India’s success in Operation Sindoor showcased the critical role played by medium and small entities in powering drones, surveillance systems, loitering ammunitions, air defence infrastructure and other sophisticated technology used to attack high precision targets. A set of events held by this newspaper last week in Bengaluru and Coimbatore, coinciding with MSME Day, showcased the pioneering role played by such entities in transforming India into a force to reckon with in modern, electronic warfare.

While India is among the world’s top three defence importers, there are signs of self-reliance emerging in the defence and space ecosystem. Along with Operation Sindoor, a stellar achievement last week — of astronaut Shubhanshu Shukla being the first Indian ever to set foot on International Space Station — yet again underscored what India’s scientific and technological expertise can achieve. With MSMEs producing cutting edge equipment for India’s key defence majors, such as HAL, L&T and Defence Research and Development Organisation, the onus now rests with the government to facilitate this process of collaboration. Most entrepreneurs at the meets were of the view that the process of acquiring an order was not just rigorous (which is how it should be) but also cumbersome. The time lag between accepting a prototype and bagging an order could be long. The Government e-marketplace leaves scope for improvement. Yet, it was widely acknowledged that ‘Make 2’ — a defence procurement scheme for indigenous design and development — had made a big difference. A realisation seems to be emerging in the MSME space that product design and development brings success, rather than mere component supply. The patents ecosystem should be supportive of these innovative instincts. The showcasing of MSMEs in Indian defence expos should improve.

This sense of confidence among innovators is all the more remarkable at a time of geo-political uncertainty, disruption of global supply chains and Trump-induced tariff turmoil. Hence, it is all the more important to address constraints such as the difficulties in getting credit without collateral. Today, an extended working capital cycle in the wake of supply chain disruption adds to financial stress. Decentralised or customised banking, no longer in vogue in an era of ‘core banking’, could help MSMEs.

While the textiles and engineering sectors expect to benefit from the India-UK FTA as well as rejigged global tariffs, GST implementation and other concerns related to ‘internal regulation’ (elaborated upon in Economic Survey FY24) need to be addressed. Internal de-regulation is a sine qua non for ‘China plus one’ to work in India’s favour, as the cost of doing business could be very uncompetitive in India. MSMEs are exceptionally resilient; they just need a bit of handholding (in areas such as book-keeping and compliance with new export norms such as sustainability reporting) so that they flourish amidst global vicissitudes.

Published on June 29, 2025