INDIA ADDA – Perspectives On India

IBEF works with a network of stakeholders - domestic and international - to promote Brand India.



Dikshu C. Kukreja
Dikshu C. Kukreja
Mr. V. Raman Kumar
Mr. V. Raman Kumar
Ms. Chandra Ganjoo
Ms. Chandra Ganjoo
Sanjay Bhatia
Sanjay Bhatia
Aprameya Radhakrishna
Aprameya Radhakrishna
Colin Shah
Colin Shah
Shri P.R. Aqeel Ahmed
Shri P.R. Aqeel Ahmed
Dr. Vidya Yeravdekar
Dr. Vidya Yeravdekar
Alok Kirloskar
Alok Kirloskar
Pragati Khare
Pragati Khare
Devang Mody
Devang Mody
Vinay Kalantri
Vinay Kalantri

MSMEs: Growth Driver for New India

MSMEs: Growth Driver for New India

The Micro, Small and Medium Businesses (MSME) sector comprises over six crore businesses and has emerged as a highly active and dynamic sector of the Indian economy, stimulating entrepreneurship and offering self-employment opportunities at a relatively lower capital cost. By 2025, the Ministry of MSME (MoMSME) aims to increase the sector's contribution up to 50% to the country's GDP. During Jan-Nov 2022, the credit growth of the micro, small, and medium enterprises (MSME) sector was remarkably high at 30.5%. Moreover, the financial allocation to the MSME sector in the Budget 2022-23 was increased from US$ 1.90 billion (Rs 15,699.65 crore) to US$ 2.59 billion (Rs 21,422 crore) as compared to the Budget 2021-22. Another factor driving the Indian economy's development in the fiscal year 2022-23, was the central government's Capital Expenditure (Capex), which rose by 63.4% in the first eight months of FY23 and has outpaced the private Capex since the January-March quarter of 2022. Depending on the trajectory of global economic and political developments, India is expected to witness a GDP growth of 6% to 6.8% in 2023-24. This projection is broadly comparable to estimates published by multilateral institutions such as the World Bank, IMF, ADB and RBI. According to IMF, India is projected to be one of the top two fastest-growing significant economies in 2022. Furthermore, the development of open-source digital platforms and ground-breaking initiatives like PM GatiShakti, the National Logistics Policy, and the Production-Linked Incentive (PLI) programmes are expected to boost the manufacturing output and shall further support economic growth.

MSME in India
The Micro, Small, and Medium Businesses (MSME) sector has been a primary focus of policymakers at the central and state levels as it is a valuable contributor to the overall economic growth and development in terms of employment, value chain creation, foreign exchange earnings, critical supplier of large industries, promotion of regional balance and inclusive development, and so on. The MoMSME comprises various institutions like National Institute for Micro, Small and Medium Enterprises (Ni-msme), the Coir Board, the Office of Development Commissioner (MSME), the Khadi and Village Industries Commission (KVIC), the National Small Industries Corporation Ltd. (NSIC), and the Mahatma Gandhi Institute for Rural Industrialization (MGIRI).

The MSMEs firms producing goods and services, contribute roughly 30% of the country’s GDP and are providing a source of livelihood to approximately 11.10 crore people. MSME-related products accounted for 45.8% of overall exports in 2021-2022 (April-September). A total number of 65,23,067 businesses were categorised as of January 4, 2023, with 94,18,101 businesses registered under the service sector and 36,75,597 businesses registered under the manufacturing category.

The former criteria for classifying MSMEs under the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 was based on investment in plant and machinery/equipment and the criteria were different for manufacturing and service units. On May 13, 2020, the AatmaNirbhar Bharat package announced a modification in MSME classification criteria to provide ease of doing business and to support small-scale enterprises. Moreover, there is no longer a differentiation between the manufacturing and service sectors in the revised definition of MSME.

Revised MSME Classification

Composite Criteria: Investment and Annual Turnover





Manufacturing and Services

Investment < US$ 121,556 (Rs. 1 crore) and Turnover < US$ 607,781 (Rs. 5 crore)

Investment < US$ 1.21 million (Rs. 10 crore) and Turnover < US$ 6.07 million (Rs. 50 crore)

Investment < US$ 2.43 million (Rs. 20 crore) and Turnover < US$ 12.15 million (Rs. 100 crore)

Source: Ministry of MSME (MoMSME)


  • Distributions of Estimated MSMEs by nature of Activity

As depicted in the below table, according to the National Sample Survey (NSS) 73rd round, carried out by the National Sample Survey Office, Ministry of Statistics & Program Implementation, there were 633.88 lakh unincorporated non-agricultural MSMEs in the country engaged in various economic activities (196.65 lakh in manufacturing, 0.03 lakh in non-captive electricity generation and transmission, 230.35 lakh in trade, and 206.85 lakh in other services).  Furthermore, out of the estimated 633.88 million MSMEs, 324.88 lakh (51.25%) are in rural areas, while 309 lakh (48.75%) are in urban areas.

Activity Category

Estimated Number of Enterprises ( in Lakhs)




















Other Services










 Source: Ministry of MSME (MoMSME)

  • Distributions of Estimated MSMEs category and area wise

According to the below pie chart, the micro sector, with 630.52 lakh estimated enterprises, accounts for more than 99% of the overall estimated number of MSMEs. The total number of estimated MSMEs in the small and medium sectors comprise of 3.31 lakh and 0.05 lakh respectively, constituting 0.52% and 0.01% of the total estimated MSMEs.

Source: Ministry of MSME (MoMSME)

Digitalisation of the sector
Digitisation enables MSMEs to have better access to a wider range of global markets while mitigating supply chain risks. Digitalisation can benefit MSMEs in the short run by facilitating remote transaction management, efficient delivery of goods, and easier access to financial services. It can provide tangible benefits to MSMEs such as improved customer acquisition, operational efficiency, staff enhancement, risk management, innovation, and reduced manpower requirements. Increasing internet penetration and growing usage of low-cost smartphone devices, together with digital lenders closing the information asymmetry gap, have further drawn MSMEs to the digital channel.

The digital route to secure instant credit has enabled MSME loan book on digital platforms to grow year after year.


During the fiscal year 2022-23 (Up to December 2022), digital transactions accounted for 97.67% in terms of value and 88.64% in terms of volume.

Source: Ministry of MSME (MoMSME)
Note: Rs 1 = 0.012 USD

Basic information for MSME units is dispersed among several databases, including the Udyog Aadhaar Memorandum (UAM), MSME Databank, and GSTN. In order to increase formal credit flow to MSMEs, the sector must be swiftly formalised. To address these challenges, several programmes have been implemented like Udyam, the Open Credit Enablement Network (OCEN), and the Trade Receivable Discounting System (TReDs).

Skill Training Eco-system of Ministry of MSME
For the purpose of enhancing the ability of both current and aspiring entrepreneurs, the Ministry has been hosting a variety of skill-development programmes and courses. These training courses are designed to meet industry expectations and provide a pathway to fill the skilled worker shortage in the MSME sector in accordance with the evolving environment of the MSME Ecosystem and its current difficulties in India. A network of organisations within the Ministry, including the Khadi & Village Industry Commission (KVIC), the Coir Board, the National Small Industries Corporation Ltd. (NSIC), the National Institutes for MSME (NI-MSME), and the MSME-Technology Centres (TCs), undertake the skill training programmes.

Source: Ministry of MSME (MoMSME)
Note: ** - April to October 2022

Recent Government Policy Intervention
This Program aims to provide assistance to the promoter(s) of operational MSMEs that are stressed and have become non-performing assets (NPA) as of April 30, 2020 and standard as of November 1, 2016.

The goal of the Self-Reliant India Fund (SRI Fund) is to meet the ever-unresolved demands of MSMEs for equity and capital. It is critical to discover pools of capital that may be further leveraged in order to produce a multiplier impact on the economy and, as a result, make MSMEs more competitive in global marketplaces. As of December 31, 2022, a total of 34 Daughter Funds were affiliated with NVCFL (Mother Fund), with a total investment of US$ 338.38 million (Rs.2,790 crore) assisting 140 potential MSMEs. The Ministry of MSME has sanctioned and released US$ 25.78 million (Rs. 212.57 crore) to NVCFL for the operationalization of the SRI-Fund in the current fiscal year 2022-23.

The Emergency Credit Line Guaranteed Scheme (ECLGS), a part of the Aatma Nirbhar Bharat Abhiyaan, was inaugurated on May 13, 2020. The scheme was developed as an emergency solution to fight the exceptional problem caused by the Covid-19 outbreak, assisting enterprises, notably Micro, Small, and Medium Businesses (MSMEs), to fulfil their operating liabilities and resume operations. Under the programme, eligible MSME units, businesses, and individuals can receive loans for commercial purposes with no collateral from Scheduled Commercial Banks, Financial Institutions, etc. The scheme's initial guarantee cover of US$ 36.38 billion (Rs 3 lakh crore) was later increased to US$ 60. 64 billion (Rs 5 lakh crore) as part of the announcement of the Union Budget 2022. 78,924 MSMEs have received guarantees of US$ 1.76 billion (Rs. 14,583 crore) during the current fiscal year 2022-23, ending December 31, 2022. Since its commencement in 2020, ECLGS has granted total guarantees worth US$ 43.66 billion (Rs. 3.60 lakh crore) to 1.19 crore accounts, which comprise MSMEs and other enterprises.

  • Aatmanirbhar Bharat Abhiyaan
    • US$ 2.42 billion (Rs 20,000 crore) Subordinate Debt for Stressed MSMEs
    • US$ 6.06 billion (Rs 50,000 crore) Equity infusion for MSMEs through Self Reliant India Fund (Fund of Funds)
    • Emergency Credit Line Guaranteed Scheme (ECLGS) / Guaranteed Emergency Credit Line (GECL)
  • Tool Rooms and Technical Institutions - A Component of Infrastructure Development & Capacity Building

The Tool Rooms and Technical Institutions established by the Ministry of MSME play an important role in delivering practical skill development training to unemployed youth and industry employees each year. In the current fiscal year 2022-23 (till 31st December 2022), 18 Tool Rooms & Technical Institutes established across the country trained 1,17,743 trainees, supported 23,694 units, 11,731  opted for placement and 8,037 trainees were self-employed.

  • MSME Champions Scheme

The MSME Champions scheme was developed by the Senate Finance Committee (SFC) by combining all six components of the previous Technological Upgradation Scheme (TUS) over a five-year term, from 2021-22 to 2025-26. The MSME Champions programme consists of three parts:

  • MSME Sustainable (ZED) Certification

MSME Sustainable (ZED) Certification is a comprehensive effort to raise MSMEs' awareness of Zero Defect Zero Effect (ZED) practises, motivate and incentivize them to pursue ZED certification, and encourage them to become MSME Champions.

  • Subsidy on ZED certification fees
    • A joining bonus of Rs. 10,000 (if accepted, Bronze becomes free)
    • For MSMEs with Bronze, Silver, or Gold ZED certification, 80%-60%-50%.
    • Achievement- The MSMEs have received 1381 Bronze, 42 Silver, and 41 Gold certificates to date, and the other registered MSMEs are currently undergoing the certification process.
  • MSME-Competitive (Lean)

MSME Competitive (Lean) Program is an extended drive on the part of the Ministry of Micro, Small, and Medium Businesses to improve the competitiveness of MSME sectors by employing Lean Tools and Techniques. Lean Tools and Techniques are a tested and proven methodology for increasing MSME sector competitiveness.

  • MSME - Innovative (Incubation, IPR and Design

MSME Innovative is a new idea for MSMEs that combines innovation in incubation, design intervention, and intellectual property protection in a single-mode approach to raise awareness about India's innovation and drive MSMEs to become MSME Champions. This will serve as a hub for innovation activities, facilitating and leading the development of ideas into viable business propositions that can directly benefit society and be effectively marketed. The scheme is divided into 4 parts:

  • Incubation
  • Design
  • IPR
  • Digital

The Road Ahead
Following the Covid-19 crisis, the Indian government has taken numerous initiatives over the past two years to strengthen MSMEs' access to funding. The government's emphasis on infrastructure spending, combined with a gradual decrease in Covid-19 infections, has resulted in a prolonged rebound in domestic demand. Export demand is predicted to surge as global economies return to normalcy, and Covid-19 infection rates are also expected to fall. Recovering from the Covid-induced downturn, along with rising external demand for Indian goods, resulting in a surge in export demand for MSMEs across sectors this fiscal year. For the last five years, MSMEs' share of overall exports has been hovering around 48-49%.