REIMAGINING INDIA'S GROWTH ENGINE

With a Rs 28 lakh crore credit gap and immense untapped potential, India's MSME sector stands at the crossroads of transformation and opportunity.

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India's Micro, Small and Medium Enterprises (MSMEs) aren't just an economic segment—they are the spirit of entrepreneurship that powers factories, crafts goods, and supports livelihoods across urban clusters and rural heartlands. With over 63 million enterprises, the sector is a critical pillar of employment, contributing nearly 30% to India's GDP and almost half of the country's exports. Yet, despite its size and relevance, India's MSME sector faces several entrenched challenges that hinder its growth and global competitiveness.

"Even though there has been progress in formal credit access with credit penetration increasing from 14% to 20% among micro and small enterprises between 2020 and 2024-formal lending still accounts for only about 19% of total MSME credit demand."

Recognising this, NITI Aayog, in collaboration with the Institute for Competitiveness, has released a significant policy document— “Enhancing Competitiveness of MSMEs in India.” The report takes a hard look at systemic challenges and offers actionable solutions that could reshape the future of the sector. If implemented effectively, these recommendations could usher in a new era of inclusive and innovation-driven growth.

A MOUNTAIN OF POTENTIAL HELD BACK BY A CREDIT CHASM

One of the report's starkest revelations is the enormous credit gap in the MSME ecosystem. Even though there has been progress in formal credit access—with credit penetration increasing from 14% to 20% among micro and small enterprises between 2020 and 2024—formal lending still accounts for only about 19% of total MSME credit demand. That leaves a staggering Rs 28 lakh crore of unmet credit needs.