Industry, MSMEs, PLI & the manufacturing push
India's industrial policy arc: MSME redefinition, the IBC, Make in India, the PLI scheme architecture, and the manufacturing-share challenge for UPSC GS-3.
From the IPR 1956 to liberalisation
India's post-Independence industrial framework was set by the Industrial Policy Resolution of 1956, which reserved the commanding heights for the public sector across 17 'Schedule A' industries and operated through the Industries (Development and Regulation) Act, 1951 — the licence-permit-quota raj. The New Industrial Policy of 24 July 1991, announced alongside the balance-of-payments crisis, abolished industrial licensing for all but a short negative list (today only a handful: defence equipment, industrial explosives, tobacco, hazardous chemicals), ended MRTP-style asset thresholds, and opened the bulk of manufacturing to automatic-route FDI. Public-sector reservation shrank to atomic energy and railways.
The MSME redefinition
Micro, Small and Medium Enterprises contribute roughly 30% of GDP, about 45% of manufacturing output and over 45% of exports, and employ around 110 million people — the largest job pool after agriculture. The MSME Development Act, 2006 originally classified firms by investment in plant and machinery and distinguished manufacturing from services. The Aatmanirbhar Bharat package of May 2020 (notified 1 July 2020) introduced a composite criterion — investment AND turnover — and abolished the manufacturing-services distinction:
- Micro: investment ≤ ₹1 crore and turnover ≤ ₹5 crore
- Small: investment ≤ ₹10 crore and turnover ≤ ₹50 crore
- Medium: investment ≤ ₹50 crore and turnover ≤ ₹250 crore
The 2024-25 Budget signalled further easing, and Udyam Registration (online, PAN/GST-linked) is now the formal gateway. Exports are excluded from the turnover calculation to avoid penalising exporters.
Credit and exit architecture
MSME finance rests on the CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises, 2000), priority-sector lending norms under RBI, and the MUDRA scheme (2015) with its Shishu/Kishore/Tarun tranches. The Emergency Credit Line Guarantee Scheme (ECLGS) of 2020 channelled collateral-free guaranteed credit during the pandemic. The TReDS platform digitises bill-discounting to ease the receivables crunch from delayed payments.
The most consequential structural reform was the Insolvency and Bankruptcy Code, 2016, which created a 330-day time-bound resolution process before the National Company Law Tribunal (NCLT), replacing the fragmented SICA/BIFR and DRT regime. The IBC reordered creditor rights, established the 'creditor-in-control' model, and — per Supreme Court rulings such as Swiss Ribbons v. Union of India (2019) and Essar Steel v. Satish Kumar Gupta (2019) — affirmed the primacy of the Committee of Creditors. For factor markets, repeal of the Sick Industrial Companies Act completed the shift from a rescue-the-firm to a release-the-assets philosophy. Together these reforms target the 'twin balance sheet' problem — over-leveraged corporates and NPA-laden banks — that throttled the investment cycle after 2012.