Exploring the Role of MSMEs in India: Impact and Contributions to the Global Market

Micro, Small, and Medium Enterprises (MSMEs) play a crucial role in the Indian economy, significantly supporting entrepreneurship and providing employment to millions of individuals. The classification of MSMEs in India is as follows:

However, the Union Budget 2025 proposed increasing the investment and turnover limits for classifying all Micro, Small, and Medium Enterprises (MSMEs) by 2.5 times and 2 times, respectively. This initiative aims to support MSMEs in enhancing their efficiency, adopting technological advancements, and improving access to capital. The expected outcome of this change is to instil confidence in these enterprises, encouraging them to grow and create more employment opportunities for young individuals.

According to data from the PIB, the sector has demonstrated exceptional resilience in recent years, with its contribution to the country’s Gross Value Added (GVA) increasing steadily from 27.3% in 2020-21 to 29.6% in 2021-22, and further reaching an impressive 30.1% in 2022-23. This upward trajectory highlights the sector's critical role in driving national economic growth.

The sector's contribution to India’s total exports has shown consistent growth, rising to 43.59% in 2022-23, progressing further to 45.73% in 2023-24, and reaching 45.79% as of May 2024. This upward trend underscores the sector’s increasing integration into global trade and highlights its significant potential to bolster India’s position as a premier manufacturing and export hub.

As per market reports, nearly 90% of businesses globally are categorized as Micro, Small, and Medium Enterprises (MSMEs). In India, MSMEs account for approximately 45% of the nation’s industrial output. These enterprises are distinguished by their innovative potential, enabling them to function efficiently within budgetary limitations while delivering cost-effective solutions to the communities they serve.

According to the data from PIB, Exports from MSMEs have grown significantly, rising from ?3.95 lakh crore in 2020-21 to ?12.39 lakh crore in 2024-25 (up to May’24). The number of exporting MSMEs has also increased from 52,849 to 1,73,350 in the same period.

MSMEs operate across a diverse range of areas, including urban, semi-urban, and rural settings. In regions where large-scale industries are absent, MSMEs contribute to local economies.

Their ability to adapt and be resourceful makes them key players in many sectors, supporting growth and development across the country, such as:

• The handloom and textile industries are among the most significant sectors managed by MSMEs. In India, the textile industry is predominantly driven by micro and small enterprises, which contribute significantly to both textile exports and employment opportunities.
• Handicrafts also represent an important area of focus for MSMEs, playing a vital role in promoting Indian crafts and arts, which are well-regarded worldwide. In various states, government initiatives employ millions of artisans through MSMEs, particularly in regions like Gujarat, West Bengal, and Uttar Pradesh.
• Furthermore, many agricultural activities receive support from these MSMEs through the provision of agricultural technology and cost-effective solutions, helping farmers improve their processes, reduce costs, and enhance productivity. This support fosters the export of agricultural products and strengthens India's position in the global Agri-market.
• Indian MSMEs (Micro, Small, and Medium Enterprises) play a crucial role in advancing renewable energy projects, such as affordable solar panels and their accessories. They significantly contribute to the installation of rooftop solar panels, which are vital for achieving the country's clean energy goals. Additionally, these enterprises are instrumental in exporting solar panels to various countries.
• By offering opportunities for both skilled and unskilled labour, from delivery services to IT, MSMEs are strengthening small-scale businesses in India, enhancing their presence in the global business arena.

Challenges Faced by MSMEs:

Despite various initiatives taken by the government, MSMEs (Micro, Small, and Medium Enterprises) in India face numerous challenges.

One significant issue is their struggle to obtain financial support from traditional financial institutions, which limits their ability to invest, grow, and expand.

Additionally, inadequate infrastructure, particularly in rural areas—such as unreliable power supply and poor transportation—hinders the daily operations.

Frequent changes in regulations and compliance requirements also lead to delays, consuming valuable time for these enterprises.

Moreover, MSMEs encounter difficulties in accessing both domestic and international markets, facing challenges such as brand recognition, distribution issues, and intense competition.

Gender parity remains a pressing issue within the MSME sector, further complicating their growth and stability.

In this blog, we aim to highlight the importance and impact of Micro, Small, and Medium Enterprises (MSMEs) on the Indian economy, particularly in the realm of exports. MSMEs play a crucial role across various sectors, including manufacturing, technology, textiles, handicrafts, and agriculture, and they are thriving in each of these areas. However, to unlock their full potential and enhance India's export capabilities, it is essential to address the challenges that MSMEs face, despite several initiatives already in place. By focusing on these challenges, we can significantly strengthen and advance India's export sector.

Now what are your thoughts on the future of these MSMEs in India's export sector? Feel free to share your insights in the comments section.