- India’s MSME sector traces its beginnings to the Swadeshi movement, where Khadi and village industries were promoted as tools of self-reliance and rural empowerment. Post-independence, government policies marked the formal foundation of what later became the MSME ecosystem.
- Over the decades, MSMEs have evolved from fragmented cottage industries into organized clusters, and span sectors including textiles, food processing, beauty and personal care, IT services, and renewable energy.
- Government programs have accelerated the formalization and modernization of MSMEs.
- In a bid to increase their contribution to the nation’s GDP, Government and Financial Institutions are working towards improving the access to credit, bringing in new regulations and also offering skill development platforms.
The roots of India’s small industries can be traced to the Swadeshi movement, where Mahatma Gandhi urged citizens to boycott foreign goods and rely on locally made products. Khadi, in particular, became the symbol of economic independence and national unity. Village crafts such as pottery, handlooms, and weaving were promoted not only for their utility but also for their role in sustaining rural livelihoods. This advocacy of Swadeshi and promotion of Khadi encouraged small village industries, instilled pride in local production, created employment, and reduced dependence on imported goods.
Decades later, small industries continue to embody this spirit, bridging India’s traditions with its modern aspirations. India’s MSMEs and small enterprises today reflect the evolution of Gandhi’s vision—growing from self-reliant village industries into a dynamic ecosystem that is diverse, resilient, and deeply integrated into the national economy.
On the occasion of Mahatma Gandhi’s birthday, lets look at how the small industries have evolved over the decades.
Strengthening the Small-Scale Industry Ecosystem
In the post-independence decades, small-scale industries (SSIs) were recognized as vital for equitable growth. The Khadi and Village Industries Commission (KVIC), which was established in 1956 to support handlooms, handicrafts, and rural industries, has been playing an instrumental role in benefiting more than 5 lakh artisans, business owners, and beneficiaries under the Gramodyog Vikas Yojana, Khadi Vikas Yojana and Prime Minister’s Employment Generation Programme (PMEGP)1. Furthermore, a disbursement of ₹469 crore as margin money subsidy to 14,456 new units under the PMEGP scheme is expected to generate 1,59,016 new jobs. Besides the handicrafts, agro, dairy, and food processing emerged alongside the Green Revolution and White Revolution, creating opportunities in flour milling, oil pressing, and cooperative dairies.
Over time, what began as fragmented local industries developed into organized clusters, laying the groundwork for today’s MSME ecosystem.
How Small Industries have Evolved Over the Years
Small industries in India have diversified to cover both heritage crafts and modern enterprises. Their presence in various industries highlights the adaptability of MSMEs to changing consumer demand and technological shifts across various sectors as highlighted below:
- Textiles & Handicrafts
India’s textile and handicraft traditions remain a backbone of rural employment and exports. While the textiles and apparel market is expected to expand at a 10% CAGR, reaching about ₹29.4 lakh crore by 2030. Many artisans now sell through e-commerce platforms globally, leading to total exports reaching ₹3,12,540 crore (US$ 36.6 billion) in FY 20252
- Food Processing
The food processing industry includes a varied range of activities related to raw agricultural, dairy, meat, fisheries, or horticultural products. The industry is expected to grow at a CAGR of 8.8% until 2032, with the market size moring than doubling from ₹25.5 lakh crore in 2023 to nearly ₹58.2 lakh crore by 2030.3 Food processing remains one of the fastest-growing industries with the largest markets in the US, UAE, Vietnam, and Bangladesh, generating large-scale rural employment and expanding opportunities for small enterprises engaged in value addition.
- Beauty & Personal Care
The beauty and personal care market in India reflects both rising consumer aspirations and renewed interest in natural products. Valued at USD 28 billion in 2024, it is projected to reach USD 48.3 billion by 2033, growing at a CAGR of ~ 5.6 %4.
This growth in the sector is driven by the rising demand for natural, herbal, Ayurvedic, and chemical-free alternatives—segments where small enterprises have established strong footholds. With e-commerce penetration in Tier-2 and Tier-3 cities, the market is increasingly accessible to emerging MSMEs.
- IT Services & Digital Enterprises
Digital adoption has transformed the MSME landscape, with 67% being digitally equipped and utilizing emerging digital tools and technologies5. Small IT firms in non-metro cities now contribute significantly to software development, design, and outsourcing, linking local talent to global markets. This trend demonstrates how MSMEs are moving into high-value service segments.
- Renewable Energy & Green Enterprises
Sustainability has opened new avenues for small industries. As of August 2025, India’s installed renewable capacity included 123,130 MW of solar power and 52,681 MW of wind energy, alongside small hydro and biomass. Cumulatively, renewable energy now accounts for a significant share of India’s energy mix.
For MSMEs, this translates into opportunities in solar panel assembly, component supply chains, and waste-to-energy units. Studies show that MSMEs account for around 25% of industrial energy consumption, and policy efforts are increasingly directed at supporting their transition to clean energy.
Present Momentum: Government Support and Policy Push
Government initiatives have played a central role in enabling small industries to modernize, secure financing, and become part of the formal economic system. Among the most impactful programs is the Prime Minister’s Employment Generation Programme (PMEGP), which provides credit-linked subsidies to micro-enterprises in both rural and urban regions. This has helped aspiring entrepreneurs overcome the initial hurdle of capital requirements and start small-scale ventures.
Similarly, the Scheme of Fund for Regeneration of Traditional Industries (SFURTI) has been instrumental in supporting crafts, handlooms, and rural industries by promoting cluster-based development. Through common facility centers, skill training, and better market access, SFURTI has rejuvenated traditional sectors that had long faced neglect.
The Aatmanirbhar Bharat Abhiyan has further extended a policy push for strengthening local supply chains and encouraging domestic production. By promoting import substitution and incentivizing local manufacturing, the scheme has boosted opportunities for small enterprises to compete in broader markets. Initiatives under Digital India, along with the Udyam registration portal, have simplified registration and compliance processes, making it easier for MSMEs to formalize operations, access credit, and connect to digital marketplaces. Together, these schemes highlight the government’s dual approach of preserving India’s traditional crafts while creating opportunities for modern, innovation-led sectors.
To address the various issues, a multi-pronged strategy includes enhanced access to credit facilitated by the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), other financial institutions, and RBI-registered NBFCs such as Protium, which provides specific loan products like machinery loans or even loans against property.
The Road Ahead
Skill development initiatives are increasingly bridging the gap between workforce capabilities and industry requirements. Programs under the Skill India Mission, sector-specific skilling councils, and MSME-focused training schemes are enabling small business owners and workers to upgrade their skills and meet the evolving market needs. Instead of viewing large corporates as competitors, many MSMEs are now forging partnerships that create mutual value. For instance, fashion designers and global brands often collaborate with traditional artisans for unique handloom and craft-based collections. Such alliances not only provide MSMEs with stable demand but also showcase India’s cultural heritage on international platforms.
While Skilling programs must be continuously updated to align with the needs of emerging industries, particularly in areas such as digital services and green technologies, this is equally essential. Additionally, Wider use of e-commerce platforms provides access to global trade networks, thereby helping small industries expand their customer base beyond local markets. All of these measures collectively not just keep small industries thriving but also help in preservation and cater to a newer audience.