Empowering India's Future: The Transformative Influence of MSMEs on the Indian Economy

The Micro, Small, and Medium Enterprises (MSMEs) play a pivotal role in the Indian economy. They have emerged as key drivers of innovation, growth and employment.

With a remarkable contribution of around 33% to India's total GDP, the MSME sector has played a significant role in shaping the nation's economic landscape. Furthermore, the sector's potential for growth is considerable, with predictions suggesting a substantial contribution of US$ 1 trillion to India's total exports by 2028. This statistic alone underscores the immense potential and influence of MSMEs in propelling India's future economic trajectory.

This brings us to our topic of discussion for today “India's Roadmap to Economic Growth”. Welcome to the fourth article based on the "Small Business to Smart Business" podcast series, presented by DBS Bank and Moneycontrol.

In this article, we are going to talk about how MSMEs are contributing to Nation building and shaping India’s future. We will also examine the challenges faced by MSMEs and the necessary support mechanisms that can harness their full potential to fuel India's growth story.

The article also covers valuable insights drawn from industry experts – Mr. Ajay Thakur (Head - BSC SME and startup), Mr. Sudarshan Chari (Executive Director and Head, DBS Bank India) and Mr. Abhishek Singh (COO, Lendingkart).

The Emergence of MSMEs as Economic Powerhouses

In recent times, the MSME sector has gained a lot of prominence and caught the attention of investors, policymakers and entrepreneurs. Their adaptability, ability and agility to nurture grassroots entrepreneurship position them as vital players in India's economic landscape. Furthermore, they contribute to enhancing the productivity and competitiveness of the Indian economy.

Besides contributing to India's current economic growth, MSMEs are also paving the way for a more prosperous future. They are driving innovation and creating jobs, nurturing an ecosystem that fosters sustained development and positions India competitively on the global stage.

The Evolving Landscape of the MSME Sector

Lately, India has emerged as an attractive destination for manufacturing companies looking to shift their production capacities from China. This presents a promising opportunity for the MSME sector. With their agility and adaptability, MSMEs can position themselves to cater to the surge in demand for ancillary products and services required by large companies that are setting up their businesses in India. This in turn will propel their own growth.

Besides, the entry of large foreign companies into India's manufacturing landscape will stimulate the entire supply chain and create direct employment opportunities. MSMEs can capitalise on these opportunities and leverage the transfer of technology, expertise, and best practices from these giants to enhance their capabilities and become more competitive in the global market. To drive this expansion, MSMEs need to strengthen their ecosystem and build collaborative partnerships to promote knowledge sharing and skill development.

Prime Minister's recent visit to the US has also led to significant FDI inflows, providing a huge opportunity for the MSME sector. With FDI support, MSMEs can expand, collaborate with international partners, and embrace advanced technologies.

Mr. Abhishek Singh from Lendingkart adds, “MSMEs can capitalize on such opportunities by establishing a strong digital presence, focusing on enhancing their capabilities, and showcasing unique offerings while complying with international standards.”

Government Push to Promote MSME Sector

Recognizing the indispensable role of the MSME sector in India's economic growth, the government is taking multiple initiatives and policy measures to create an inclusive ecosystem. The government’s support in implementing the 'Make in India' campaign, creating financial support schemes, providing funding and access to capital, promoting partnerships, offering training and education programs and bringing ease of doing business reforms further contribute to empowering MSMEs to reach their full potential.

Mr. Ajay Thakur further shows confidence in the growth of the MSME sector by emphasizing the impetus of supportive policies and initiatives from the government. He adds, “government is giving the right boost to the MSME sector by rolling out several support policies such as change in the definition of MSMEs to include enterprises with turnover up to Rs. 250 crores in its scope, enhancement of the limit on the ceiling for guarantees to Rs. 5 crores under the Credit Guarantee Scheme for MSME, disallowance of global tenders for government purchases up to Rs. 200 crore are few of the measures that ensure sustainable growth of the MSME sector.”

Hurdles Encountered by MSMEs

Despite this encouragement, the MSME sector still faces obstacles that hinder its growth. According to Mr. Sudarshan Chari from DBS Bank India, “MSMEs are facing three major challenges i.e. access to capital, access to technology and access to information.” He further adds that “DBS Bank offers a range of services and solutions to support MSMEs overcome these barriers. Our digital platforms provide seamless access to credit, paperless transactions, and cross-border payments. Furthermore, we bring a lot of transparency and traceability to transactions through contactless modes and digital solutions.”

The Bottom Line

The evolving MSME landscape in India presents an array of opportunities. With an emphasis on streamlined regulations, improved credit access and fostering innovation, MSMEs can significantly boost the nation's economic growth and prosperity.

Moneycontrol Journalists are not involved in creation of this article.