MSME GDP Share at 30%, Still below Pre-COVID Levels

In 2022-23, India’s MSME sector’s GDP contribution rose to 30.1%, recovering from pandemic lows but still below pre-COVID levels. The sector also saw an improvement in export share, reaching 45.73% in FY24, signaling gradual recovery despite ongoing challenges.

In 2020, former MSME Minister Nitin Gadkari set ambitious targets for the sector, aiming for a 40% share of MSMEs in India’s GDP by 2025, alongside a 60% share in exports (up from nearly 50% in 2020) and the creation of 5 crore additional jobs.

Recent data indicates that the MSME sector’s contribution to India’s GDP has rebounded to 30.1% in the financial year 2022-23, as reported by Minister of State for MSME Shobha Karandlaje in the Rajya Sabha. This marks an improvement from 29.6% in FY22 and 27.3% in FY21. Despite this recovery, the share is still below the pre-pandemic level of 30.5% in FY20.

Currently, there are 4.76 crore enterprises registered with the MSME Ministry through the Udyam portal, which offers benefits related to credit, new enterprise creation, exports, and public procurement. Of these, nearly 2 crore are informal micro enterprises not covered by Goods and Services Tax (GST). Among the registered MSMEs, 70.56 lakh are in manufacturing, while a significant 2.06 crore are in the services sector.

Additionally, the share of MSMEs in India’s total exports has seen a resurgence in FY24, reaching 45.73% after three years of decline. This is an improvement from 43.59% in FY23, 45.03% in FY22, and 49.35% in FY21. As of May 2024, the share stands at 45.79%.

The MSME sector’s ongoing recovery is a promising sign, but it still faces challenges in reaching the ambitious targets set before the pandemic. In the Budget 2024, Finance Minister Nirmala Sitharaman has allocated Rs 22,138 crore to the MSME Ministry, representing 0.45% of the total budget expenditure of Rs 48.21 lakh crore. While this allocation remains consistent with the previous year’s budget, there is a slight increase in funding for central sector schemes, rising to Rs 21,868 crore from Rs 21,852 crore in the 2023-24 budget. In addition to this marginal increase, Sitharaman’s budget speech highlighted a range of new measures aimed at enhancing credit access for MSMEs, signaling a commitment to supporting the sector’s recovery and growth.