Too Small To Succeed?

A majority of India's MSMEs find themselves hamstrung by delayed payments, limited credit access, and policy-execution gaps that together shackle their true potential

- By Abhishek Sharma

AS JUNE was coming to an end, industry associations and corporate voices launched statements lauding India's micro, small and medium enterprises (MSMEs), celebrating their role in fuelling economic growth, boosting exports and creating millions of jobs. As in the past, the narrative was polished and persistent: small businesses are resilient, dynamic and full of untapped potential. What it glossed over was indeed just as telling: the chronic financing gaps, the suffocating bureaucracy, the delayed payments and the policy inertia.

According to official data from the Ministry of MSME, the sector contributed an estimated 29.6 per cent to India's gross domestic product in FY2024-25 and accounted for 48.2 per cent of the country's total exports. MSMEs employ over 110 million people across India, making the segment the second-largest source of employment after agriculture.

Growth Amid Headwinds

In FY2024-25, India had approximately 6.4 crore registered MSMEs under the Udyam platform, up from 6.3 crore in the previous fiscal year. However, the sector continues to face challenges, including delayed payments, high compliance costs, and limited access to formal credit. According to Reserve Bank of India (RBI) data, outstanding bank credit to MSMEs stood at Rs 23.2 lakh crore as of March 2025, a year-over-year increase of 11.2 per cent. Despite growth in formal credit, micro enterprises, which make up over 95 per cent of all MSMEs, remain underserved. Industry estimates suggest that the credit gap for MSMEs continues to exceed Rs 20 lakh crore.