SIDDHARTH DESAI
Micro, Small, and Medium Enterpris es (MSMEs) are a major driver of India’s economic growth and em ployment. They contribute more than 31% to the coun try’s GDP, account for nearly 49% of India’s exports, and generate over one-third of the nation’s manufacturing output. With more than 7.4 crore enterprises support ing the livelihoods of near ly 33 crore people, MSMEs remain the second-largest source of employment after agriculture. MSMEs are particularly sig nificant due to their strong presence in rural and semi-ur ban regions. These enterprises foster local entrepreneurship, create non-farm employment, strengthen local supply chains, and support balanced regional development. Their dispersed nature reduces the need for workers to migrate to large metro cities in search of liveli hoods and opportunities. Recognising the growing importance of MSMEs, the gov ernment has strengthened and formalised the MSME ecosys tem through digital interven tions. Platforms such as Udyam and Udyam Assist have brought crores of informal enterprises into the formal economy. This formalisation enables MSMEs to access institutional cred it, government schemes, and market opportunities, while also improving the country’s overall digital capability. Market access and payment reliability are critical for MSME sustainability. Initiatives such as the Government e-Market place (GeM), TReDS (Trade Receivables Discounting Sys tem), and MSME Samadhaan support stronger market link ages and faster payments. These measures collectively enhance the ease of doing business for small entrepre neurs. In addition, legal and policy reforms—aligned with the MSMED Act’s stipulation that payments must be made within 45 days—have further encouraged formal participa tion by MSMEs. As of March 2026, 8.39 crore MSMEs are registered on Udyam.
If you enjoyed reading this article, you can help support our journalism by adding OHeraldo as a preferred source.
These enterprises em ploy more than 37 crore peo ple. Over two months, more than 1 crore additional MSMEs were registered. During the same period, an additional 4 crore people were reported as being engaged by MSMEs, demonstrating a meaningful employment contribution and indicating accelerating formal isation. Of the 8.39 crore registered MSMEs, approximately 98% fall under microenterprises. Only about 1.5% are classi fied as small or medium en terprises. Microenterprises are primarily located in rural and semi-urban areas and are largely owned as proprietor ships or partnerships rather than as public limited compa nies, private limited compa nies, or LLPs. This composition underscores the central role of microenterprises in providing local employment and support ing regional economic activity. Digital access has enabled MSMEs to complete registra tion faster and enter formal systems effectively. Formali sation opens up pathways to additional business sources, customers and markets. It also improves business confidence, particularly because timely payments become more feasi ble through mechanisms sup ported by the MSMED frame work.
This shift is instrumental in reducing operational uncer tainty and supporting MSMEs to participate more fully in the national economy. A key factor driving for malisation is improved gov ernment policy design and on-the-ground implemen tation. Earlier, many enter prises avoided registration due to complex compliance requirements, inspections, and perceived vulnerability to bureaucratic processes. Modern systems—particu larly Udyam—have reduced time and procedural barriers, making registration less bur densome. Beyond registration, simplified compliance pro cesses and the ability to com plete many steps online have lowered friction, especially for microenterprises. In rural and semi-urban set tings, awareness of rights and available schemes has histori cally been limited. Digital plat forms, outreach, and support from associations have helped address this challenge. Tools such as Udyam Assist enable MSMEs to submit grievances and access guidance remote ly, allowing them to feel heard and supported. Improved connectivity—both digital and physical—has further strengthened participation by reducing the need to physical ly approach offices for routine processes. Banking support for MSMEs under collateral-free and re lated schemes is increasing. However, for the process to remain fair, consistent, and scalable, loan assessment must rely on objective criteria using digital footprints rather than subjective branch-level discretion. MSMEs may not al ways maintain balance sheets or understand detailed finan cial ratios.
Using available digital records—such as GST data, bank statement analyt ics, credit bureau information, and income-tax footprints— can enable lenders to evaluate proposals more quickly and consistently. Recent uncertainty related to supply chain disruptions and input availability has af fected MSMEs across sectors. Measures such as the exten sion/application of the Emer gency Credit Line Guarantee Scheme (ECLGS)-type sup port and relief related to gov ernment contracts and force majeure conditions can help reduce distress during dis ruption periods. Sector-spe cific challenges—particularly those tied to fuel and key raw materials—may require tar geted interventions to prevent output restrictions and avoid costly equipment downtime. Sustaining MSME growth also requires adherence to strong business practices. A core priority is maintaining consistent quality—not only of the product, but also of op erational processes, business dealings, and delivery commit ments. Buyers, including large domestic corporates and in ternational partners, increas ingly require reliability and on-time supply. MSMEs must therefore treat quality consist ency and commitment adher ence as essential foundations for long-term partnership and market access.
Despite the availability of multiple schemes, MSMEs of ten face awareness and capaci ty constraints. To address this, the government’s announced concept of “Corporate Mitra” professionals is intended to support MSMEs—especially in tier 2 and tier 3 locations—at an affordable cost. Capacity building initiatives, including structured training modules on registrations, online dis pute resolution, and growth processes, can help ensure that MSMEs receive the bene fits they are eligible for. Further strengthening MSMEs requires addressing not only debt access but also equity and venture capital gaps. Government-announced initiatives such as ECLG 5.0 and substantial provisions under growth and self-reliant funds are expected to support MSME scaling, particularly microenterprises. Strength ened financial flows can help MSMEs expand operations, invest in capability building, and enhance their long-term contribution to GDP and em ployment.
The MSME sector will con tinue to play a crucial role in driving innovation, gen erating employment, and supporting India’s economic growth—especially in rural and semi-urban regions. The primary challenge going for ward is to ensure equitable access to opportunities and support across all enterprises, enabling MSMEs to participate more meaningfully in national development. This aligns with the broader objective of build ing a Viksit Bharat by 2047. (The author is an advocate by profession.)
