Powering Progress : The Role of MSMEs in India's Manufacturing Growth
India’s manufacturing sector stands at the cusp of global leadership. Behind the towering factories, high-volume production lines, and cutting-edge innovation are the unsung heroes — Micro, Small, and Medium Enterprises (MSMEs) — that quietly but powerfully drive India’s industrial engine forward.
The Make in India initiative, launched in 2014, recognizes this potential. With its focus on domestic production, self-reliance, and global competitiveness, MSMEs play a pivotal role in making this vision a reality.
Let’s explore how MSMEs are shaping India’s manufacturing growth, sector by sector.
MSMEs : Backbone of Indian Manufacturing
India’s MSME sector accounts for :
- 30% of India’s GDP
- 45% of total manufacturing output
- 40% of total exports
- Employing over 110 million people
Their agility, flexibility, and innovation give India a unique edge in sectors where customization, cost competitiveness, and speed to market are crucial.
Sector-Wise Contributions of MSMEs in Manufacturing
1. Auto Components
India’s auto component sector is globally recognized, and MSMEs are central to its success.
- Contributes ~ 2.3% of India's GDP
- Over 70% of auto component manufacturers are MSMEs
- Supplies to global OEMs as Tier-1, Tier-2, and Tier-3 vendors
- Exporting to over 160 countries, with the sector expected to reach USD 200 billion by 2026
MSMEs here specialize in engine parts, transmission systems, suspensions, braking systems, and electrical components.
India is the 2nd largest casting producer in the world, and forging is integral to multiple industries.
- Over 85% of foundry units in India are MSMEs
- Supplies critical parts to automotive, aerospace, defense, and railways
- Foundry industry alone employs over 500,000 workers
- Forging sector has over 400 MSME units, contributing to both domestic and export demands
The flexibility of MSMEs allows them to cater to niche requirements with precision engineering.
3. Chemicals
The Indian chemical sector is a $220 billion industry, set to reach $300 billion by 2030.
- MSMEs account for approximately 50% of chemical production
- Key areas include specialty chemicals, agrochemicals, dyes, and intermediates
- Support sectors like textiles, pharmaceuticals, automotive, and agriculture
Government support through PLI schemes and the Make in India initiative is pushing MSME-driven chemical exports to newer heights.
4. FMCG (Fast-Moving Consumer Goods)
FMCG remains one of India’s fastest-growing sectors, fueled by MSME dynamism.
- MSMEs contribute 20-25% of FMCG production
- Play a vital role in food processing, personal care, cleaning products, and packaging
- Serve both urban demand and deep rural penetration, where large players often struggle
With rising consumerism and e-commerce integration, MSMEs have new channels to scale rapidly.
Plastic processing and molding remain key enablers for packaging, automotive, electronics, and consumer goods.
- Over 90% of plastic processing units in India are MSMEs
- MSMEs contribute heavily to custom molding, injection molding, and packaging materials
- The sector employs nearly 4 million people
Sustainability challenges are also driving MSMEs to explore recyclable and biodegradable alternatives, creating new growth avenues.
India’s pharma sector, known as the “Pharmacy of the World,” relies extensively on MSME-driven manufacturing.
- ~60% of pharmaceutical production units are MSMEs
- Major players in bulk drug intermediates, generics, and API manufacturing
- Contributing significantly to India's $50+ billion pharma exports
MSMEs also play a crucial role in supplying affordable medicines to domestic markets and developing economies globally.
7. Oil Extraction & Edible Oils
The edible oil segment remains highly fragmented and MSME-driven.
- MSMEs handle ~80% of domestic oilseed crushing and processing
- Specialized in mustard, groundnut, cottonseed, and sunflower oil extraction
- Play a crucial role in supporting local farmers and rural employment
This segment is seeing modernization through technology adoption and better processing standards under Make in India efforts.
Sheet metal manufacturing forms the base for multiple industries — from construction to electronics.
- MSMEs constitute over 75% of sheet metal fabrication units
- Serve critical sectors like automotive, defense, consumer electronics, and appliances
- Known for flexibility in small-batch production, prototyping, and customized solutions
Automation and precision engineering are enabling MSMEs to move up the value chain globally.
9. Driving Self-Reliance and Export Growth
The Make in India initiative offers multiple schemes and benefits to MSMEs :
- PLI (Production-Linked Incentive) Schemes
- Credit Linked Capital Subsidy (CLCSS)
- ZED Certification (Zero Defect, Zero Effect)
- Simplified compliance and digital integration
By leveraging these, MSMEs are not only strengthening domestic supply chains but also becoming formidable global players.
The Road Ahead
MSMEs are no longer seen as “small-scale” contributors. They are :
- Innovators
- Job creators
- Export champions
- Catalysts of inclusive growth
For India to achieve its vision of becoming a $5 trillion economy, MSMEs will continue to power forward — scaling manufacturing excellence, adopting Industry 4.0 technologies, and competing globally. Powering progress isn’t just a slogan. For MSMEs, it’s business as usual.
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