India’s MSMEs get a digital makeover to compete with global suppliers

The government is working on an ambitious plan to help 72 million MSMEs meet stricter compliance and export-market requirements on machine-level data, traceability and energy efficiency by equipping them with essential digital factory tools such as machine monitoring, energy management systems and shop-floor software, three people directly involved in the process said.

Pilot launch

The first pilot to use sensors, data analytics, automation and artificial intelligence (AI) to capture real-time information on machine performance, energy consumption, downtime and maintenance will be launched in Gujarat under the World Bank-backed Raising and Accelerating MSME Performance (RAMP) scheme for 750 identified manufacturing units, and will be implemented through the National Productivity Council (NPC), the first of the three persons cited earlier said, all of whom spoke on the condition of anonymity.

“Limited visibility into shop floor operations remains a key constraint for many MSMEs, often resulting in low productivity, high energy costs, inconsistent quality and unplanned downtime. By digitising basic shop floor monitoring, the pilot aims to help unit owners identify hidden productivity losses, stabilise output, reduce energy wastage and shift from reactive to planned maintenance," the second person said.

As part of the plan, the National Productivity Council will empanel startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT) as technology providers.

“These startups will be responsible for installing and supporting a plug-and-play digital twin solution, known as the Shopfloor Insight and Monitoring Kit, on one machine in each participating MSME unit," said the third person. The MSMEs themselves are not empanelled by DPIIT and do not require startup recognition, as they are the end users of the technology, this person clarified.

Each technology provider startup will be paid ₹50,000 per unit, covering hardware, installation, analytics and one year of support, with the engagement expected to run until March 2027, the people cited earlier said. The standardised design and subsidised deployment are intended to lower adoption barriers for MSMEs and create a pathway for scaling digital tools across more machines once the benefits become visible, they said.

Queries sent to the ministry of commerce on Monday remained unanswered till press time.

The development assumes significance, as India’s MSMEs contribute 30% to its gross domestic product and 45% to overall exports.

The National Productivity Council functions under the DPIIT and focuses on improving productivity and competitiveness across Indian industry and services.

“From a global competitiveness perspective, such capabilities are increasingly becoming baseline requirements rather than optional upgrades", said Amit Singh, associate professor at the Special Centre for National Security Studies, Jawaharlal Nehru University.

To be sure, even small suppliers in major manufacturing economies such as Germany, Japan, South Korea and China are increasingly required to use machine monitoring, energy management systems and basic digital twins—simple digital replicas of physical machines or production processes—to meet buyer expectations on quality consistency, traceability, energy efficiency and sustainability.

Access to real-time production and energy data also helps firms respond to buyer audits and compliance checks, including emerging requirements around carbon reporting.

“For Indian MSMEs, adopting these technologies could improve product consistency, reduce rejection rates, meet tighter delivery timelines and support integration into global value chains. Improved shop floor data is also expected to strengthen buyer confidence and enable repeat export orders, allowing small firms to compete on reliability and quality rather than purely on price," said Vinod Kumar, president, India SME Forum.

In December, in a written reply to a question in the Lok Sabha, minister of state for micro, small and medium enterprises Shobha Karandlaje said the total number of MSMEs registered in India stood at about 72 million by the end of November 2025 under the Udyam Registration Portal and the Udyam Assist Platform. Maharashtra accounted for the highest number of registered MSMEs at around 9.4 million units, followed by Karnataka with about 6.7 million, Tamil Nadu with about 6 million, Uttar Pradesh with about 4.6 million units, and Gujarat with about 4.1 million.