Challenges Faced by MSMEs in Utilizing the EPCG Scheme for Machinery Modernization: A Thematic Analysis

Micro, Small, and Medium Enterprises (MSMEs) are critical contributors to India’s economy, playing a significant role in generating employment, enhancing production capacity, and boosting exports. Despite numerous government initiatives aimed at promoting their growth, MSMEs continue to face substantial challenges in accessing and effectively utilizing export promotion schemes. One such initiative is the Export Promotion Capital Goods (EPCG) scheme, which permits duty-free imports of capital goods to encourage technological advancement and competitiveness in the international market. However, many MSMEs struggle to benefit from this scheme due to a range of structural and operational barriers. This study, based on in-depth qualitative interviews with twenty MSME unit owners, explores the key obstacles that hinder their successful participation in the EPCG scheme. Through thematic analysis, the research identifies four critical challenges: complex administrative and bureaucratic procedures, limited awareness and lack of adequate technical guidance, stringent and often difficult-to-meet compliance requirements, and significant financial and operational constraints faced by MSMEs. These findings highlight the urgent need for targeted policy interventions that can simplify the application process, enhance information dissemination, and provide tailored support to MSMEs. Addressing these barriers is essential to ensure that the EPCG scheme can achieve its intended objectives of facilitating MSME growth, modernization, and expanded integration into global markets.