MSMEs Contribution to Economy Set to Rise to 40% by 2027: U Grow Report

The contribution of Micro, Small, and Medium Enterprises (MSMEs) to India’s Gross Domestic Product (GDP) is projected to increase from the current 30% to 40% by 2027, according to a recent report by U Grow.

The report emphasized that MSMEs will play a pivotal role in India’s journey towards becoming a developed nation, or “Viksit Bharat”, by 2047. “From FY18 to FY22, MSMEs contributed about 29-30% to India’s GDP. By 2027, this contribution is expected to grow to 35-40%,” the report noted. It highlighted that unlocking the potential of MSMEs is crucial for India to reach this ambitious target.

A key driver of this growth is the formalization of MSMEs through the UDYAM portal, launched in FY21. Registrations on the portal have almost doubled each year, improving access to government initiatives, financial support, subsidies, and market opportunities for small businesses.

The report also highlighted the increasing importance of women-led MSMEs, although they still represent a smaller share. Currently, one in five UDYAM-registered MSMEs is led by women, contributing to 20% of MSME jobs. However, the report noted that these enterprises are generally smaller, accounting for only 10% of total MSME investment and turnover.

Despite their significant contribution to the economy, MSMEs accounted for only 6.3% of total commercial credit in FY24. However, this figure has improved by 60 basis points since FY19, reflecting better access to credit.

In the Union Budget 2024-25, the central government reinforced its commitment to MSME growth through a comprehensive package aimed at promoting labor-intensive manufacturing, technology adoption, and women entrepreneurship.

The report concluded that increased digitalization will continue to formalize the MSME sector, providing these businesses with enhanced access to credit and markets, further driving their contribution to India’s economy.

Disclaimer: The information provided in this article is based on publicly available reports and statements. Readers are advised to verify details independently before making business or financial decisions.