From Tariff Shock to Strategic Resilience: Rethinking MSME Competitiveness in India

US protectionism - with tariffs peaking at 50% - created a crisis for Indian small enterprises in late 2025. A February 2026 diplomatic breakthrough landed an 18% reciprocal-tariff framework between the US and India, easing but not eliminating the pressure. Sectoral impact was uneven: textiles were most vulnerable, auto components proved resilient, and gems/jewellery were moderately affected. The paper identifies three structural bottlenecks facing Indian MSMEs regardless of tariff levels: inadequate credit access, technology lag, and high informality. The Union Budget 2026-27 responded with credit-guarantee expansion, technology subsidies, and formalisation incentives. Strategic recommendations include a shift toward quality manufacturing rather than cost competition, geographic market diversification away from over-reliance on the US, and industrial clustering to build scale. The paper's conclusion is that structural reform - not tariff relief alone - is what secures lasting MSME competitiveness.