India’s manufacturing sector is undergoing a transformation—and at the heart of it lies the Micro, Small, and Medium Enterprises (MSMEs). These units are the engines of grassroots employment, industrial output, and exports. As of 2024, the MSME sector contributes nearly 30% to India’s GDP, accounts for 49% of exports, and employs over 111 million people. Recognising this potential, the Indian government has introduced a variety of schemes aimed at empowering manufacturing MSMEs through financial support, infrastructure, technology access, and market linkages.
But with so many schemes available, navigating them can be overwhelming for entrepreneurs and factory owners. This blog breaks down the most relevant government schemes for manufacturing MSMEs—clearly and simply—so you can leverage them to grow your unit.
Understanding MSMEs in the Manufacturing Sector
Definition as per Latest Norms
According to the updated classification under the Atmanirbhar Bharat package (July 2020), MSMEs are defined based on investment in plant & machinery or equipment and annual turnover:
| Type | Investment in Plant & Machinery or Equipment | Annual Turnover |
| Micro | Up to ₹1 crore | Up to ₹5 crore |
| Small | Up to ₹10 crore | Up to ₹50 crore |
| Medium | Up to ₹50 crore | Up to ₹250 crore |
This redefinition has enabled more businesses to fall under the MSME umbrella, unlocking eligibility for multiple government schemes.
Challenges Faced by Manufacturing MSMEs
- Limited access to formal credit
- Obsolete technology and low automation
- Difficulty in reaching wider markets
- Rising compliance burden and regulatory complexities
- Shortage of skilled manpower
Government schemes have been designed precisely to plug these gaps and help MSMEs scale efficiently.
Credit and Finance Support Schemes
a. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
Launched in 2000, CGTMSE enables collateral-free credit for micro and small manufacturing enterprises. The scheme guarantees up to 75–85% of the loan amount.
- Eligibility: New and existing manufacturing MSMEs
- Coverage: Term loans or working capital up to ₹5 crore (with enhanced provisions for specific sectors)
- Where to Apply: Through scheduled commercial banks, NBFCs, or regional rural banks
Why it matters: In a sector where traditional lenders hesitate without collateral, CGTMSE helps mitigate risk for banks and makes credit accessible for first-generation entrepreneurs.
b. Pradhan Mantri MUDRA Yojana (PMMY)
The MUDRA scheme provides micro-financing through three tiers:
- Shishu: Loans up to ₹50,000
- Kishore: ₹50,001 to ₹5 lakh
- Tarun: ₹5 lakh to ₹10 lakh
Ideal for micro-manufacturers, artisans, and small-scale units, the scheme promotes inclusion for informal and semi-formal businesses.
- No collateral required
- Interest rates: Vary by lender but generally competitive
- Application through: Public/private sector banks, MFIs, NBFCs
c. Credit Linked Capital Subsidy Scheme (CLCSS)
CLCSS offered a 15% capital subsidy on institutional credit up to ₹1 crore for technology upgradation. However, it has since been subsumed into newer initiatives under the MSME Champions framework and is no longer active in its original form.
Manufacturers seeking tech support should now explore the ZED Certification scheme or MSME Champions subcomponents.
Capital and Infrastructure Support
a. Scheme of Fund for Regeneration of Traditional Industries (SFURTI)
SFURTI focuses on cluster development of traditional manufacturing industries—like handicrafts, coir, khadi, and bamboo units.
- Components covered: Common facility centres (CFCs), training, raw material banks
- Grants up to: ₹5 crore depending on the cluster size
- Implemented by: Ministry of MSME through nodal agencies (KVIC, Coir Board)
This scheme helps manufacturers access modern infrastructure and economies of scale without compromising traditional value chains.
b. Micro and Small Enterprises – Cluster Development Programme (MSE-CDP)
MSE-CDP supports the development of industrial clusters through:
- Common facility centres (machinery/tool rooms)
- Infrastructure (roads, power, water)
- Capacity building and market promotion
- Grants: Up to 90% of project cost in some cases
- Implemented through: State governments or SPVs
Technology and Innovation Schemes
a. MSME Champions Scheme
This umbrella scheme aims to enhance MSME competitiveness and includes:
- Lean Manufacturing: Waste reduction, productivity improvements
- Design Clinic Scheme: Financial support for innovative design projects (up to ₹15 lakh per unit)
- ZED Certification (now ZED 2.0): Promotes zero defect, zero effect manufacturing across three levels—Bronze, Silver, and Gold
- IPR Reimbursement: Helps MSMEs file patents, trademarks, and copyrights
With India targeting Industry 4.0 adoption, MSMEs need schemes like this to transition into smart, sustainable manufacturing units.
b. Technology Centres (Tool Rooms)
The Ministry of MSME operates over 18 Technology Centres (Tool Rooms and Tech Support Centres), offering:
- Advanced training in CAD/CAM, CNC machining, robotics, and more
- Prototype development, testing, and production support
- Affordable tooling services for manufacturing units
Additional centres are being established under the Technology Centre Systems Programme (TCSP). These centres democratise access to innovation and high-end equipment.
Market Access and Export Promotion
a. Procurement and Marketing Support (PMS) Scheme
This scheme assists MSMEs in:
- Participating in national/international trade fairs
- Brand development and packaging
- Buyer-seller meets and e-commerce onboarding
- Financial aid up to: 80% of participation cost
- Focus: Boosting visibility for small manufacturers
b. Interest Equalisation Scheme (IES)
IES provides a subsidy on interest for pre- and post-shipment rupee export credit:
- Subsidy: 3% for MSME manufacturers and 2% for others in select sectors
- Objective: Make Indian goods more competitive in global markets
Export-ready MSMEs can significantly reduce their working capital burden through this scheme. The current scheme is effective until June 2024 and may be extended.
Digitalisation and Ease of Doing Business Initiatives
a. Udyam Registration
This is now the only official MSME registration, replacing Udyog Aadhaar.
- Completely online and paperless
- Linked with GST and PAN databases
- Mandatory for accessing any Government scheme
It gives your unit a verified identity and enables seamless benefits from multiple portals.
b. Integration with GeM and TReDS
- GeM (Government e-Marketplace): Allows registered MSMEs to supply goods/services to Government departments
- TReDS (Trade Receivables Discounting System): Enables digital discounting of invoices from large buyers at low interest rates
Three licensed platforms operate under TReDS: RXIL, M1xchange, and Invoicemart. These digital platforms reduce delays, improve working capital, and increase reach—all critical for small manufacturers.
Sustainability and Green Manufacturing Support
As India commits to sustainable development goals (SDGs), green manufacturing is gaining traction. MSMEs are being incentivised to:
- Adopt energy-efficient technologies
- Switch to solar or renewable power sources
- Improve waste management and pollution controls
Support is available through:
- Ministry of MSME’s ZED 2.0 Certification Scheme
- State-level green tech funds
- Energy Efficiency Services Limited (EESL) initiatives
These programmes promote environmentally responsible production and compliance with sustainability norms.
How to Choose the Right Scheme for Your Manufacturing Unit
Navigating the maze of Government schemes can feel overwhelming. Here’s a simple process to streamline your approach:
Step 1: Know Your Stage and Needs
- Are you a startup, early-stage, or scaling business?
- Do you need working capital, tech upgradation, or market access?
Step 2: Match the Scheme’s Objective
- If you need funding: Look at CGTMSE, PMMY
- For expansion or infra: Try MSE-CDP
- For innovation: Explore ZED, Design Clinic
- For exports: Consider IES, PMS
Step 3: Leverage MSME Facilitation
Approach your local MSME Development Institute, District Industries Centre (DIC), or use the Udyami Helpline (1800 115 565). You can also explore the Champions Portal, which provides handholding, grievance redressal, and scheme support.
The Bottomline:
Manufacturing MSMEs are vital to India’s journey towards self-reliance and global competitiveness. The Government is actively supporting this sector through thoughtfully designed schemes—but these benefits can only be unlocked if MSME owners are aware and proactive.
Whether you are a tool manufacturer in Ludhiana, a textile unit in Tirupur, or a pharma SME in Ahmedabad—there is a government scheme tailored for your growth.
By staying informed and leveraging the right support at the right time, your unit can achieve faster growth, stronger compliance, and greater market reach.
Don’t let red tape stop your success—start exploring these MSME schemes today and unlock the full potential of your manufacturing business.
