Convergence of Schemes for MSMEs

NITI Aayog has released a Report on the convergence of schemes for MSME in January 2026 to improve the efficiency of the MSME sector. Read here to learn more about the report.

In January 2026, NITI Aayog released a comprehensive policy report titled “Achieving Efficiencies in MSME Sector through Convergence of Schemes”, prepared by the Administrative Staff College of India (ASCI).

The report responds to a growing concern that India’s MSME ecosystem suffers not from scarcity of schemes, but from fragmentation, overlap, and delivery inefficiencies, despite a sharp rise in budgetary support.

Why MSMEs Matter for India

The MSME sector is a pillar of India’s inclusive growth model:

• GDP contribution: ~29-30%
• Employment: ~28.7 crore people (second only to agriculture)
• Exports: ~45-46% of India’s exports, though only ~1% export directly
• Scale & spread: Over 6.3 crore MSMEs, with ~51% in rural areas
• Public spending surge: MSME budget outlay rose from ₹6,717 crore (2019-20) to ₹22,094 crore (2023-24)

This scale makes efficiency, coordination, and last-mile delivery critical.

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Fragmentation of MSME Support Architecture

The report identifies four systemic weaknesses:

1. Scheme Proliferation without Integration: Multiple schemes target similar objectives (credit, skilling, clusters, marketing) but operate in silos.
2. Digital Overload, Not Digital Ease: MSMEs must navigate numerous portals, documentation norms, and compliance pathways.
3. Overlapping Institutional Jurisdiction: Ministries and departments operate parallel programmes with limited coordination.
4. Weak Outcome Measurement: Focus remains on fund utilisation rather than productivity, exports, or employment outcomes.

What does Convergence mean?

The report stresses that convergence should:

• Reduce duplication
• Improve coordination
• Enhance outcomes
• Preserve targeted support for vulnerable groups

It warns against mechanical mergers that could dilute inclusivity.

Key Areas Identified for the Convergence of Schemes for MSMEs

1. Unified Digital Access: From Portal Proliferation to Single-Window Support

Existing Challenge

• Multiple platforms create high compliance costs
• Small enterprises lack awareness and digital capacity

Recommendation

• Creation of a Centralised AI-enabled MSME Portal integrating:
  • Scheme discovery and eligibility checks
  • Credit access and subsidy integration
  • Market intelligence and export facilitation
  • Grievance redressal and chatbot-based support

Governance Impact

• Reduces transaction costs
• Strengthens formalisation beyond Udyam
• Enables data-driven policymaking

2. Rationalising Cluster Development Programmes

Existing Challenge

• Overlaps between SFURTI, MSE-CDP, and state-level cluster schemes
• Diluted funding and weak governance

Recommendation

• Merge SFURTI with MSE-CDP under a unified framework
• Create a dedicated sub-scheme for traditional and artisan industries
• Standardise cluster governance and funding norms

Economic Impact

• Stronger common infrastructure
• Improved technology adoption
• Enhanced collective competitiveness

3. Alignment of MSME Skilling Ecosystem

Existing Challenge

• Multiple skilling schemes targeting similar beneficiaries
• Weak linkage with enterprise productivity and market demand

Recommendation

• Reorganise MSME skilling into a three-tier structure:

1. Entrepreneurship and enterprise management
2. Technical and productivity-linked skills
3. Tailored skilling for women, rural artisans and informal workers

Social Impact

• Better employment outcomes
• Reduced skill mismatch
• Greater inclusivity

4. Integration of Marketing and Export Promotion Support

Existing Challenge

• Fragmented marketing schemes limit scale and global visibility

Recommendation

• Establish a Dedicated MSME Marketing Assistance Wing to:
  • Coordinate domestic fairs (IITF, state expos)
  • Streamline buyer–seller meets
  • Integrate export promotion and overseas trade events

Trade Impact

• Improves export readiness
• Enhances MSME brand visibility
• Encourages direct exporting

5. Consolidation of MSME Innovation and Incubation Schemes

Existing Challenge

• Parallel incubation and innovation schemes fragment mentoring and funding

Recommendation

• Integrate ASPIRE into MSME Innovative as a special agro-rural vertical
• Ring-fenced funding for rural and grassroots innovation

Innovation Impact

• Stronger innovation pipelines
• Better technology diffusion
• Enhanced rural enterprise development

Key Existing MSME Enablers (to be Strengthened through Convergence)

• Udyam Registration & Udyam Assist Platform: Formalisation and access
• PMEGP & PM Vishwakarma: Self-employment and artisan livelihoods
• CGTMSE & SRI Fund: Credit and equity support
• RAMP Programme: Productivity, resilience and competitiveness
• GeM & Public Procurement Policy: Assured market access

Challenges in Implementing the Convergence of Schemes

1. Inter-Ministerial Silos

• Ministries resist loss of jurisdiction
• Example: Overlaps between the MSME and the Rural Development ministries

2. Risk to Targeted Schemes

• Vulnerable groups may lose focus
• Example: National SC/ST Hub needs ring-fenced funding

3. Field-Level Capacity Constraints

• Uneven performance of District Industries Centres (DICs)
• Digital readiness gaps across states

4. Data Integration Issues

• Incompatible legacy IT systems
• Poor integration with Udyam and state dashboards

5. Transition Risks: Abrupt scheme mergers may delay benefits and disbursements

Significance of the Report

• Shifts MSME policy from scheme proliferation to outcome optimisation
• Aligns with:
  • Minimum Government, Maximum Governance
  • Ease of Doing Business
  • Digital India
• Enhances value for money amid rising public expenditure

Conclusion

The NITI Aayog report makes it clear that India’s MSME ecosystem requires coherence, not clutter.

If implemented cautiously, with digital integration, institutional coordination, and protection of vulnerable groups, scheme convergence can unlock productivity, employment, and export potential, turning MSMEs into a true engine of Viksit Bharat.

Practice questions

1. “India’s MSME challenge today is not the lack of schemes but fragmented delivery.” In light of the NITI Aayog report on the convergence of MSME schemes, examine this statement.
2. Discuss how convergence of MSME schemes can enhance efficiency, inclusiveness and global competitiveness of India’s MSME sector. Highlight key challenges in implementation.
3. Evaluate the NITI Aayog’s proposal for the convergence of MSME schemes as a governance reform. How can smart convergence improve last-mile delivery without diluting targeted welfare?