Why India is so bad at politics

Indian Small and Medium Business Modernization and Innovation Program (MSMEs)

Brief description of the program

Description: Indian SME Modernization and Innovation Program (MSMEs)
Client: Federal Ministry for Economic Cooperation and Development (BMZ)
Country: India
Lead executing agency: Ministry of Micro, Small and Medium Enterprises
Total duration: 2018 to 2020

initial situation

Economic growth is right at the top of the political agenda in India: by 2017, “faster, more sustainable and more inclusive growth” is to be achieved. Around 12 to 13 million young people enter the labor market every year. In order to take up these, 120 to 130 million new jobs must be created by 2025. The Indian middle class with its smallest, small and medium-sized enterprises (MSMEs) is to become the driving force here.

The 44 million micro-enterprises, as well as hundreds of thousands of small and medium-sized enterprises (SMEs), have an enormous economic, social and ecological impact. However, international competition and the pressure to use resources such as energy, water and other raw materials more efficiently and to produce in an ecologically sustainable manner pose challenges. Through technical modernization and “green” and broad-based innovations, India's medium-sized businesses can tap new economic potential and maintain their competitiveness in the long term strengthen.

Unlike in Germany, medium-sized companies with innovative ideas often work in isolation. There is hardly any cooperation with research, technology or academic institutions. Medium-sized companies have also received poor or inadequate support in important areas such as technology transfer, resource efficiency or sustainability management. The Indian government has launched a number of initiatives to strengthen the middle class, but the situation has only improved slightly so far. Cooperation between industry, science and government agencies continues to be weak. This affects the innovative capacity and sustainability of MSMEs (including social enterprises and start-ups). So far there is no conducive environment for cooperation; Funding institutions lack effective methods, funding approaches and incentive systems to strengthen cooperation.


With the support of the project, selected medium-sized companies have increased their innovative strength in order to develop broad-based and sustainable innovations.


Based on the assumption that innovations arise where companies and other actors work together, the project's strategy is aimed at strengthening cooperation between business, politics and research. The aim of this collaboration is to initiate, introduce and disseminate new technologies, products, processes or business models.

To this end, the project supports economic development institutions, such as chambers and associations, to develop a functioning and innovation-promoting range of services for MSMEs. In addition, GIZ provides advice on methods and instruments that help identify opportunities for improvement in the operations and supply chains of large companies. The project draws on international and national experts from the field of innovation. GIZ also supports the creation of new training materials on the subject of innovation management and the establishment of new mechanisms for promoting start-ups. The aim is to enable medium-sized companies to meet the demands of international or German customers.

The Ministry for SME Promotion is advised at the national level in order to develop new funding instruments that contribute to more innovation and modernization in SMEs. The experience gained in promoting innovation will flow into the political dialogue, provide new impulses for the improvement of funding policies and instruments and thus become an integral part of economic development in India.