Micro, small, and medium enterprises (MSMEs) are one of the driving forces propelling the Indian economy towards global greatness. As per the Udayam portal, MSMEs employ over two crore people, firmly establishing themselves as the bedrock of the economy. 

Aided partly by supportive and reformatory government initiatives and technological innovations, the MSME sector has grown exponentially, accounting for ~46% of India’s total exports.

What government initiatives have supported MSME growth in India?

To support and foster MSME, the Ministry of MSME has launched and implemented various schemes offering credit support, new enterprise development, formalisation, technological assistance, infrastructural development, skill development and training, and market assistance to MSMEs through initiatives like: 

• Udyam Registration Portal
  The government notified composite criteria for classifying an enterprise as micro, small, and medium based on investment and turnover. To ensure conformity to the new criteria and enhance the ease of doing business, the government launched the Udyam Portal to facilitate the permanent registration of MSMEs. There is no registration fee, and an enterprise is issued a digital certificate based on self-declaration. The Udyam certificate enables MSMEs to access several government initiatives such as:

1. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)
   The CGTMSE, operational under the Government of India and the Small Industries Development Bank of India (SIDBI), offers credit guarantees to help MSMEs access bank credit without the hassles of crushing collaterals or third-party guarantees. MSMEs can access collateral-free loans up to INR 5 Cr, with a guaranteed coverage of up to 85% for multiple loan categories under CGTMSE. The scheme has covered over 67 lakh beneficiaries in the first 22 years of its existence and has had a positive impact on six major areas in the MSE sector, viz., technology upgradation, skill degradation, market development, sustainability of the scheme, economic impact, and social impact. During January-November 2023, 12.50 lakh guarantees were approved, amounting to INR 1.46 Lakh Cr.
2. The Prime Minister Employment Generation Programme (PMEGP)
   Established to create employment opportunities for MSMEs in India, the PMEGP provides loans and working capital — INR 25 Lakh for manufacturing and INR 10 Lakh for service sector MSMEs  — through bank disbursal.
   The scheme is implemented at the national level by the Khadi and Village Industries Commission (KVIC) and at the state and district levels by State KVIC Directorates, State Khadi and Village Industries Boards (KVIBs), District Industries Centres (DICs), and banks. Since its inception in 2008 and until 30 November 2023, over 9.29 Lakh micro-enterprises have been supported across the country with the disbursement of a Margin Money subsidy of INR 34,517 Cr, generating a total estimated employment for around 78.36 Lakh persons.
3. Raising and Accelerating MSME Performance (RAMP)
   Launched in July 2022, under the aegis of the Ministry of MSME, the World Bank-assisted RAMP scheme aims to improve the access of MSMEs to both the global market and credit. RAMP aims to foster the sector by accelerating Centre-State collaboration in MSME promotion and development, Enhancing the effectiveness of existing Ministry of MSME schemes for technology upgradation, Strengthening the Receivable Financing Market for MSMEs, Enhancing the effectiveness of Credit Guarantee Trust for Micro & Small Enterprises (CGTMSE), and promoting guarantee for greening initiatives of MSEs, and women-owned MSEs, and Reducing the incidence of delayed payments to MSEs. An outlay of INR 6000 Cr has been assigned for five years to ensure the implementation. The scheme aims to benefit over 5.5 Lakh MSMEs.

MSMEs as investment opportunities

As India steadily approaches the threshold of becoming a $5 Tn economy by 2026-27, interest in the nation as an investment destination is soaring. The Indian MSME sector is projected to grow to $1 Tn by 2028.

Its many winning advantages encompass a diverse range of investment opportunities across various industries and supply chain ecosystems, including but not limited to textiles, food processing, agriculture, and more. Another distinct advantage that MSMEs offer is the opportunity to invest in enterprises beyond metropolitan cities. Investors can capitalise on the potential of the rapidly expanding rural MSMEs catering to an accelerating consumer base, disposable incomes, and a vibrant domestic market. 

Moreover, with the relaxation of the FDI policy allowing a 100% FDI inflow under the automatic route for MSMEs and the various tax exemptions and tax holidays that the sector can avail, investments in Indian MSMEs have much to attract astute investors.

The Digital Transformation of MSMEs

MSMEs are moving forward with renewed vim and vigour and a decided focus towards innovation and digitisation of operational procedures. Adopting new tools and systems ensures a sharper edge to their global competitiveness. Moreover, schemes like the Digital MSME Scheme, which empowers all MSMEs registered with the Udyam registration portal to adopt Information Communication Technology (ICT) tools and applications in their production and operations, ensure that the transition from traditional processes to digital ones is as seamless as possible. Furthermore, the Ministry of MSMEs has been allocated INR 22,137.95 Cr under the interim Budget 2024-25 for implementing various schemes and technology upgrades.

The Role of MSMEs in Building a Sustainable and Inclusive Economy

MSMEs' role in fostering sustainability and inclusivity in the Indian economy is irrefutable. 20.5% of the MSMEs registered on the Udyam Registration Portal are led by women, accounting for 18.73% of the total employment generated by Udyam-registered MSMEs.

While the numbers speak for themselves, to ensure the growth of the sector and the economy remains inclusive, equitable, and sustainable, the Ministry of MSMEs has undertaken various initiatives to foster MSMEs that value these goals. For example, the Credit Guarantee Scheme for Micro & Small Enterprises offers a 10% concession in annual guarantee fees and up to 85% guarantee coverage for female entrepreneurs. Meanwhile, the SAMARTH initiative provides more than 7500 women from rural and sub-urban areas with skill development and market development assistance to encourage female entrepreneurship.

On the other hand, the MSME Sustainable (ZED) Certification Scheme encourages MSMEs to streamline their processes to transition towards sustainability and reduce environmental costs. Furthermore, the scheme offers a 100% subsidy for ZED Certification for Women-owned MSMEs.

Conclusion

MSMEs and a focus on their growth are critical for the long-term prosperity of India’s economy. MSMEs play a crucial role in the GDP growth, industrial production, and job creation in the nation's economy, and the various initiatives and regulatory reforms fostering them are a step in the right direction to ensure that untapped talent, resources, and growth opportunities are brought to the foreground.