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Chief Economic Advisor (CEA) V Anantha Nageswaran on Monday emphasised that the trajectory of the national economy depends on how inclusively small and medium enterprises (MSMEs) are enabled to adapt and compete in future.
Addressing the CII Annual Business Summit 2026 in the national capital, Nageswaran noted that the integration of micro-enterprises into domestic and global value chains remains the primary driver for India's future economic growth, requiring a focused shift toward trade skills and regulatory simplification. "I will focus on the importance of trade skills. No manufacturing enterprise in the country, regardless of the size, can function without skilled human resources. And those skills will also today have to be such that that makes them important and indispensable to the enterprise so that they are not replaced by either artificial intelligence or down the road by industrial robots," Nageswaran said. He also mentioned that historical precedents in countries like Japan, Germany, and South Korea demonstrate that MSMEs serve as the "fountainheads of innovation" rather than "technological backwaters." In the Indian context, where more than 90 per cent of micro-enterprises operate with an employment strength of one to five people, the CEA has identified human resource development as the critical bridge to scaling these operations. "Trade skills where human judgment skill and craftsmanship are important would be the areas like carpentry, electrical, plumbing, mechanical, civil....Investing in trade skills personally and for their own employees is the way to integrate themselves into domestic and global value chains, because all enterprises in the manufacturing space are facing a shortage, regardless of size," Nageswaran said. The CEA also suggested entrepreneurs that even a modest doubling of the average employment strength in micro-units would contribute significantly to national employment generation. To facilitate this, he proposed the formation of clusters that can collaborate to revamp Industrial Training Institutes (ITIs). "The important thing is to make the industrial training institutes an aspirational place for our youngsters to go to. For them to be in dilapidated structures and buildings which don't look appetizing or inviting for youngsters is not the way to persuade them to embrace trade skills," he added. On the regulatory front, Nageswaran highlighted that policymakers are pursuing a trust-based architecture to reduce the compliance burden that often hinders smaller firms with limited bandwidth. He pointed to the ongoing "Phase 2" of deregulation, which builds upon the 23 areas addressed in the previous year, focusing on self-certification and lengthening the validity of approvals. "Regulatory architecture places disproportionately large burden on micro and small enterprises, given their limited bandwidth. They don't have that much time to devote to complaints, but they are required to do so. Larger enterprises can outsource such tasks. Small enterprises or micro enterprises in particular cannot afford to do that," Nageswaran said. Addressing the financial relationship between industry players, the CEA called on larger corporations to resolve the working capital imbalances currently faced by smaller vendors. He noted that micro-enterprises often inadvertently end up financing larger firms due to payment delays, despite having a higher cost of capital. "Larger enterprises in the country have to pledge to contribute to relieving the working capital requirements of micro and small enterprises. In general, evidence around the country shows that micro, small, and medium enterprises are the source of working capital for large enterprises. It should be the reverse," Nageswaran stated. (ANI)
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