India’s Manufacturing Talent Gap: Skilling MSMEs for the Future

Posted on November 18, 2025 by Ratish Pandey, One of Thousands of Business Coaches on Noomii.

India is poised to become the world’s next manufacturing powerhouse, especially as global supply chains diversify through the China-plus-one strategy. You can see the action in industrial hubs like Noida, where an ecosystem of ancillary manufacturing units busy churning out components for global electronics giants is gaining momentum. And yet, despite the influx of orders and investment, many factories run below capacity.

The culprit?

A widening talent and skill gap that threatens to undo our manufacturing dreams.

A challenge that the MSMEs and SMEs in the manufacturing sector, which form the backbone of India’s industrial economy, are battling. Unlike large corporations with deep pockets and structured HR systems, these smaller enterprises face unique constraints—limited access to skilled labour, minimal training infrastructure, and high attrition.

If India is serious about becoming the next manufacturing base for the world, it’s time to accept a hard truth: upskilling is no longer optional—it’s a strategic imperative.

Manufacturing’s Growing Skills Crisis

Manufacturing in India is undergoing a tectonic shift, yet the workforce isn’t keeping pace. From CNC operations and precision welding to advanced electronics assembly, the industry is struggling to find trained talent across every level. According to reports, India will need around 100 million workers by 2030 to meet manufacturing demand.

Today, only 2.3% of our workforce is formally skilled, as against 52% in the U.S., 68% in the U.K., and over 80% in countries like Japan and South Korea.

This disparity is more than a statistic—it is a bottleneck for thousands of businesses. MSMEs, particularly those in ancillary manufacturing, suffer the most due to:

1. Limited HR and training infrastructure
2. High turnover due to wage competition
3. Lack of access to skilling programs on new technology
4. An aging workforce resistant to change
5. No formal knowledge transfer systems

In industrial clusters like Sriperumbudur or Tiruppur, these challenges are magnified by geographic isolation and wage pressures from larger corporations. Skilled workers migrate to better-paying jobs in multinational factories, leaving MSMEs in a constant churn of hiring and retraining.

When Talent Doesn’t Align with Industry Needs

Mismatch in skills is just a theoretical concern, but a practical one.. It directly impacts productivity, which in turn affects profitability, and sometimes even survival. Let’s look at how:

1. High Defect Rates

Lack of technical proficiency in roles like micro-soldering or assembly line inspection leads to increased defects and rework. The example that comes to mind is the initial days of Apple’s iPhone assembly line at Tata’s Hosur factory. It initially reported only a 50% yield, attributed mainly to insufficient technical skills among workers.

2. Production Delays

India’s manufacturing utilisation still lags at around 75.4%, well below the 83% mark of 2011. A big reason? Inadequate workforce to meet production deadlines. In many cases, especially in the ancillary segment, minor delays translate to cancelled orders, broken client relationships, and financial strain.

3. Workplace Safety Risks

Inadequately trained workers are more likely to skip safety protocols or mishandle machinery. It not only puts lives at risk but can also result in plant shutdowns, insurance claims, and compliance violations.

In all of these cases, the impact is amplified for MSMEs, which lack the buffers and resources of larger firms. Skilling isn’t a nice-to-have—it’s a make-or-break factor.

The Smart Manufacturing Shift: Industry 4.0 Is Already Here

To be the global hub, India’s manufacturing landscape is working to best its capability and therefore is quickly adopting Industry 4.0 technologies—automation, robotics, IoT, and AI. Large manufacturers are already integrating predictive maintenance, digital twins, and data-driven decision-making.

A change that is demanding MSMEs wishing to stay relevant in this ecosystem, to have a workforce that can:

1. Operate and program automated machinery (CNCs, cobots)
2. Understand sensor data and production analytics
3. Troubleshoot smart equipment using digital tools
4. Adapt to new manufacturing methods like 3D printing and composite materials

These changes are creating new job roles overnight—from automation technicians to data integration specialists. Yet most MSME employees, trained in legacy systems, struggle to keep up.

Why MSMEs Are Most at Risk

Larger established manufacturers have the luxury of scale—they can have access to training academies, partnerships with global learning platforms, and rotate employees across roles for continuous learning.

MSMEs, in contrast, face:

1. Budget constraints that make external training unfeasible
2. Limited awareness of available government schemes
3. Difficulty finding industry-relevant training partners
4. Fear of attrition after investing in employee skilling

As a business coach for the manufacturing sector, I frequently encounter owners trapped in a cycle. They hesitate to invest in upskilling due to the fear of attrition risk, which ultimately leads to talent leaving due to poor growth prospects —a trap that MSMEs must escape—and fast.

Strategic Solutions: Skilling That Works for MSMEs

MSME’s need to rise above their constraints and find ways and means to upskill their workers without impacting operations or breaking the bank. Here are a few ways that MSMEs can work at biting the upskilling bullet:

1. Skilling Clusters and Shared Training Centers

When the challenge is too big to tackle alone, collaboration becomes the smartest strategy. For MSMEs facing the growing demands of skilling and upskilling, this means pooling resources within their industrial clusters. By coming together, peers can co-establish shared training infrastructure—such as CNC labs, welding simulators, and automation learning zones—that would be financially out of reach individually. They can further approach the local institutions or take support from Government Schemes to support these “micro-academies” over time.

2. Partnerships with Vocational Institutes and ITIs

Forging long-term relationships with ITIs or polytechnic colleges allows MSMEs to influence curricula and build a talent pipeline. Apprenticeship programs, especially under government co-financing schemes, are a low-cost and high-return investment.

3. Microlearning Through Mobile Platforms

With mobile-first, bite-sized learning modules, MSMEs can now train employees without halting operations. Workers can learn during breaks or off-hours using modular, job-relevant lessons in local languages. Platforms offering AI-personalised learning paths ensure higher retention and relevance.

4. Industry-Led Curriculum Design

Taking a page from China, where over 80% of vocational institutes are linked to real factories, India’s MSMEs should push for curriculum co-creation. Customised skilling in areas like smart metering, robotics, or even ERP systems can directly boost productivity.

Business Coaching: The Solution to the Skilling Puzzle.

Business coaching is no longer just about leadership or profitability. In the manufacturing context, it now plays a critical role in workforce development and strategy alignment.

A business coach can help MSME founders:

1. Identify high-impact skilling areas based on current operations and future market trends
2. Build a culture of learning and mentorship
3. Connect training initiatives to individual KPIs
4. Access government grants or CSR-funded skilling programs
5. Mandate training and coaching for junior technicians and plant staff at the time of onboarding

In essence, business coaching helps bridge the gap between intent and execution. It offers MSME leaders a roadmap to build lean, capable, and future-ready operations.

Final Thoughts: From Surviving to Scaling

India’s ambition to become a global manufacturing leader hinge not on infrastructure or incentives alone—but on people. Unless MSMEs and SMEs can consistently attract, train, and retain skilled workers, they will be left behind in the industry 4.0 transition.

While the skilling crisis is real, it’s also a strategic opportunity. Forward-looking businesses can leapfrog legacy systems and embrace innovative, tech-enabled skilling models. With the right mindset, partnerships, and business coaching, even the smallest manufacturer can upskill their team and take on global demand.

The time to act is now. Because in the new manufacturing paradigm, your workforce is your most important machine.