MSME ministry demands ₹6,000 crore to support khadi, village industry

New Delhi: The Ministry of Micro, Small and Medium Enterprises (MSME) has sought ₹6,000 crore to continue its flagship program for khadi and village industries for five years till March 2031, as the government considers further support for the sector that supports millions of rural livelihoods.

The proposed outlay for the Khadi Gramodyog Vikas Yojana is meant to support artisans, mostly women, unemployed rural youth, self-help groups and thousands of village industries, three people aware of the development said. Continuation of the program with adequate funding is also essential to preserve the legacy of Khadi as a symbol of India’s freedom struggle, they said.

According to the Khadi and Village Industries Commission (KVIC), about 20.4 million people were involved in khadi and village industries in fiscal year 2026 (FY26), underscoring the rural employment and income generation stakes.

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The government spent ₹2,374 crore under the scheme over three years till FY26. It has two components: Khadi Vikas Yojana, which promotes and develops the khadi sector, and Gramodyog Vikas Yojana, which promotes village industries through communal facilities, technological upgradation, training and other assistance.

“Discussions are on for the Khadi Gramodyog Vikas Yojana, there are plans to continue targeted support to this ecosystem,” said a government official, one of the people cited above.

The Ministry of MSME promotes khadi production and village industries through the KVIC, a statutory body established by an Act of Parliament in 1956.

Queries emailed to the MSME and the Finance Ministry and KVIC on October 28 remained unanswered.

Modernization is key

Sales of Khadi products and village industries have reached ₹1.87 trillion in FY26, up 20% ₹1.55 trillion a year earlier, according to preliminary KVIC data released in May. Khadi sales alone grew by 10%. ₹7,869 crore in FY26, from ₹7,145 crore a year earlier.

Wages for artisans rose to ₹15 per skein, which is the length of yarn wound into a bobbin, in FY26, from ₹4 per hank in FY14, according to KVIC data. The length of the hank varies according to the fabric.

Worn and promoted by Mahatma Gandhi, Khadi became a symbol of the independence and self-reliance movement during British colonial rule. But sustaining the sector will require more than financial support, industry groups said.

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Infrastructure, better practices and stronger links to markets are also needed, especially as many small businesses in the sector operate outside the formal economy and have limited financial capacity to pay decent wages.

“International experiences offer valuable lessons: Japan’s emphasis on passing skills to the next generation, Thailand’s development of community products for contemporary markets, and France’s recognition of historic businesses as enterprises of excellence. India can adapt these approaches while protecting the authenticity of khadi, regional craft identity and producer interests,” said Vinod Kumar, president of the India SME Forum, an industry lobby group MS, representing about 000.

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The sector’s longer-term prospects will also depend on its ability to respond to changing consumer needs and production challenges, experts said. Khadi and village industries are rooted in the Gandhian model of development, but their institutions need to adapt to current market conditions to better support those who depend on them.

“MSMEs, especially cottage industries, should be seen as functional partnerships with larger enterprises; or as functional relationship builders between the smallest and largest industries, and not just smaller enterprises,” said Pune-based political economist Abhay Tilak, director of the Indian School of Political Economy.

Khadi and village industries now have to respond to the demands for healthier products, better quality textiles and the challenges posed by climate change, he said.

“The support provided by KVIC is essential even in today’s world, but the work done to uplift artisans and their businesses needs to adapt,” added Tilak.