Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

SME

India’s micro, small and medium enterprises (MSMEs) comprise ~630 lakh units and employ ~11.1 crore people. They account for ~90% of the country’s enterprises and ~60% of the workforce. In terms of economic muscle as well, the sector accounts for ~30% of the country’s gross domestic product (GDP) and ~48% of exports.

Globally too, MSMEs are engines of employment as well as revenue generation. MSMEs are key to achieving Sustainable Development Goals (SDGs) as well. Just as these small enterprises have a large footprint in India’s GDP, carving themselves a significant role in economic growth, the sector could also weigh in considerably in achieving the SDGs 2030.

But while MSMEs occupy such all-round importance to the economy, their access to funding has fallen behind. Overall systemic credit (of banks and non-banking financial companies, or NBFCs) was estimated at Rs 125 lakh crore in fiscal 2020. However, the sum of MSME credit of banks and NBFCs was a mere ~Rs 18 lakh crore.

MSME credit (banks + NBFCs) is expected to grow at ~6% on-year in fiscal 2021, supported primarily by the government’s Rs 3 lakh crore collateral-free loan scheme. Also, the bulk of this credit growth would go to meet higher working capital requirements necessitated by the Covid-19 pandemic. This white paper looks at how India’s small-but-huge growth engine needs a crank up now.

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Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the views of the Economic Times – ET Edge Insights, its management, or its members

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