Skill Drought in Manufacturing: Why MSMEs Are Struggling to Hire

At first glance, India’s manufacturing sector appears to be marching steadily toward progress, bolstered by the Make in India campaign, the PLI schemes, and a push for localised production. But beneath the surface lies a pressing challenge that continues to throttle the potential of small and medium enterprises (SMEs): a deepening skill drought.

Walk into any small factory in Faridabad, Rajkot, or Coimbatore, and you’ll hear a common lament from the shop floor to the MD’s office—“We have the orders, we have the machines, but we don’t have the hands.”

When Supply Doesn’t Meet Demand

According to recent data from the Ministry of Skill Development and Entrepreneurship (MSDE), India trains over 10 million youth every year under various government-

At first glance, India’s manufacturing sector appears to be marching steadily toward progress, bolstered by the Make in India campaign, the PLI schemes, and a push for localised production. But beneath the surface lies a pressing challenge that continues to throttle the potential of small and medium enterprises (SMEs): a deepening skill drought.

Walk into any small factory in Faridabad, Rajkot, or Coimbatore, and you’ll hear a common lament from the shop floor to the MD’s office—“We have the orders, we have the machines, but we don’t have the hands.”

When Supply Doesn’t Meet Demand

According to recent data from the Ministry of Skill Development and Entrepreneurship (MSDE), India trains over 10 million youth every year under various government-backed skilling programs. Yet, paradoxically, manufacturing MSMEs continue to report an acute shortage of employable talent.

“The irony is that people are getting certified, but we’re still not getting workers who can operate CNC machines or manage basic quality checks,” says Vipul Joshi, a small auto-parts manufacturer from Pune. He has had three open positions for machinists for over two months, with no takers who meet even minimum practical benchmarks.

This mismatch points not to a lack of training programs, but to a disconnect between what’s being taught and what the industry actually needs. MSMEs require workers who can hit the ground running. Unfortunately, most candidates are trained in outdated methods or possess only theoretical knowledge.

Why MSMEs Feel the Pinch Harder

Large manufacturers can invest in dedicated training infrastructure and absorb inefficiencies during onboarding. MSMEs, on the other hand, do not have the luxury of time or resources. A small foundry cannot afford to hire someone who needs three months of hand-holding. They need ready-to-work talent today.

Moreover, MSMEs tend to operate in tight-knit industrial clusters, often in non-metro areas. These locations are less attractive to skilled youth who prefer service sector jobs in cities or tech parks over shop floor jobs with physically demanding routines.

“In many cases, even when we find skilled workers, retaining them becomes difficult,” says Reena Varma, who runs a small textile dyeing unit in Surat. “Young people often jump to e-commerce delivery jobs or retail outlets where the work is less demanding and offers similar or better pay.”

A Cultural Shift in Aspirations

This skill mismatch is not just technical—it's cultural. The younger workforce aspires for “cleaner” jobs—IT roles, remote gigs, and gig-economy assignments. A survey by the National Sample Survey Office (NSSO) in 2024 showed that only 12% of youth under 30 considered manufacturing as their preferred employment sector.

This generational shift in preference is a wake-up call. If small-scale manufacturing is to thrive, the sector must find ways to make shop floor jobs aspirational again, through better incentives, upskilling pathways, and safer, more dignified working conditions.

Bridging the Divide

The government has taken steps—like the PM Vishwakarma Yojana and collaboration with ITIs—but their impact remains fragmented at the grassroots. What MSMEs need is a hyper-localised approach to skilling: one that collaborates directly with industries in specific clusters to design need-based curricula and hands-on apprenticeships.

Digital platforms like NSDC’s Skill India Portal and private job-matching apps are emerging, but they too need to be tailored to SME needs rather than just large corporations.

Until this gap is narrowed, India’s vision of becoming a global manufacturing powerhouse may continue to run into a silent bottleneck—one where orders exist, opportunities abound, but skilled hands are few and far between.