MSMEs & Their Economic Footprint in India’s Journey to Viksit Bharat

Syllabus: GS3/Economy

Context

• As India envisions itself as a Viksit Bharat (developed nation) by 2047, the role of Micro, Small, and Medium Enterprises (MSMEs) has emerged as both foundational and transformative, that act as engines of employment, critical drivers of innovation, exports, and inclusive growth.

About the Micro, Small, and Medium Enterprises (MSMEs)

• MSMEs form the backbone of industrialisation and inclusive development, recognised globally as engines of innovation, job creation, and equitable growth.
• MSMEs serve as essential nodes in domestic and global value chains, linking suppliers, distributors, and service providers, while advancing technological innovation and green growth.
  • According to the World Bank, MSMEs account for around 90% of formal businesses and nearly 50% of global employment, underscoring their critical role in shaping resilient and diversified economies.

Indian MSME Landscape

• According to the Ministry of Micro, Small & Medium Enterprises (MoMSME), MSMEs are classified based on their investment in plant and machinery or equipment and annual turnover:
  • Micro Enterprises: Investment ≤ ₹1 crore and turnover ≤ ₹5 crore;
  • Small Enterprises: Investment ≤ ₹10 crore and turnover ≤ ₹50 crore;
  • Medium Enterprises: Investment ≤ ₹50 crore and turnover ≤ ₹250 crore;
    • This classification was revised in 2020 to provide a more inclusive and growth-oriented framework.
• India’s MSME sector is among the world’s largest, comprising over 74 million registered enterprises, including 29 million women-led businesses, and providing employment to over 320 million people. 
• MSMEs contribute substantially to India’s GDP (approx. 30%), manufacturing output (approx. 45%) and exports (approx. 40%), reinforcing the nation’s emergence as a global manufacturing and innovation hub.

Key Challenges Facing MSMEs

• Access to Credit: A SIDBI study found that MSMEs struggle with ‘timely and adequate’ credit, especially micro and women-led enterprises.
  • Many MSMEs rely on informal sources for funding due to lack of collateral and credit history.
  • The sector faces a ₹30 lakh crore funding gap, as noted by the Coimbatore District Small Industries Association.
• Regulatory and Compliance Burdens: The Economic Survey 2025 emphasized that regulatory compliance requirements hinder formalization, reduce labor productivity, and stifle innovation.
  • Complex GST norms and delayed payments from buyers further strain working capital.
• Low Formalization and Digital Adoption: A large share of MSMEs remain unregistered or unincorporated, excluding them from government schemes.
  • While digital readiness is improving, especially in urban areas, rural MSMEs still lag behind due to infrastructure and skill gaps.
• Market Visibility and Branding: MSMEs often lack branding, marketing, and consumer outreach capabilities, limiting their competitiveness in domestic and global markets.
  • Weak market intelligence and limited access to e-commerce platforms further isolate them from growth opportunities.
• Labour and Skill Shortages: MSMEs face manpower shortages, especially skilled labor, which affects productivity and scalability despite being labor-intensive.
• Policy Awareness and Scheme Utilization: Only about 10% of medium enterprises have accessed any of the 18 central government schemes, indicating a disconnect between policy and implementation.
  • Many MSMEs are unaware of initiatives like PMEGP, CGT-MSE, and RAMP.

Policy Push: Empowering the Growth Engine

• Flagship MSME Schemes:
  • Prime Minister’s Employment Generation Programme (PMEGP): Facilitates the creation of non-farm micro enterprises by supporting aspiring entrepreneurs.
  • PM Vishwakarma Scheme: Empowers traditional artisans through skill training, financial aid, and modern tool access.
  • Raising and Accelerating MSME Performance (RAMP): Enhances market access, innovation, and technology adoption while promoting green initiatives and women entrepreneurship.
• Bridging Financial Gaps and Empowering Entrepreneurs:
  • Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): Provides collateral-free credit guarantees to MSEs.
  • Self-Reliant India Fund: Injects equity into MSMEs with high growth potential.
  • Stand-Up India Scheme: Offers loans up to ₹1 crore for women and marginalized community entrepreneurs establishing new enterprises.
• Formalisation, Digitalisation, and Global Integration: The formalisation of over 70 million MSMEs through the Udyam Registration and Udyam Assist Platform has expanded financial inclusion and access to priority-sector lending.
  • It enables MSMEs to participate effectively in global value chains.
• Technology and Sustainability: Initiatives such as ZED Certification, MSE Green Investment and Financing for Transformation (GIFT), and MSE Scheme for Promotion and Investment in Circular Economy (SPICE) promote green manufacturing, circular economy practices, and technological upgrades, enhancing competitiveness and sustainability.
  • Digital Transformation: Platforms like Udyam, GeM, and Trade Receivables Discounting System (TReDS) are digitizing registration, procurement, and payments, enhancing transparency and efficiency.
• Skill Development and Cluster-Based Growth: India’s Cluster Development Programme supports infrastructure and common facility centres to bolster productivity and innovation.
  • India is building human capital capable of adopting modern technologies and innovative practices through Advanced Training Institutes and the Entrepreneurship Skill Development Programme (ESDP).
• Global Partnerships and Future Outlook: MSMEs are being integrated into global value chains with the government’s focus on One District One Product (ODOP) and Production Linked Incentive (PLI) schemes.
  • Moreover, MSMEs are at the forefront of India’s export surge, particularly in sectors like pharmaceuticals, textiles, engineering goods, and IT services.
  • India’s growing network of MoUs and Free Trade Agreements (FTAs) strengthens MSME competitiveness and integration into global supply chains.
  • Technology centres and cooperative frameworks promote resilience, innovation, and sustainable development, central to India’s BRICS Presidency in 2026.

Conclusion

• India’s MSME sector stands as a testament to inclusive and transformative economic policy guided by the principle of ‘Sabka Saath, Sabka Vikas, Sabka Vishwas, Sabka Prayas’ and continues to drive India toward the ambitious goal of Viksit Bharat by 2047 through formalisation, digital empowerment, financial inclusion, and gender-responsive entrepreneurship.
• The MSME sector remains a cornerstone of India’s journey toward a more resilient, equitable, and globally competitive economy by fostering innovation, sustainability, and cooperation.

Source: BS