MSMEs In India
MSMEs In India

India is one of the fastest-growing economies in the world, aiming to hit the target of USD 5 trillion by 2024. Ever since the government announced its vision to achieve this target, economists and financial experts have been stressing the significance of strengthening the MSME sector. India’s vision of becoming a global economic power is undoubtedly possible only when the MSME sector can contribute further to the economy.

Besides contributing to economic growth, the MSME sector is considered as a catalyst for socio-economic transformation in India. It largely contributes to various national objectives like employment generation, poverty eradication, and resistance to rural-urban migration. To sum up, MSME plays a significant role in national development in multiple ways.    

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In this blog, let’s explore the Indian MSME sector in detail and its prospects in numbers.  

Also Read: MSME Loans: The Optimum Choice For Small Industries

What is MSME? 

Micro, Small and Medium Enterprise, fondly called as MSME, is majorly classified into two categories – manufacturing enterprise and services enterprise sector. The definition and classification of MSME are based on the Micro, Small and Medium Enterprises Development Act (MSMED) of 2006. 

The definition of MSME in the manufacturing sector is based on capital investment in plant and machinery.

The limits are: 

Investment in micro industries should not exceed Rs 2,500,000

Investment in small industries is between Rs 2,500,000 and Rs 50,000,000 

Investment in medium industries is between Rs 50,000,000 and Rs 100,000,000  

In services, the definition is based on the investment made on equipment, and the limits are as follows: 

Investment in micro industries should not exceed Rs 10,00,000  

Investment in small industries is between Rs 10,00,000 and Rs 20,000,000 

Investment in medium industries is between Rs 20,000,000 and Rs 50,000,000

As per the amendment of 2018, MSME is defined and categorized in terms of business turnover.

MSME is defined and categorized as follows

A microenterprise is a unit that produces goods or renders services with annual turnover below INR 5 crores.

A small enterprise is a unit that produces goods or renders services with an annual turnover of more than INR 5 crores but does not exceed INR 75 crores.

A medium enterprise is a unit that produces goods or renders services with an annual turnover of more than INR 75 crores but does not exceed INR 250 crores. 

Also Read: Best Government Business Loan Schemes For MSMEs In India

MSME –The present scenario

Micro, Small, and Medium Enterprises (MSMEs) play a vital role in India’s economy, contributing significantly to GDP, employment, and exports. As of 2024, the MSME sector in India is experiencing both opportunities and challenges in a dynamic environment. Here’s an overview of the current scenario:

1. Economic Contribution

  • GDP Contribution: MSMEs contribute around 30% to India’s GDP.
  • Employment: The sector employs over 110 million people, making it one of the largest sources of employment in the country.
  • Exports: MSMEs contribute approximately 45% to India’s total exports, especially in sectors like textiles, leather, and gems & jewelry.

2. Government Initiatives

  • Atmanirbhar Bharat Abhiyan: The government launched this initiative to make India self-reliant, with a focus on boosting the MSME sector. This includes schemes like the Emergency Credit Line Guarantee Scheme (ECLGS), which provides collateral-free loans.
  • Udyam Registration: The government introduced Udyam Registration to simplify the process for MSMEs to formalize their businesses and access various benefits.
  • Production-Linked Incentive (PLI) Schemes: These schemes have been extended to MSMEs in sectors like electronics and pharmaceuticals to boost manufacturing.

3. Challenges

  • Access to Finance: Despite initiatives, many MSMEs still face challenges in securing adequate and timely finance. The reliance on informal credit sources remains a concern.
  • Technological Adoption: Many MSMEs lag in adopting new technologies, which affects their competitiveness, particularly in a global market.
  • Regulatory Hurdles: While there has been progress, MSMEs still face challenges related to compliance, which can be cumbersome and costly.

4. Impact of COVID-19

  • The pandemic had a severe impact on the MSME sector, with many businesses facing closures or reduced operations. While recovery is underway, many MSMEs are still grappling with reduced demand and financial stress.
  • PM MODI recently announced a financial relief package of Rs.20 lakh crore to revive the economy of India from the aftermath of Coronavirus. He laid down the importance of the five pillars of Atmanirbhar India, i.e. economy, technology, infrastructure, demography, and demand. These pillars are going to help India realize growth in years to come.

The Five Pillars of Self-Resilient India


Prime Minister Narendra Modi has envisioned India’s economic growth by highlighting five pillars that can help transform the prevailing situation. They also have the power to shape the growth of the Indian economy moving forward. The Atmanirbhar Bharat Abhiyan is based on these five pillars.

  1. Economy
    India should be aiming for a quantum leap in economic progress. We should be looking beyond incremental changes.
  2. Infrastructure
    The second pillar is related to large scale infrastructure development which could become the face of modern India.
  3. Technology
    The third pillar is technology. It has the power to transform traditional operating methods. This can drive the development of India to an all-new level and fulfil the country’s ambitions for the 21st century.
  4. Demography
    The fourth pillar is the vibrant demography of India which signifies its innate strength. The energy for Atmanirbhar Bharat is found in this pillar.
  5. Demand
    The fifth pillar of self-resilient India is a demand which is one of the most crucial factors for the economy of any country. The cycle of demand and supply has the potential to affect the economy. PM Modi strongly recommends improving the supply chain to meet the increasing demands that can improve the economic system of the country. For this, we need to strengthen all the stakeholders of the value chain including suppliers, manufacturers, distributors, and the daily wage labourers who bridge the demand-supply gaps.

5. Emerging Trends

  • Digital Transformation: There is a growing trend of MSMEs adopting digital tools for operations, marketing, and sales, especially post-pandemic.
  • Green Practices: Some MSMEs are beginning to adopt sustainable practices, driven by both market demand and regulatory push.
  • Global Expansion: With the support of government schemes, some MSMEs are exploring international markets, though this remains a challenge for many.

6. Future Outlook

  • The future of the MSME sector in India looks promising with continued government support, increasing focus on digital and green practices, and potential growth in both domestic and international markets. However, addressing the persistent challenges of finance, technology, and regulatory compliance will be crucial for sustained growth.

Would you like more detailed insights on any specific aspect of the MSME sector?

As per the latest available official estimates: 

Number of micro industries in India – 6.305 crores

Number of small scale industries in India – 3.3 lakhs 

Number of medium scale industries in India – 5000

The sector manufactures more than 6000 types of products. It ranges from traditional coir goods to most modern electrical machinery. It includes commonly-used consumer goods to high-precision, sophisticated finished products.  

Also Read: Business Loans For MSMEs — Overview, Features & Benefits, Eligibility, Interest Rates & More

Role of MSME in our economy 

For any given country, the MSME sector is crucial in determining economic growth and stability. In the Indian context, MSME is considered as the backbone of the economy. It has constantly maintained a growth rate of over 10%. This sector contributes around 6.11% of the manufacturing GDP and 24.63% to the services sector GDP. In total, the MSME sector contributes nearly 30% to the GDP.

According to official data, the share of exports from the MSME sector stood at 48.01 percent in FY 2019, which is nearly half of the total exports. More than 95% of industrial units in the country are categorized under the MSME sector.  

Also Read: Can Tech-Innovations Reshape MSME Lending In India?

MSME :- Biggest Employment Generator

MSME is the second-largest employment-generator in the country after agriculture. The employment generating potential of the MSME sector has reported a CAGR of 11.74 percent in the last decade. MSME sector currently provides employment to 12.4 crore people in India. Moreover, it creates more than 13 lakh jobs every year.

One of the major objectives of Prime Minister Employment Generation Programme is to generate employment opportunities in the country through setting up of new self-employment ventures and microenterprises. If nurtured well, the MSME sector is capable of tackling the menace of unemployment in India. It promotes rural employment while restricting rural-urban migration. Out of the total MSMEs in India, around 59% are based in rural regions. 

Off the record, it is estimated that when 2% of Indians start MSMEs and give employment to 25 people on an average, half of the Indian population will be employed.  

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A promising future! 

The future of the MSME sector looks bright with contributions from all its stakeholders and integration with global value chains. As pointed out by Nitin Gadkari, Union Minister for MSME, “The MSME sector contributes 29 percent to country’s GDP, and the government plans to take it to 50 percent in the next five years.” It is expected to create employment for around 15 crore people by 2024. India’s vision of becoming a USD 5 trillion economy is possible when the MSME sector contributes to 50% of GDP. 

In conclusion 

India’s MSME ecosystem is taking giant strides now, more than ever before, influenced by various factors like government policies, availability of small business loans, marketing assistance schemes, accelerators, and incubation facilities, general acceptance to entrepreneurship in the society, etc. 

Are you planning to launch a business and in need of funding? Indifi is here to assist you! We provide customized loans without collateral for businesses. Apply for small business loans or MSME loan through our online lending platform. We ensure your quick assistance and hassle-free experience when you apply for small business loans!  

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