FINANCING AND TECH FACILITATION KEY TO SUSTAINED GROWTH

AS an election year with two budgets, 2024 was significant for India's micro, small and medium enterprises (MSMEs). This year, the government's focus on driving growth, improving financial inclusion and addressing structural issues within key sectors like MSMEs has become evident. The Union Budget's thrust on enhancing credit access and support, combined with the push for digitisation, financial inclusion and technology adoption, can propel the sector to achieve its true potential.

- HARDIKA SHAH, Founder & CEO, Kinara Capital

The sector is set to expand to around 75 million enterprises from around 63 million, and all initiatives to support its unhindered growth need to be scaled up. Major challenges remain that need to be addressed if India is to achieve its ambitious goal of increasing the MSME sector's contribution to GDP to 50 per cent from 30 per cent. The year 2025 can be transformative in this regard.

Access to Formal Credit

Access to timely financing, crucial for the growth of MSMEs, remains a key hurdle due to high collateral requirements, lengthy approval processes, and a lack of formal credit history. Challenges persist despite the Union Budget 2023-24 introducing a new credit guarantee scheme for manufacturing MSMEs, enabling access to collateral-free term loans for machinery and equipment, and expanding the outlay under the Pradhan Mantri Mudra Yojana. Women-led MSMEs face additional barriers, such as limited financial literacy, societal biases, and a lack of collateral. While initiatives like Mudra Yojana have supported women-led businesses, the gap persists, particularly for micro and small businesses.