs seeking to operate effectively under public market scrutiny.

The SIDBI–Jocata Sumpoorn initiative continues providing data-driven insights into MSME economic activity. With the substantial increase in equity allocation and growing investor base, the runway for MSME participation in capital markets remains extensive, provided enterprises maintain structural preparedness for transparency and governance requirements.