When Rahul Gandhi recently warned that India’s economy is slipping into the grip of monopolies and duopolies, and that the “reins must be handed back to MSMEs,” the statement landed with unusual force. Not because it was politically explosive, Indian politics has seen sharper rhetoric, but because it articulated a discomfort many entrepreneurs, bankers, and policy insiders have been quietly acknowledging for years.
So DeshWale decided to pause the noise and examine the claim itself. Are India’s micro, small and medium enterprises, the much-celebrated backbone of the economy, being edged out by a system that increasingly favours size, scale and concentration? And if so, how deep does the problem really run?
The answers are unsettling.
Big numbers, small reality
On paper, India’s MSME sector looks formidable. It contributes roughly a third of the country’s GDP, nearly half of its exports, and employs more people than any sector outside agriculture. More than six crore enterprises fall under the MSME umbrella. Every policy speech references them. Every budget mentions them. Every crisis claims to protect them.
Yet beneath these headline figures lies a fragile truth: over 97 percent of Indian MSMEs are micro enterprises, often employing fewer than five people, operating with wafer-thin margins, and surviving month to month. The celebrated “medium enterprise”, the category that typically scales, exports aggressively, invests in technology, and creates stable jobs, is vanishingly small in India’s industrial landscape.
In other words, India has many small businesses, but very few that grow up.
The credit trap
Nothing exposes this fragility more clearly than credit. Despite decades of priority-sector lending mandates, the majority of MSMEs remain chronically under-financed. Formal bank credit reaches only a fraction of enterprises, and even then, often at high collateral cost.
The result is a structural paradox:
India has one of the world’s largest banking systems, yet its smallest entrepreneurs rely on informal lenders, supplier credit, or short-term digital loans with punishing interest rates.
Emergency credit schemes during the pandemic prevented collapse, but they also postponed a reckoning. Many firms today are servicing debt without having regained stable demand. New loans are harder to secure. Banks, scarred by earlier NPA cycles, have become cautious to the point of paralysis when dealing with small borrowers.
Growth without oxygen is not growth. It is slow suffocation.
Compliance: Equality that isn’t equal
GST was designed to unify India’s fragmented market. In principle, it succeeded. In practice, it introduced a compliance burden that falls unevenly.
A small manufacturer filing multiple returns, reconciling invoices, responding to automated notices and managing working capital blockages faces the same digital architecture as a multi-billion-rupee corporation, but without an accounts department, tax consultants, or software teams.
Formalisation was meant to empower MSMEs. Instead, many feel it exposed them to constant procedural anxiety. The irony is sharp: firms that enter the system hoping for legitimacy often find themselves penalised more than those who remain outside it.
Delayed Payments: The silent killer
Ask any small business owner what truly threatens survival, and the answer is rarely taxes or labour laws. It is delayed payments.
Large buyers, private and public, routinely stretch payment cycles to 60, 90, sometimes 120 days. For a micro enterprise, this delay can freeze wages, halt procurement, and trigger loan defaults.
Legal safeguards exist. Enforcement barely does.
In effect, MSMEs are being forced to finance the working capital of much larger entities, a reversal of economic logic that drains the weakest to support the strongest.
Market Concentration: The unequal battlefield
This is where the monopoly question becomes unavoidable.
Across sectors, infrastructure, digital platforms, logistics, retail, manufacturing, scale increasingly determines survival. Large firms enjoy cheaper capital, preferential access to markets, bargaining power over suppliers, and the ability to absorb shocks.
MSMEs, meanwhile, compete not just with peers but with ecosystems designed around size.
Digital platforms, often praised for democratizing access, frequently replicate concentration. Algorithms reward volume. Fees erode margins. Visibility is bought, not earned. The small seller becomes dependent, not empowered.
Competition still exists, but it is no longer symmetrical.
Exports: Success that masks stress
India proudly cites rising MSME exports, and the numbers are real. Small firms have pushed aggressively into global markets, particularly in engineering goods, textiles, pharmaceuticals, and services.
But export success hides structural strain. Certification costs, logistics inefficiencies, volatile freight rates, currency risks and compliance demands weigh far heavier on small exporters than on large conglomerates.
Many export-oriented MSMEs survive on relentless hustle rather than systemic support. One missed shipment, one rejected consignment, one delayed rebate can undo years of effort.
How others got it right
Contrast this with countries that deliberately built their economies around small businesses.
Germany’s Mittelstand firms are not romanticised startups; they are technologically sophisticated, export-oriented, family-run enterprises backed by patient capital, local banks, and world-class vocational training systems. They scale without losing identity.
China’s small enterprises operate within tightly integrated industrial clusters, backed by state-supported finance, logistics and procurement pipelines that feed directly into global value chains.
The lesson is clear: successful MSME economies are not accidental. They are designed.
India’s MSMEs, by contrast, are expected to survive through resilience alone.
The cost of neglect
The consequences of this imbalance are already visible. Job creation is slowing. Informality is creeping back. Entrepreneurship is becoming riskier, not aspirational. Many young Indians would rather join the gig economy than inherit a fragile family business.
An economy that sidelines its smallest producers eventually hollows itself out. Consumption weakens. Innovation narrows. Inequality hardens.
The question that remains
Rahul Gandhi’s statement was political. The problem it highlighted is structural.
Is India comfortable with an economy where growth is driven by a few large engines while millions of small ones sputter? Or does it want a broad-based, competitive system where scale is earned, not structurally favoured?
MSMEs do not ask for protection. They ask for fair access, to credit, to markets, to time, and to dignity.
Ignore that ask, and the backbone everyone praises may quietly fracture.
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