Growing footprint of MSMEs in India’s space and defence sectors: Official

Pune: The Centre is pushing public sector enterprises to procure components for space and defence sectors from micro, small, and medium enterprises (MSMEs), creating a growth corridor for small-scale manufacturers. Speaking at the Pune International Business Summit on Monday, Rajneesh, additional secretary, MSME ministry, highlighted the growing footprint of small businesses in India's most strategic sectors. "MSMEs across the country are no longer just peripheral players; they are key suppliers to the Indian Space Research Organisation (ISRO) and the defence sector," he said.
The two-day summit, organised by the Mahratta Chamber of Commerce, Industry and Agriculture (MCCIA), is supported by the MSME ministry and the World Bank under the Raising and Accelerating MSME Performance (RAMP) initiative. According to MCCIA data, Pune alone houses approximately 600 MSMEs currently supplying components to the defence sector. Rajneesh noted that the MSME ministry's technology centre in Bhubaneswar manufactured and supplied over 400 critical components for the successful Chandrayaan mission. Similarly, MSMEs and technology centres nationwide were instrumental in providing parts for the light combat aircraft (LCA) Tejas. A key driver of this growth is the govt mandate requiring public sector enterprises to source a minimum of 25% of their procurement from micro and small enterprises. "Initially, there was some reluctance, but today, procurement levels have exceeded all expectations," Rajneesh said. "Current figures show that 46% of procurement of public sector enterprises now comes from MSMEs. This shift occurred because MSMEs not only met strict technical specifications but also reduced procurement costs for PSUs by 20% to 30%." Despite global economic headwinds, Rajneesh emphasised that India's free trade agreements (FTAs) would further propel the sector. MSMEs currently account for nearly 45% of India's total exports, which stand at approximately $825 billion (Rs75 lakh crore). The sector remains a titan of the domestic economy, employing 32 crore people and contributing 31% to the national output. To further strengthen this, the govt has formalised over 4.5 crore MSMEs, allowing them to access various credit and support schemes. However, the sector continues to face hurdles, including delayed payments, quality control, and a lack of formalisation. Rajneesh also addressed the "high-risk" perception that prevents banks from lending to small businesses. "Lenders are often wary of MSMEs, fearing high non-performing assets (NPAs). However, the data tells a different story: NPA levels in the MSME sector are remarkably low at just 3.4%," he said. Rajneesh called for state-specific interventions rather than a "one-size-fits-all" strategy. He stressed that because MSMEs face unique challenges depending on their geography, customised regional solutions are essential to unlocking their full potential.