Page 31 - Banking Finance October 2024

ARTICLE

sections of society, plays a crucial role in poverty
Year Number of MSMEs GDP Contribution
(%) (in Million) alleviation and inclusive growth. MSMEs are the largest
employers in India, providing jobs to over 120 million
2015 51.1 25
people, making them the second-largest employment
2018 54.6 27
generator after agriculture. Sectors like textiles, food
2021 63.4 29 processing, and handicrafts heavily rely on MSMEs for
2024 75.00 30 employment.

As per the information culled out from the Data Challenges Faced by MSMEs:
Dissemination Portal of Directorate General of Despite their remarkable resilience, MSMEs face a
Commercial Intelligence and Statistics (DGCIS), the share multitude of challenges that hinder their growth potential.
of export of MSME specified products in all India exports Further, as per SIDBI MSME Pulse report highlights that
are as follows: only about 16% of MSMEs have access to formal credit.
Here's a closer look at some key hurdles:
Year % share of Export of MSME related High-interest rates on formal credit: MSMEs
products in All India Export often face exorbitant interest rates when borrowing
2019-20 49.75% from banks or financial institutions, reducing their
profit margins and hindering growth. For instance, a
2020-21 49.35%
small-scale manufacturer might be charged interest
2021-22 45.03%
rates as high as 12-15%, making it difficult to
2022-23 43.59% compete with larger firms.
2023-24 45.73%
Complex documentation and collateral
2024-25* 45.79% requirements: The cumbersome process of obtaining
loans, involving extensive paperwork and collateral,
*up to May 2024 acts as a significant barrier for MSMEs. A small
retailer might struggle to provide property as
MSMEs are the unsung heroes of India's economy,
collateral, limiting their borrowing capacity.
contributing significantly to its growth and development.
Accordingly, to recognize and support MSMEs on
International MSME Day (27th June), 2024, the Ministry
of Micro, Small & Medium Enterprises (MSME) organised
the 'Udyami Bharat-MSME Day' event and proposed
amendment to MSME Development Act, 2006 to improve
dispute resolution for delayed payments and address the
changing needs of the MSME sector. Further, the
government's target of $1 trillion in exports by 2028
heavily relies on MSME contribution.

Employment Generation: A Beacon of
Opportunity
MSMEs have been instrumental in creating employment
opportunities across the length and breadth of the country,
particularly in rural and semi-urban areas. Their ability
to absorb a vast workforce, especially from marginalized

28 | 2024 | OCTOBER | BANKING FINANCE