The contribution of Micro, Small, and Medium Enterprises (MSMEs) to India’s Gross Domestic Product (GDP) is expected to grow significantly over the next few years.
According to a report by Ugro, the share of MSMEs in the country’s GDP is currently around 30 per cent and is likely to increase to around 40 per cent by 2027.
The report also highlighted that the MSMEs will play a crucial role in India achieving its goal of become a developed nation, or “Viksit Bharat,” by 2047.
“From FY18 to FY22, the contribution of MSMEs to India’s GDP has been around 29 per cent to 30 per cent. By 2027, MSMEs are expected to increase their GDP contribution to 35-40 per cent up from the current approx 30 per cent. Unlocking the potential of MSMEs is crucial for India to achieve its goal of becoming a Viksit Bharat (a developed economy) by 2047” said the report.
The report stated that one of the key factors behind this growth is the rapid formalization of MSMEs through registration on the UDYAM portal. Launched in FY21, the portal has seen a near doubling of registrations each year.
As per report this formalization process helped small businesses gain better access to government initiatives, such as financial support, subsidies, and improved market opportunities.
The report also pointed to the growing role of women-led MSMEs, which are registering in greater numbers on the UDYAM portal, despite representing a smaller share of overall MSMEs.
“Currently, one in five UDYAM-registered MSMEs is led by women, and these businesses contribute to one in five jobs created by MSMEs, even with lower investment and turnover” the report added.
However, the report said that the women-led MSMEs are generally smaller than their counterparts, and accounts for only one in ten rupees of investment and turnover.
The report noted that despite the substantial role of MSMEs in the economy, its share in commercial credit remains relatively low. In FY24, they accounted for only about 6.3 per cent of total commercial credit.
However, the report added that this share has improved by 60 basis points from FY19 to FY24, indicating growing access to credit for MSMEs.
The central government has also reiterated its commitment to supporting the growth of MSMEs. In the Union Budget for 2024-25, the government announced a comprehensive package aimed at promoting labor-intensive manufacturing and MSME development. This includes funding, regulatory reforms, technology support, and special initiatives to encourage women entrepreneurs.
The report concluded that the increased adoption of technology and digitalization will further formalize the MSME sector, giving these businesses greater access to credit and markets.
