MSME Workers Only Produce 14% Value of Large Enterprise Counterparts: Report

Entrepreneur

01-07-2025

According to the report, 61 per cent of MSMEs said they had received no support from government-led skill and talent development programs. Only 39 per cent could confirm they had benefited in any way.
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India's small and mid-sized manufacturing enterprises are carrying the weight of the country's industrial ambitions, but with productivity levels that are crippling their potential. While micro, small, and medium enterprises (MSMEs) employ 80 per cent of India's manufacturing workforce and generate 40 per cent of its output, their efficiency tells a different story. A report by Cushman & Wakefield lays bare a stark imbalance: each MSME worker produces just 14 per cent of what their counterpart in a large enterprise delivers.
This gulf has wide-reaching implications. Comparable firms in other emerging economies are already pushing worker productivity to nearly 30 per cent, and in developed countries, the divide is even smaller. The report estimates that narrowing the productivity divide between MSMEs and large enterprises could add up to 10.5 per cent to India's GDP.
But that progress masks a deeper disconnect. While infrastructure investments are helping modernize the sector at large, the benefits are not being felt equally across the ecosystem. Smaller firms, especially those employing fewer than 500 people, are largely being left behind. According to the report, 61 per cent of MSMEs said they had received no support from government-led skill and talent development programs. Only 39 per cent could confirm they had benefited in any way.
Skill shortages, limited access to finance, and lack of guidance on technology adoption continue to stifle MSME competitiveness. Rahul Chandalia, founder and CEO of WOL3D, sees these issues firsthand. "MSMEs need targeted support in several key areas to ensure their growth and sustainability," he said. "Access to affordable credit remains a top priority, as many small businesses struggle with funding gaps and collateral requirements. Guidance on digital transformation and technology adoption is crucial, especially as MSMEs look to modernize operations and stay competitive."
He further emphasized that skill development is essential to drive innovation and productivity. "Skill development and training both for entrepreneurs and their workforce are essential for productivity and innovation," Chandalia noted. "Market access, including support for marketing, exports, and participation in trade fairs, helps MSMEs expand their reach."
Nearly 88 per cent of respondents acknowledged that large-scale infrastructure initiatives like the Bharatmala, Sagarmala, Dedicated Freight Corridors, and the National Industrial Corridor Development, had directly influenced their capital expenditure plans. Among larger firms, 94 per cent credited these infrastructure upgrades as crucial to their growth trajectory. Moreover, 93 per cent of companies operating within industrial parks or near new freight corridors reported tangible improvements in efficiency and profitability.
Even as infrastructure builds out and large firms thrive, the long-term competitiveness of the sector is threatened by high logistics costs, a severe warehousing shortfall (just 0.2 square feet per urban resident compared to 47.3 in the US), and low levels of domestic value addition, which stand at 17 per cent versus China's 25 per cent.
To move forward, the report urges a recalibration of priorities. Without narrowing the productivity gap and enabling MSMEs with real, operational support and not just policies on paper, the sector risks stalling under its own weight. Chandalia offers a roadmap: "Policymakers can help by strengthening credit guarantee schemes, increasing subsidies for technology and training, streamlining regulations, and raising awareness about government programs. While recent initiatives are positive, ongoing efforts to simplify access, reduce compliance burdens, and promote innovation are crucial."