Beyond credit challenges, evolving technology and digital enhancements pose hurdles for development of MSMEs, limiting their marketing, technological and distribution capabilities and hampering their market penetration.

An Asian Development Bank survey noted that 87% of MSMEs cited funding shortages as a key barrier to upgrade their technology.

Limited credit availability also impedes the ability of domestic MSMEs to innovate and make technological and digital upgrades. As per a World Bank report, research and development allocation of 0.6% of GDP in India in 2023 was well below the global average of 2.6%, indicating an urgent need for further investments to upgrade domestic technological and digital capabilities.

Amid technological challenges, the government has allocated incentives of about Rs 975 crore for technology upgrades and boosting competitiveness. Additionally, it has implemented the Open Credit Enablement Network and Open Network for Digital Commerce to enhance digital access of MSMEs.

A World Bank study underscores that digital services could amplify financial access by up to 50%. For instance, Malaysia's Fintech Booster programme integrates predictive analytics and machine learning to enhance MSME credit underwriting and trains MSMEs in legal compliance, business modelling, and technology by offering resources and mentorship programmes. The Malaysian government's budget surged 60%, reflecting amplified support for fintech and MSMEs in Budget 2021. This data-driven approach has improved credit accessibility and offers key insights to develop Indian MSMEs.

Next, harvesting agriculture hopes through schemes such as PM Kisan.

Pradhan Mantri Kisan Samman Nidhi (PM Kisan), launched in February 2019, provides financial assistance of Rs 6,000 per year to small and marginal farmers to purchase critical farm inputs or support agri-allied activities. An instalment of Rs 2,000 is directly credited to the bank account of farmers in April-July, August-November, and December-March periods of each fiscal year. As of November 2023, 15 instalments had been made to support ~9.1 crore farmers.

As per the National Sample Survey Office (NSSO) situation assessment survey 2018-19, the average farm family income was Rs 10,218/month. Thus, an additional Rs 6,000/year through the PM Kisan scheme contributed to ~5% of their income. The scheme enables farmers to purchase agri inputs, maintain farm machinery, repay loans, and support animal husbandry and other expenses. The scheme proved especially beneficial during the Covid-19 pandemic when farm activities were disrupted. That said, the government needs to look at the following parameters to optimise its effectiveness.

• Inclusion of tenant farmers and targeting right beneficiaries: PM Kisan currently ignores tenant farmers, the segment that reportedly caters to ~17% of the landholding pie in India as per NSSO (FY19). However, the reality could be much higher, given large number of oral leases. This issue can be addressed through digitisation of land records as evident from other state-level direct cash transfer (DCT) programmes such as Rythu Bharosa and KALIA. As of December 2023, ~12 states have completely digitised their land records and nine states reported more than 90% digitisation. However, identifying the right beneficiaries also remains a concern as the number of beneficiaries surged to ~11.2 crore in fiscal 2022, and later fell to around 9 crore. Thus, the government can leverage Agristack to create a unified farmer database to target the right beneficiaries.
• Increase in the allocation amount: The Commission for Agricultural Costs & Prices composite input price index increased ~38% between 2018-19 and 2023-24, indicating that the cost of cultivation has increased rapidly. Therefore, the government needs to factor in inflation before allocating funds to the PM Kisan scheme as the disbursement amount has remained stagnant amid surging cultivation costs.
• Integration with other schemes: The government can look at an integrated direct cash transfer programme that includes all subsidies provided to farmers under various agri-schemes. To begin with, agri input subsidies can be directly transferred to the account of farmers as a top-up to the existing PM Kisan scheme disbursement.
• Disbursement schedule: As per a study conducted by IPRI and the Indian Council of Agricultural Research, 52% of sample beneficiaries spent their PM Kisan disbursement received during the peak season (February 2019) on agriculture, while only 23% beneficiaries utilised the disbursement for cultivation during the off season. Thus, the benefit transfer should be disbursed before the sowing window viz May-June for kharif and October-November for rabi seasons to improve the scheme’s effectiveness.

Since its inception, the PM Kisan scheme has benefitted ~11 crore farm families and ~50 crore people, which is more than the population of the US. However, a holistic approach based on the above-mentioned parameters will maximise the scheme’s impact.