MAINS Current Affairs includes MSMEs: The Backbone of India’s Inclusive Growth & Digital Chokepoints in the Era of Global Connectivity

ECONOMY

1. MSMEs: The Backbone of India’s Inclusive Growth

Context

• India’s Micro, Small and Medium Enterprises (MSME) sector has become a key driver of economic growth, employment generation, exports and grassroots entrepreneurship, particularly in rural and semi-urban areas.

What are MSMEs?

• MSMEs are enterprises classified on the basis of investment in plant and machinery or equipment and annual turnover.
• The Union Budget 2025-26 revised the MSME classification criteria to expand coverage and encourage enterprises to scale up without losing benefits.

Why MSMEs Are Important?

• MSMEs contribute about 1% to India’s GDP, account for 48.58% of total exports, and generate around 35.4% of manufacturing output.
• The sector encompasses more than 47 croreenterprises across manufacturing, services, and trade activities.
• It provides livelihoods to approximately 8 crore people, making it the second-largest source of employment after agriculture.
• A large share of these enterprises operate in rural and semi-urban areas. They support local value chains, promote non-farm employment, and contribute to regional economic development.

Key Challenges Faced by MSMEs

• Access to Finance:MSMEs, particularly micro enterprises in rural areas, face significant credit gaps due to collateral requirements, limited credit history and risk aversion among lenders.
• Increased Competition: Globalisation and e-commerce have exposed MSMEs to competition from large domestic players and cheap imports, particularly in textiles, handicrafts and electronics.
• Lack of Technological knowledge: A large proportion of MSMEs — especially in rural areas — lack awareness and capacity to adopt digital tools, automation and modern production techniques.
• Marketing and Networking Opportunities:Limited market linkages and poor brand visibility restrict MSMEs from accessing national and global markets effectively.
• Regulatory Burden:Complex compliance requirements across labour, taxation and environmental regulations disproportionately affect small enterprises with limited administrative capacity.
• Skilled Labour Shortage:MSMEs struggle to attract and retain skilled workers, particularly as urban migration pulls labour away from rural manufacturing clusters.
• Vulnerability to External Shocks: As demonstrated during COVID-19, MSMEs — especially micro enterprises — have limited financial buffers to absorb demand shocks, supply chain disruptions or raw material price volatility.

Government Initiatives

• PM Vishwakarma: Launched in 2023, it is a central sector scheme for 2023-24 to 2027-28.
  • It aims to uplift traditional artisans and craftspeople by enhancing product quality and connecting them to wider markets.
• Credit Guarantee Scheme for Micro and Small Enterprises (CGSMSE): A Credit Accessibility Breakthrough, the CGSME provides credit guarantees for credit facilities extended by Member Lending Institutions to MSEs without collateral security or third-party guarantees.
• Udyam Registration Portal: It was launched in 2020, offers a free, paperless, and self-declared registration process for MSMEs.
• Prime Minister’s Employment Generation Programme (PMEGP): PMEGP is a credit-linked subsidy scheme that supports self-employment by helping set up micro-enterprises in the non-farm sector.
• MSME Hackathon 4.0 (2024): Supports 500 young entrepreneurs with funding up to Rs. 15 lakh each for innovation and incubation.
• MSME-TEAM Scheme (2024): A trade enablement initiative with an outlay of Rs. 277.35 crore, supporting 5 lakh MSEs (including 2.5 lakh women-led) in digital onboarding, cataloguing, logistics and packaging.
• Khadi and Village Industries: The Government is promoting the Khadi and Village Industries (KVI) sector through the Khadi and Gramodyog Vikas Yojana (KGVY), a Central Sector Scheme with no state component.
• International Cooperation Scheme:Supports MSMEs in entering global markets by facilitating participation in international fairs, exhibitions and knowledge-sharing events on a reimbursement basis.

Conclusion and way forward

• As India moves towards becoming a $5 trillion economy and achieving the vision of Viksit Bharat 2047, MSMEs are expected to remain central to the country’s economic transformation by driving employment, local manufacturing, exports, innovation and inclusive growth.
• However, addressing challenges related to credit access, technology adoption, delayed payments, skilling and global competitiveness will be crucial to unlocking the sector’s full potential, particularly in rural and semi-urban India.

SCIENCE AND TECHNOLOGY

2. Digital Chokepoints in the Era of Global Connectivity

Context

• Amid rising geopolitical tensions, Undersea Cable Networks passing through strategic Digital Chokepoints have emerged as highly vulnerable infrastructure.

What are Undersea Cables?

• Undersea or submarine cables are fibre-optic communication cables laid on the seabed to transmit internet and telecommunication data across countries and continents.
• Key Features of Undersea Cables: 
  • More than 500 submarine cables connect different parts of the world.
  • Around 95% of global internet and international data traffic passes through these cables.
  • Undersea cablessupport global banking systems, digital payments, cloud computing, e-commerce, and military communications.
  • Major technology companies such as Google, Meta, and Microsoftare increasingly investing in submarine cable infrastructure.

What are Digital Chokepoints?

• Digital chokepoints are narrow maritime passages through whichmultiple submarine communication cables pass
  • These chokepoints become strategically important because disruption at one location can affect internet connectivity across several regions simultaneously.
• Major Global Digital Chokepoints: 
  • Strait of Hormuzserves as a major digital and energy chokepoint connecting the Gulf region with the global economy.
  • Bab el-Mandeb Straitlinks the Red Sea with the Arabian Sea and carries major submarine cable routes.
  • The Suez Canal acts as a crucial corridor connecting Europe and Asia through both maritime trade and digital infrastructure.
  • Malacca Strait connects the Indian Ocean with the Pacific Ocean and carries vital communication networks.
  • The Red Seahosts several critical undersea cable systems connecting Europe, Asia, and Africa.

Geopolitical Dimensions of Undersea Cables

• Emergence of Infrastructure Geopolitics:Digital infrastructure is increasingly becoming an instrument of geopolitical influence and strategic leverage.
• Rise of Hybrid Warfare: States may use cyberattacks, sabotage, or infrastructure disruption below the threshold of conventional warfare to pressure rival countries.
• Growing Maritime Competition: The seabed is emerging as a new domain of strategic competition involving countries such as the United States, China, Russia, and Iran.

Major Vulnerabilities Associated with Undersea Cables

• Concentration of Infrastructure:Many submarine cables are concentrated along the same seabed routes, creating dangerous single points of failure.
• Difficulty in Repair Operations:Repairing damaged submarine cables requires specialised ships, technical expertise, and international coordination. Repair operations become difficult during military tensions or maritime conflicts.
• Legal and Regulatory Ambiguity:International legal frameworks regarding intentional cable disruption remain weak and ambiguous, especially in situations involving hybrid warfare or grey-zone conflicts.

Potential Consequences of Cable Disruption

• Disruption of Global Connectivity: Damage to submarine cables can reduce internet speed, disrupt communication networks, and createregional internet blackouts.
• Financial Instability: Interruptions in data flows can affect banking systems, stock markets, and global payment networks, thereby increasing economic uncertainty.
• Impact on Global Trade: Digital disruptions can affect shipping operations, insurance markets, supply chains, and energy trade routes.
• Security and Military Risks: Damage to submarine cables can weaken military coordination, intelligence communication, and command-and-control systems during crises.
• Disproportionate Impact on Developing Countries: Developing countries with limited digital backup infrastructure may face severe communication and economic disruptions.

Concerns for India

• India’s financial and IT sectors are highly dependent on uninterrupted data connectivity.
• Rising geopolitical tensionsin the Indian Ocean Region (IOR) increase risks to digital infrastructure.
• Dependence on foreign-controlled cable infrastructure creates strategic vulnerabilities.

Way Ahead

• Diversification of Cable Routes:Countries should develop alternative submarine cable routes to reduce excessive dependence on a few chokepoints.
• Strengthening Maritime Security:Naval cooperation and maritime surveillance should be enhanced to protect underwater digital infrastructure.
• Building Redundant Systems: Countries should invest in satellite communication systems and backup digital infrastructure to improve resilience.
• International Cooperation:Global cooperation is required for protection of submarine cables, faster repair coordination, information sharing and development of legal norms regarding infrastructure protection.

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