MSMEs to Boost India’s GDP to 40% by 2027, Key to ‘Viksit Bharat’ by 2047
The contribution of Micro, Small, and Medium Enterprises (MSMEs) to India’s Gross Domestic Product (GDP) is expected to grow significantly over the next few years. According to a report by U Grow, the share of MSMEs in the country’s GDP is currently around 30% and is likely to increase to around 40% by 2027. The report also highlighted that MSMEs will play a crucial role in India achieving its goal of becoming a developed nation, or ‘Viksit Bharat,’ by 2047.
From FY18 to FY22, the contribution of MSMEs to India’s GDP has been around 29% to 30%. By 2027, MSMEs are expected to increase their GDP contribution to 35-40%, up from the current approximately 30%. Unlocking the potential of MSMEs is crucial for India to achieve its goal of becoming a ‘Viksit Bharat’ by 2047, said the report.
One of the key factors behind this growth is the rapid formalization of MSMEs through registration on the UDYAM portal. Launched in FY21, the portal has seen a near doubling of registrations each year. This formalization process has helped small businesses gain better access to government initiatives, such as financial support, subsidies, and improved market opportunities.
The report also pointed to the growing role of women-led MSMEs, which are registering in greater numbers on the UDYAM portal, despite representing a smaller share of overall MSMEs. Currently, one in five UDYAM-registered MSMEs is led by women, and these businesses contribute to one in five jobs created by MSMEs, even with lower investment and turnover. However, women-led MSMEs are generally smaller than their counterparts and account for only one in ten rupees of investment and turnover.
Despite the substantial role of MSMEs in the economy, their share in commercial credit remains relatively low. In FY24, they accounted for only about 6.3% of total commercial credit. However, this share has improved by 60 basis points from FY19 to FY24, indicating growing access to credit for MSMEs.
The central government has reiterated its commitment to supporting the growth of MSMEs. In the Union Budget for 2024-25, the government announced a comprehensive package aimed at promoting labor-intensive manufacturing and MSME development. This includes funding, regulatory reforms, technology support, and special initiatives to encourage women entrepreneurs.
The report concluded that the increased adoption of technology and digitalization will further formalize the MSME sector, giving these businesses greater access to credit and markets.
Doubts Revealed
MSMEs -: MSMEs stands for Micro, Small, and Medium Enterprises. These are small businesses that are very important for the economy because they create jobs and produce goods and services.
GDP -: GDP stands for Gross Domestic Product. It is the total value of all goods and services produced in a country in a year. It helps us understand how well a country’s economy is doing.
U Grow -: U Grow is a company that provides financial services to small businesses. They help these businesses get loans and other financial support.
UDYAM portal -: The UDYAM portal is an online platform where small businesses in India can register themselves. This helps the government keep track of these businesses and provide them with support.
Women-led MSMEs -: Women-led MSMEs are small businesses that are started and run by women. These businesses are important because they help women become financially independent and contribute to the economy.
Viksit Bharat -: Viksit Bharat means ‘Developed India’ in Hindi. It is a goal set by the Indian government to make India a fully developed country by the year 2047.