Advantage India
Sector
Overview
* As on Dec 2024, 5.70 crore MSMEs, with an employment of 24.14 crore are registered on Udyam Registration Portal and Udyam Assist Platform (UAP).
* The Union Ministry of Micro, Small, and Medium Enterprises has received an allocation of Rs. 23,168 crore in FY26 Union Budget, reflecting a 4.6% increase compared to the FY25 Budget.
Statutory
Bodies
* The MSME Ministry heads five statutory bodies—KVIC, Coir Board, NSIC, NI-MSME and the MGIRI
* These bodies are responsible for aiding MSMEs with respect to government schemes and policies.
Government
Schemes
* Under Pradhan Mantri Mudra Yojana (PMMY), In FY25 (until 21st February 2025), Rs. 4.14 lakh crore (US$ 47.6 billion) was sanctioned under 4.2 crore Mudra loans to non-corporate and non-farm MSEs.
* The "Raising and Accelerating MSME Performance" (RAMP) scheme, launched in 2022, has benefitted 4 lakh micro, small, and medium enterprises, with women-owned businesses making up over 38% of the registered MSMEs, highlighting the government's focus on empowering female entrepreneurs.
Policy
Support
* The Union Budget for FY26 has raised the investment limits for MSMEs by 2.5 times and doubled the turnover thresholds. Specifically, the new limits are as follows:
1. For micro-enterprises, the investment limit is now Rs. 2.5 crore (US$ 0.3 million), with a turnover limit of Rs. 10 crore (US$ 1.2 million).
2. For small enterprises, the investment limit has been set at Rs. 25 crore (US$ 2.9 million), and the turnover limit is Rs. 100 crore (US$ 11.5 million).
3. For medium enterprises, the investment limit is now Rs. 125 crore (US$ 14.4 million), while the turnover limit stands at Rs. 500 crore (US$ 57.6 million).
Introduction
The Micro Small and Medium Enterprises (MSMEs) sector is a major contributor to the socio-economic development of the country. In India, the sector has gained significant importance due to its contribution to Gross Domestic Product (GDP) of the country and exports. The sector has also contributed immensely with respect to entrepreneurship development especially in semi-urban and rural areas of India.
A revision in Micro Small and Medium Enterprises (MSME) definition was announced under the Aatmanirbhar Bharat Abhiyaan Scheme on May 13, 2020. The Ministry of Micro, Small, and Medium Enterprises, vide its gazette notification dated June 1, 2020, has announced the upward definition and criteria of the MSME. The new classification for MSME came into effect from July 1, 2020.
Therefore, according to the new classification of Micro, Small and Medium Enterprises (MSME) under the Aatmanirbhar Bharat Abhiyaan Scheme, enterprises are defined based on the investment criteria in plant and machinery and turnover.
|
Criteria |
Manufacturing Enterprises and Enterprises rendering Services (Revised classification with effect from July 1, 2020) |
|
|
Turnover |
Investment |
|
|
Micro |
Rs. 5 crore (US$ 610,000) |
Less than Rs. 1 crore (US$ 120,000) |
|
Small |
Rs. 50 crore (US$ 6.1 million) |
More than Rs. 1 crore (US$ 120,000) but less than Rs. 10 crore (US$ 1.2 million) |
|
Medium |
Rs. 250 crore (US$ 30.4 million) |
More than Rs. 10 crore (US$ 1.2 million), but less than Rs. 50 crore (US$ 6.1 million) |
Market Size
As per data from the Ministry of Micro, Small & Medium Enterprises, as of July 2024, the number of MSMEs registered on the Udyam portal, including the Udyam Assist Platform (UAP), has reached 4.77 crore, with continual growth observed.
MSMEs are being encouraged to market their products on the e-commerce site, especially through Government e-Marketplace (GeM), owned and run by the government, wherefrom Ministries and PSUs (public sector undertakings) source their procurement.
In January 2024, UPI processed over 16 billion transactions, totalling Rs. 23. 48 lakh crore (US$ 270.3 billion), marking a 27% year-on-year increase.
MSME-SAMBANDH scheme has positively impacted target beneficiaries by providing professional support in upgrading their skills, facilitating market linkages and handholding support which resulted in a 17-fold increase in public procurement from SC/ST MSEs (in terms of value) i.e., Rs. 99 crore (US$ 11.4 million) in FY16 to Rs. 1,722 crore (US$ 198 million) in FY24 as reported on the portal.
As of December 2024, 32 states and union territories have submitted Strategic Investment Plans (SIPs), with 31 of these plans evaluated. Over 200 proposals, amounting to approximately Rs. 3,000 crore (US$ 345.3 million) have been approved for the states and union territories. Since its inception, all initiatives under RAMP have positively impacted more than 4,00,000 MSMEs.
Total 2,792 programmes have been conducted, benefiting 1,40,738 persons, under the scheme, ESDP from January to December 2024.
Scheme of Fund for Regeneration of Traditional Industries (SFURTI) from January to December 2024, 18 clusters have become operational, benefiting a total of 11,810 artisans across 11 states. Additionally, 15 clusters were approved in FY23, with total assistance of Rs. 40.0 crore (US$ 4.6 million) from the Government of India, directly benefiting 8,875 artisans.
From January to November 2024, tool rooms and technical Institutions have supported 44,223 units.
In alignment with the Atmanirbhar Bharat initiative, significant import substitution efforts have been implemented. As a result, several tool rooms have successfully developed and manufactured indigenous components tailored for Micro, Small, and Medium Enterprises (MSMEs).
Under the 'IPR' component, the Intellectual Property Facilitation Cell (IPFC) has approved a total of 73 patents, 616 trademarks, 37 designs, and 1 geographical indication (GI) registration as of September 2024.
In Union Budget FY26, the government mentioned to support for 5 lakh first-time women entrepreneurs from scheduled castes and scheduled tribes, providing up to Rs. 2 crore (US$ 0.2 million) in term loans along with online training. This represents a significant advancement toward gender inclusivity in business.
As of March 2024, the Government e-marketplace (GeM) portal served 5.8 million orders worth Rs. 3,87,006 crore (US$ 46.67 billion) with 148,245 primary buyers and 215,743 secondary buyers.
As of December 14, 2023, under the top five state-wise Udyam registrations, Maharashtra recorded the maximum number of registrations with 37.12 lakh units, followed by Tamil Nadu (21.74), Uttar Pradesh (20.28), Gujarat (15.53), Rajasthan (15.57).
The number of MSMEs in the country is expected to grow from 6.3 crore, of which only 2.5 crore have ever availed credit from formal sources to approximately 7.5 crore in the coming times, growing at a projected CAGR of 2.5%.
Jammu and Kashmir leads in employment generation under the Prime Minister’s Employment Generation Programme (PMEGP), with 44,542 projects assisted between 2021-22 and 2023-24, receiving a margin money subsidy of Rs. 921.38 crore (US$ 110 million) and creating an estimated 3,56,336 jobs, accounting for 18% of nationwide employment generated under the scheme during this period.
Domestic business requires a strong financial stimulus with concessional working capital loans to ensure adequate liquidity is maintained in business operations from the government and financial institutes.
Indian Micro, Small and Medium Enterprises (MSMEs) are rapidly adopting digital payments over cash, with 72% payments done through the digital mode compared with 28% cash transactions. Rise in digital adoption presents prospects for further growth in the sector. In FY23 till December 31, 2022, the number of digital transactions stood at 9,192 crore and worth Rs. 2,050 trillion (US$ 24.73 trillion).
Statutory Bodies
MSME Ministry has four statutory bodies namely, Khadi and Village Industries Commission (KVIC) who is responsible for promoting and developing khadi and village industries for providing employment opportunities in rural areas, thereby strengthening the rural economy, Coir Board in charge of promoting overall development of the coir industry and improving living conditions of workers in this industry, National Small Industries Corporation Limited (NSIC) responsible for promoting, aiding and fostering growth of micro and small enterprises in the country, generally on commercial basis, National Institute for Micro, Small and Medium Enterprises, (NI-MSME) in-charge of enterprise promotion and entrepreneurship development, enabling enterprise creation, performing diagnostic development studies for policy formulation, etc. and lastly, Mahatma Gandhi Institute for Rural Industrialisation (MGIRI) responsible for accelerating rural industrialisation for sustainable village economy, attract professionals and experts to Gram Swaraj, empower traditional artisans, encourage innovation through pilot study/field trials and R&D for alternative technology using local resources.
Government Policies
The Government of India has designed various policies for the growth of MSMEs in the country.
- The Union Budget for FY26 has raised the investment limits for MSMEs by 2.5 times and doubled the turnover thresholds. Specifically, the new limits are as follows:
- For micro-enterprises, the investment limit is now Rs. 2.5 crore (US$ 0.3 million), with a turnover limit of Rs. 10 crore (US$ 1.2 million).
- For small enterprises, the investment limit has been set at Rs. 25 crore (US$ 2.9 million), and the turnover limit is Rs. 100 crore (US$ 11.5 million).
- For medium enterprises, the investment limit is now Rs. 125 crore (US$ 14.4 million), while the turnover limit stands at Rs. 500 crore (US$ 57.6 million).
- The Union Ministry of Micro, Small, and Medium Enterprises has received an allocation of Rs. 23,168 crore in FY26 Union Budget, reflecting a 4.6% increase compared to the FY25 Budget.
- In December 2024, 5.70 crore MSMEs, with an employment of 24.14 crore are registered on Udyam Registration Portal and Udyam Assist Platform (UAP).
- Under Pradhan Mantri Mudra Yojana (PMMY), In FY25 (Until 21st February 2025), Rs. 4.14 lakh crore (US$ 47.6 billion) was sanctioned under 4.2 crore Mudra loans to non-corporate and non-farm MSEs.
- In the first 100 days of Prime Minister Mr. Narendra Modi's third term, over Rs. 3,148 crore (US$ 377 million) in loans have been disbursed under the Prime Minister Employment Generation Programme (PMEGP). This initiative has led to the establishment of more than 26,000 micro enterprises and the creation of approximately 210,000 jobs.
- The Ministry of MSME has increased the CGTMSE credit guarantee coverage for women-owned micro and small enterprises to 90%, benefiting approximately 27 lakh women-led MSEs and supporting the government's goal of providing Rs. 5 lakh crore (US$ 59.94 billion) in credit guarantees over the next two years.
- The Telangana government has launched the "Telangana MSME Policy 2024," allocating Rs. 4,000 crore (US$ 479 million) over five years to establish over 25,000 new MSMEs and enhance support for self-help groups, while focusing on key areas like finance access, raw material availability, and green technology adoption.
- The Union Government will launch a new special credit guarantee scheme providing up to Rs. 100 crore (US$ 12 million) in collateral-free loans for Micro, Small, and Medium Enterprises (MSMEs), as announced by Union Finance Minister Mrs. Nirmala Sitharaman, with a particular focus on supporting Karnataka's 35 lakh MSMEs that contribute significantly to job creation.
- According to the Budget 2024 documents, Union Minister for Finance and Corporate Affairs, Mrs. Nirmala Sitharaman announced a crucial increase in the MUDRA loan limit for MSMEs from Rs. 10 lakh (US$ 11,988) to Rs. 20 lakh (US$ 23,977) for those who have successfully repaid their previous loans.
- The "Raising and Accelerating MSME Performance" (RAMP) scheme, launched in 2022, has benefitted 4 lakh micro, small, and medium enterprises, with women-owned businesses making up over 38% of the registered MSMEs, highlighting the government's focus on empowering female entrepreneurs.
- The Prime Minister’s Employment Generation Programme (PMEGP) has created approximately 8 million jobs and supported over 9.65 lakh micro enterprises since its inception in FY09, according to the MSME ministry. The scheme has provided more than Rs. 25,263.33 crore (US$ 3.03 billion) in subsidies and aims to enhance employment opportunities for traditional artisans and unemployed youth.
- Credit Guarantee Fund for Micro and Small Enterprises (CGTMSE) approves Rs. 2 lakh crore (US$ 23.98 billion) guarantees in FY24, marking the highest ever in a single fiscal year, doubling from the previous year's figure, aimed at facilitating collateral-free loans to eligible MSMEs.
- The central government approves Rs. 114.80 crore (US$ 13.67 million) for Rajasthan under the Raising and Accelerating MSME Performance (RAMP) programme, aimed at boosting MSME enterprises in the state and enhancing their capacity to contribute to the goals of Developed India-Developed Rajasthan.
- The Centre approves Strategic Investment Plans (SIPs) for nine states, including Rajasthan, West Bengal, and Gujarat, under the Raising and Accelerating MSME Performance (RAMP) scheme, with a total funding of Rs. 713 crore (US$ 85.49 million), aiming to reduce compliance costs and improve credit access for micro, small, and medium enterprises.
- The Self-Reliant India (SRI) fund, with a corpus of Rs. 50,000 crore (US$ 6 billion), has invested Rs. 7,593 crore (US$ 910 million) in 425 MSMEs, supporting sectors such as agriculture, pharma, auto, and chemicals, under the Aatmanirbhar Bharat package.
- In the interim budget 2024-2025, it was announced the establishment of a corpus totalling Rs. 1 lakh crore (~US$ 12 billion), offering 50-year interest-free loans. This initiative aims to incentivize the private sector, particularly MSMEs, to enhance research and innovation in emerging sunrise domains.
- Since the launch of the Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE), till November 30, 2023, guarantees amounting to Rs. 5,33,587 crore (US$ 64.35 billion) have been issued under the Credit Guarantee Scheme for Micro and Small Enterprises (CGMSE).
- The Department of Animal Husbandry & Dairying (DAHD) under the Ministry of Fisheries, Animal Husbandry and Dairying announced the launch of a new credit guarantee scheme. The scheme under the Animal Husbandry Infrastructure Development Fund (AHIDF) aims to facilitate collateral-free credit for MSMEs in the livestock sector.
- Launched on 17th November 2023, the PM Vishwakarma Scheme provides holistic support to artisans and craftspeople, offering recognition, skill enhancement, tool incentives, credit aid, digital transaction bonuses, and marketing assistance, with a total financial outlay of Rs. 13,000 crore (US$ 1.57 billion) and a target of 30,00,000 beneficiaries by 2027-28.
- Under Pradhan Mantri Mudra Yojana (PMMY), In FY24, Rs. 5.41 lakh crore (US$ 64.87 billion) was sanctioned under 6.6 crore Mudra loans to non-corporate and non-farm MSEs.
Recent Developments
Major Recent Developments in the MSMEs include:
- MSMEs exports have witnessed a remarkable rise, increasing from Rs. 3.95 lakh crore (US$ 45.5 billion) in CY21 to Rs. 12.39 lakh crore in CY25, underscoring their critical role in boosting India’s economy and strengthening global trade. The total number of exporting MSMEs in CY25 has also increased to 1,73,350 in CY25.
- Aragen Life Sciences has announced a Rs. 2,000 crore (US$ 239 million) investment to expand its facility in Hyderabad, aiming to create 1,500 new jobs and enhance its capabilities in drug discovery, development, and manufacturing for the global life sciences industry. This expansion underscores Hyderabad's growing prominence as a hub for Contract Research Organizations (CROs) in India.
- At the TN Global Investors Meet in January, investments of Rs. 63,573 crore (US$ 7.62 billion) were committed, with Rs. 13,000 crore (US$ 1.56 billion) operationalized in the MSME sector. State Minister for MSME, Mr.T.M. Anbarasan announced that 1,277 MSME companies have invested Rs. 13,003 crore (US$ 1.56 billion) over the past five months, generating approximately 46,000 jobs. Additionally, 60% of the MoUs signed during the meet are in advanced stages of implementation, with a high-level committee to oversee these investment commitments being formed.
- The Holani Group has successfully raised Rs. 184 crore (US$ 22 million) for its new SME-focused venture capital fund, which aims to reach a total of Rs. 300 crore (US$ 35.96 million). This initiative follows the group's approval from SEBI for its Alternate Investment Fund earlier this year. The fund includes a green shoe option to potentially raise an additional Rs. 100 crore (US$ 12 million).
- As of February 05, 2024, women owned MSMEs constitute 20.5% of Udyam Portal registrations, contributing 18.73% to employment and 10.22% to turnover. Various initiatives support their growth and empowerment in the sector.
- On January 18, 2024, FinAGG Technologies, specializing in MSME financing, secured US$ 11 million funding co-led by BlueOrchard and Tata Capital Ltd. The Series A round also involved SIDBI and Prime Venture Partners, aiming to expand presence, drive innovation, and empower women entrepreneurs.
- On February 27, 2023, in New Delhi, a Memorandum of Understanding (MoU) was signed to renew cooperation in the MSME sector between the National Small Industries Corporation Ltd. (NSIC), a CPSE under the Ministry of MSME, and the Korea SMEs and Startups Agency (KOSME) of the Republic of Korea.
- On December 15, 2023, DCM Shriram Ltd. approved its Chemicals business entry into "Advanced Materials". The Self-Reliant India (SRI) Fund, initiated by the government in May 2020, managed by SBICAP Ventures, has invested Rs. 6,448 crore (US$ 777.62 million) in MSMEs as of November 30, 2023, with a 15-year tenure for equity infusion.
- On June 27, 2023, DealShare announces a Rs. 1,000 crore (US$ 120 million) investment over five years in MSME partners across six states. This initiative aims to enhance partner capacity, foster research, and development, and increase affordability through indigenous brands and private labels.
- Google plans to make a calculated investment in digital payments with the aim to strengthen the dynamic Indian Micro, Small and Medium Enterprise (MSME) market, said Mr. Sanjay Gupta, Country Head and Vice President of Google India. Google plans to expand its impact beyond payments, aiming to unlock India's MSME potential through financial inclusion and digital empowerment.
- In a significant move to bolster the MSME sector in India, the Technology Development Board (TDB) and the Small Industries Development Bank of India (SIDBI) formalized a Memorandum of Understanding (MoU) to facilitate easier access to credit for enterprises engaged in the development and commercial application of indigenous or imported technology.
- As announced in December 2023, the share of MSME-related products in all India exports stood at 45.56% as of September 2023 (FY24), informed the Minister of State in the MSME Ministry Mr. Bhanu Pratap Singh Verma.
- The Reserve Bank of India on August 17, 2023, announced the launch of the Public Tech Platform for Frictionless Credit (PTPFC) pilot project. The PTPFC has been created by the Reserve Bank Innovation Hub (RBIH), a wholly-owned subsidiary of the central bank. The aim of the pilot project is to connect borrowers and lenders, which will make credit more accessible to millions of individuals looking for small loans. The PTPFC will be enabling the disbursal of non-collateral based loans for Micro, Small and Medium Enterprises (MSMEs), Kisan Credit Card loans up to Rs. 1.6 lakh (US$ 1,924.07), dairy loans, personal loans, and home loans.
- In August 2023, Flipkart partnered with the Government of Gujarat through a MoU with the Commissioner of Cottage & Rural Industries, Government of Gujarat, under its Flipkart Samarth program. The tie-up aims at digitising local businesses that focus on the development of the crafts in every district and to revive the languishing crafts in the state.
- In August 2023, DBS Bank in collaboration with supply chain platform Infor Nexus announced the launch of a pre-shipment financing solution for SMEs part of the Infor Nexus supply chain ecosystem.
- In May 2022, Aditya Birla Capital launched Udyog Plus, an MSME-focused portal, which provides capital and other business solutions to small businesses, including investments, advisory services, and utility services. It offers online loans up to Rs. 10 lakh (US$ 120,000) to MSMEs through various product offerings such as supply chain finance and transaction-based loans.
- Life insurance company Max Life on May 8, 2023 announced a strategic tie-up with an MSME representative body Indian Industries Association (IIA) to provide life insurance to employees working in MSMEs based in Uttar Pradesh. The insurance programme will cover more than 11 lakh MSME workers affiliated with IIA and their families in the state and will be undertaken with Sana Insurance Brokers as the enrolment partner.
- In February 2023, government announced in budget 2023-24 that Entity DigiLocker is to be setup for use by MSMEs, large businesses, and charitable trusts to store and share documents online securely.
- In February 2023, government announced in budget 2023-24 that 95% of the forfeited amount relating to bid or performance security, shall be returned to MSMEs by the government and government undertakings in cases wherein the MSMEs failed to execute contracts during the Covid period.
- In June 2022, the central government announced a new initiative called "Promotion of MSMEs in North Eastern Region and Sikkim". The main purpose of this project was to stimulate MSMEs in the North East by establishing mini-technological centres, developing new and existing industrial estates, and promoting tourism.
Achievements in the Sector
The Ministry of MSME runs numerous schemes targeted at providing credit and financial assistances, skill development training, infrastructure development, marketing assistance, technological and quality upgradation, and other services for MSMEs across the country.
Road Ahead
The Government of India has envisioned doubling the Indian economy to US$ 7 trillion by FY30. To achieve this goal, career opportunities for the young population have been generated and MSMEs have the potential to serve as a key employment generator. Therefore, the government has taken up promotion of MSMEs to create new jobs in the sector. Further, the government aims to enhance MSME’s share in exports and its contribution to GDP.
To achieve these targets, the government should invest in providing more back-end services to improve performance of the MSME sector as it supplies goods and services to big industrial enterprises. Lack of technology-based production activities and low investment in R&D activities are bottlenecks hindering the sector to become competent. Globally available technology could be subsidised by the government so that the product quality of MSME players can be improved using the existing resources. This also requires the help of academic institutions in the form of providing Research and Development (R&D) services for product innovation.
References: Government Websites, Press Releases, Media Reports, Deloitte Report, Budget 2025-26
Note: Conversion rate used in January 2025, Rs. 1 = US$ 0.012
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