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What will it take to unlock the full potential of India’s MSME sector

As we stand at the crossroads of economic evolution, the success of MSMEs is closely tied to their access to timely and adequate credit. Credit facilitation emerges as a critical driver for the sustained growth of these enterprises, as their ability to thrive often hinges on their access to financing.

The MSME sector, comprising approximately 30% of India’s GDP, is a formidable economic force, boasting over 35% share in manufacturing output and contributing roughly 40-45% to exports. Its pivotal role in shaping India’s economic landscape is undeniable. Recognizing its potential, government initiatives such as ‘Atmanirbhar Bharat’ and ‘Make in India’ aim to strengthen and enhance the MSME sector.

This commitment is evident in the increased registrations on platforms like the UDYAM portal, which now boasts a total of 2.28 crore registrations, including an additional 80 lakh MSMEs as of Jan 2024, employing 453 lakh people. The sector also plays crucial roles in export revenue, innovation, and social development. With India aspiring to become the world’s third-largest economy, with a GDP of $5 trillion in the near term and $7 trillion by 2030, the burgeoning MSME sector holds immense promise for India’s economic growth.

As we stand at the crossroads of economic evolution, the success of MSMEs is closely tied to their access to timely and adequate credit. Credit facilitation emerges as a critical driver for the sustained growth of these enterprises, as their ability to thrive often hinges on their access to financing. If anything, we’ve just about scratched the surface as India’s MSME credit segment. Supplementing the government’s vision to increase MSME contribution to 50% of the country’s GDP, presents a significant lending opportunity and untapped potential for lenders to innovate and adopt a focused approach.