Vital, Visible, Yet Vulnerable

India's MSMES continue to drive employment and exports but remain constrained by informality, delayed payments, and uneven policy execution despite a decade of reforms

- By Abhishek Sharma

FROM AMRITSAR TO THE industrial backstreets of Coimbatore, India's micro, small and medium enterprises (MSMEs), often family-run, sometimes undocumented, are the unsung engines of the country's economic growth and aspirations as it eyes developed nation status by 2027.
Over the last decade, these businesses have transitioned from the shadows of informality into the light of state-led recognition, driven by policy shifts and an evolving marketplace.

With 5.93 crore registered MSMEs employing more than 25 crore people, they contribute around 30 per cent to the gross domestic product (GDP). In 2023-24, MSME-related products accounted for 45.73 per cent of total exports and the sector's share in gross value added (GVA) increased from 27.3 per cent in 2020-21 to 30.1 per cent in 2022-23.

Yet, while government schemes trumpet progress, millions of MSMEs remain trapped in cycles of delayed payments, limited access to capital, and inconsistent regulatory frameworks. Behind the headlines of 'ease of doing business' lies a sector still grappling with systemic neglect and the urgent need for structural reform.

Between Reform And Reality

According to the Ministry of MSME, micro-enterprises make up over 97 per cent and more than 86 per cent of units remaining unregistered or outside the formal economy. Despite ongoing policy efforts, the International Finance Corporation (IFC) says that the formal credit gap stands at US$ 418 billion and over 40 per cent of micro and small firms still depend on informal lenders.