The MSMEs in India are predominantly the ones which operate from rural belts and still deploy the obsolete technology. There is a new emerging category of MSMEs which are driven by new-age entrepreneurs with thrust on innovation and sophisticated technology. The Indian MSME sector is considered the backbone of the Indian economy and rightly so because it has consistently maintained a growth rate of over 10%.
Let’s take a look at various areas where MSME is leaving its footprint:
Contribution to GDP
MSME sector contributes around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities as well as 33.4% of India’s manufacturing output. Given that the government has a special thrust on ‘Make in India’, MSME has potential to flourish tremendously. The overall services sector accounts for about 55.2% of GVA and again MSME can play a crucial role in boosting it.
MSME sector provides employment to around 120 million people. These people are either self-employed, salaried workers or daily wage laborers. The sector is also giving rise to entrepreneurship on a massive scale and is attracting highly educated manpower.
MSME sector contributes around 45% of the overall exports from India. Both domestic and international companies are sourcing their semi-finished and ancillary components from MSMEs at affordable rates.
Low Capital Intensive
Usually, MSME does not require large-scale facility or equipment to run a business. The low-capital intensive investment lowers down the entry barriers. Unfortunately, in spite of low investment, the availability of funds is a major concern for them. MSME loans can help them meet the financial requirement easily. However, the demand for MSME loans is much higher than the supply. Moreover, the mainstream financing options such as banks and
NBFCs are not able to bridge the demand-supply gap. The alternate credit sources such as digital lending platforms are making it convenient and fast in borrowing small unsecured loans.
MSME is truly the growth engine of the Indian economy. The need of the hour is to provide them complete financial, structural and regulatory support to help them realize their full potential.