• Admin
• Dec 20, 2024
• Business Optimization

Why MSMEs are at the core of India’s evolution

With its diverse markets and vibrant economy, it is no surprise that India has developed into a promising investment destination for both global and domestic investors. While the country offers multiple avenues for investment, one sector that has emerged as the backbone of India’s growth story is the Micro, Small, and Medium Enterprises (MSMEs). In 2022 alone, India was home to 63 million MSMEs contributing close to 30% of the country’s GDP. As India inches toward the precipice of a $5 trillion economy by 2026-27, it is essential that we direct our focus and resources toward MSMEs.

Recognizing the significance of MSMEs in India’s economic development, the government has also taken significant steps to support and promote the sector as well. Initiatives such as the “Make in India” campaign, the “Udyog Aadhaar Memorandum”, incubation facilities, support programs for women entrepreneurs, and various financial schemes and incentives have been introduced to encourage entrepreneurship, ease regulatory compliance, and provide financial assistance to MSMEs. These initiatives are creating a favorable investment climate and reducing the barriers for investors seeking to participate in the growth of MSMEs. Moreover, the sector is poised to reach INR 1 trillion by 2028.

There are several such factors that position MSMEs at the core of India’s evolution, not just economic but also social. 

Reach Beyond Metros 

More than half of the country’s MSMEs are located in rural India. The government’s focus on promoting local manufacturing and reducing import dependency has created a favourable market environment for MSMEs across the country. Investors must recognize and tap into this potential to capitalize on a rapidly growing consumer base, increasing disposable incomes, and the advantages of a thriving domestic market across industries. 

Technological Developments

Meanwhile, rapid digital penetration has opened up new avenues for MSMEs to expand their reach and tap into larger markets. For instance, the adoption of e-commerce platforms and digital payment systems has facilitated easier access to customers, enabling MSMEs to overcome geographical barriers and scale their businesses more efficiently. Moreover, the introduction of ONDC is driving new opportunities for MSME businesses, enabling access to technology platforms and, subsequently, more consumers across the geography. 

Improving Livelihoods 

MSMEs are major contributors to employment generation in India, accounting for 120 million employment opportunities across various industries. Investing in MSMEs amplifies employment opportunities for the populace. Impact Investments, in particular, have the potential to foster sustainable economic growth for MSME businesses. By channeling capital into socially responsible enterprises, impact investors not only provide a pillar for their growth but also enable meaningful impact for underserved communities through the livelihood opportunities they create, uplifting local communities, and driving economic growth. By supporting MSMEs through impact investments, not only are these enterprises empowered to thrive, but it also fosters inclusive development, and addresses societal challenges such as poverty alleviation, gender equality, and sustainable livelihoods. 

Promote Inclusive Entrepreneurship

MSMEs thrive on innovation and rapidly adapt to market dynamics and customer demands. With their drive towards developing innovative products and disrupting traditional markets, they continue to combine innovation with impact. From an investment perspective, by infusing capital and supporting aspiring entrepreneurs, investors can help drive innovation, develop disruptive technologies, and nurture sustainable business models. 

As India continues to make strides towards its ambitious goals, the MSME sector stands tall at the core of this evolution, presenting an investment landscape that is headed towards a transformative journey.