Empowering MSMEs Financially

MSMEs form the backbone of the Indian economy and improving access to finance will be key in enabling them to become the cornerstone of a 5-trillion economy

- PRAKASH KUMAR

MICRO, SMALL, AND mediumsized enterprises (MSMEs) are pivotal contributors to economic growth, particularly in developing nations, where they play an important role in creating employment opportunities and contribute to industrial production. In India, MSMEs account for 30% of the GDP and over 45% of exports. These businesses, ranging from micro-business entities to mid-sized manufacturers and export-oriented entities, are at the core of the value chain of the economy. MSMEs also aid in reducing the disparity in income distribution by providing job possibilities and industrialising rural regions. The MSME sector is considered a vital engine in India's vision of 'Viksit Bharat 2047'.

In light of the crucial role played by MSMEs in India's growth story, we make an effort to investigate their relevance and how they might contribute to inclusive growth, and also highlight the problems, difficulties and possibilities that MSMEs in India are facing.

CHALLENGES FOR MSMEs

• Access to finance: The ‘vast’ informal nature of entities and absence of relevant data puts the small enterprises at a disadvantage in accessing formal finance from banks and other regulated financial intermediaries. Further, access to capital markets by MSMEs or listing on SME exchanges is underpenetrated, may be due to them shying away from growth to continue to avail benefits extended to the sector. Other reasons may include vulnerability to macroeconomic shocks impacting valuations of SMEs and lack of awareness regarding the processes of listing.