MSMEs’ contribution to economy to increase upto 40% by 2027

The contribution of Micro, Small, and Medium Enterprises (MSMEs) to India’s GDP is expected to grow considerably in the coming years. The U Grow report states that MSMEs currently represent roughly 30% of India’s GDP, and this figure is expected to rise to about 40% by 2027.

According to a report by U Grow, the contribution of Micro, Small, and Medium Enterprises (MSMEs) to India’s GDP is projected to increase from the current 30% to around 40% by 2027. The growth in MSME’s contribution to GDP is expected to play a crucial role in helping India achieve its goal of becoming a developed nation, or “Viksit Bharat,” by 2047.

The report noted, “From FY18 to FY22, the contribution of MSMEs to India’s GDP has been around 29 per cent to 30 per cent. By 2027, MSMEs are expected to increase their GDP contribution to 35-40 per cent up from the current approx 30 per cent. Unlocking the potential of MSMEs is crucial for India to achieve its goal of becoming a Viksit Bharat (a developed economy) by 2047.” 

A major driver of this growth is the ‘rapid formalization of MSMEs’ through the UDYAM portal, launched in FY21, which has nearly doubled registrations each year. This formalization process has enabled MSMEs to access better government support, including financial aid, subsidies, and enhanced market opportunities. The report also emphasizes the growing involvement of women-led MSMEs, which, despite accounting for a smaller share, are increasingly registering on the UDYAM portal. However, women-led MSMEs currently contribute only one in ten rupees of investment and turnover, indicating room for growth.

Although MSMEs play a substantial role in the Indian economy, their share of commercial credit remains relatively low, representing just 6.3% of the total in FY24. Still, this marks an improvement, with a 60-basis-point increase from FY19 to FY24, signaling gradually improving access to credit for MSMEs.

The government has reaffirmed its commitment to supporting MSMEs through the Union Budget for 2024-25, introducing a comprehensive package focused on promoting labor-intensive manufacturing and MSME growth. The package includes funding, regulatory reforms, technological support, and initiatives aimed at encouraging women entrepreneurs.

The report concludes that the ongoing adoption of technology and digitalization will further formalize the MSME sector, leading to greater access to credit and markets,