When the Prime Minister addressed the nation from Hyderabad earlier this month, the headlines read a superficial message: work from home, cut fuel consumption, brace for impact. Commentators reached for familiar terminology – import vulnerabilities, current account pressures, rupee on edge. The machinery of destruction ran efficiently.
What got lost in the noise was the underlying message. Which is embedded inside the first. Not crisis-management directives, but structural logic: that India’s next phase of development cannot be borrowed from the global cycle. It must be created from within.
The trend to look inward and build domestic resilience is right. What the moment demands is that this be translated into specific economic action. That action is the systematic opening up of equity capital to India’s middle-market businesses.
load bearing layer
India’s family-owned manufacturers, regional business operators, service providers, all together medium-sized companies – which include ₹from 50 ₹The Rs 300 crore revenue limit is the quiet, load bearing layer of the Indian economy. They employ the most people, establish the most supply chains, and generate the most sustainable economic activity across the country. Most have been built over decades through bank loans and reinvested cash flows. That discipline is a real accomplishment. But this is also a roof.
A business growing solely on internal resources cannot simultaneously expand geographically, invest in technology, upgrade its talent base, and finance the kind of R&D that makes a product globally competitive. These things require patient, long-term equity capital. And for most businesses in this category, the knowledge of equity capital, the process for accessing it, and the conditions that create a business to obtain it are still not well understood.
Equity capital does much more than finance
A fair observation that many mid-market businesses are not yet structured for institutional investment is that they need to improve the depth of their governance, financial reporting and management before equity capital can flow. The observation is accurate. But the causal sequence is usually misread.
When a founder raises institutional equity for the first time, the discipline that comes with the process changes the way a business is run. The financial position is audited according to a standard that reveals previously invisible inefficiencies. Management structures become less dependent on any one person. A board with independent voices begins to ask questions that increase strategic clarity. Companies that undergo PE raises or SME listings do not simply have more capital. They end up with better institutions.
Equity-backed middle-market companies upgrade their supply chains, pay vendors faster, invest in worker skills, and adopt technology at rates that debt-financed peers do not. The compounding effect on the broader economy through better working capital velocity, lower NPA risk in the banking system and higher tax compliance is significant. Expanding equity access is therefore not just a financing intervention but a structural lever for building a more resilient, transparent and internationally competitive economy.
what has the government created
The Prime Minister has said that his government’s ambition is to take Indian MSMEs “from local to global level”. He called on the private sector to “invest boldly in R&D, supply chain and quality”. These are right ambitions. The policy architecture being built to support them is acceptable – the ₹Rs 1 lakh crore Research, Development and Innovation Fund, SEBI’s revised SME IPO platform, rational framework for setting up AIFs. These are genuine and well-designed steps.
What remains to be strengthened is the bridge between this architecture and the midmarket businesses that are its intended beneficiaries. There are three spans in that bridge.
The first is awareness. Most mid-market founders have an inaccurate and limited mental model of what equity capital involves – it means surrendering control, being subject to long periods of due diligence, and being permanently second-guessed. The reality of a well-structured growth equity capital is fundamentally different. India’s industry associations and the government’s own entrepreneurship platforms at the national and state levels have the reach to correct this misconception on a large scale. It requires institutional intent to do so.
The second is the velocity of domestic capital. India’s private equity market is concentrated in large-cap transactions. The mid-market segment, where the amount of opportunity is substantial, is not adequately served by a capital pool sized and structured for it. The government can change this directly: by creating government-based mid-market equity funds, providing co-investment incentives for domestic funds, offering earlier stop loss guarantees for priority sector investments and rationalizing the tax treatment of domestically domiciled fund structures. A meaningful portion of the capital accumulating in India’s mutual funds, family offices and institutional pools needs to find its way to mid-market businesses. For this to happen the conditions can be made conducive to quick and solid equity capital deployment.
The third is the speed and efficiency of the working capital cycle. Every rupee stuck in delayed receivables or pending GST refunds is a rupee prevented from productive reinvestment. Further strengthening India’s financial pipeline – TReDS adoption, MSME credit guarantee processing, trade receivable financing will help mid-market businesses in a big way. By suppressing this cycle in a restrained and systematic manner, productive capital will be released on a large scale without a single rupee of additional government expenditure.
moment and opportunity
The Prime Minister’s appeal for economic self-reliance was not an advice to retreat. It was a call to recognize that India’s deepest strengths lie within and that in a turbulent world, only the nations that know how to mobilize those strengths emerge stronger. The middle-market businesses that have quietly built the real economy over many decades are the driving force. Giving them equity capital, and allowing that capital to do what it always does – enhance governance, sharpen ambition and mix value. In this way, India can turn this moment of external geopolitical crisis into the foundation of its next decade of development.
[This article is authored by Varun Jhaveri is the National Incharge for Policy and Research at the BJP Youth Wing (BJYM)].
(Views expressed are personal)