India’s Micro, Small and Medium Enterprises (MSME) sector has emerged as one of the strongest pillars of the country’s economic growth, employment generation and grassroots development. From small manufacturing units and rural traders to artisans, self-employed entrepreneurs and service providers, MSMEs today form the backbone of India’s domestic economy.
With targeted reforms, digital integration, financial support schemes and formalisation drives, the Government is now attempting to transform the MSME ecosystem into a more resilient, inclusive and globally competitive sector – particularly in rural and semi-urban India.
According to the Ministry of MSME, the sector currently contributes more than 31 per cent to India’s Gross Domestic Product (GDP), accounts for 48.58 per cent of the country’s exports, and supports livelihoods for nearly 32.8 crore people.
The Ministry said the focus is now on strengthening local production systems, promoting self-employment, improving ease of doing business and integrating millions of informal enterprises into the formal economy.
MSMEs: The Backbone of India’s Economy
MSMEs play a critical role in promoting entrepreneurship and decentralised industrialisation. Unlike large industries concentrated in urban centres, MSMEs have a widespread presence across villages, small towns and semi-urban regions, making them central to balanced regional development.
The sector currently includes more than 7.47 crore enterprises engaged in manufacturing, services and trading activities. MSMEs contribute around 35.4 per cent of India’s manufacturing output and remain the second-largest source of employment after agriculture.
A significant portion of these enterprises operate in rural and semi-urban areas where they support local value chains, create non-farm employment opportunities and help strengthen household incomes.
The Ministry believes that strengthening MSMEs is essential not only for economic growth but also for achieving inclusive development and reducing regional disparities.
Massive Push Towards Formalisation
One of the biggest challenges facing India’s MSME ecosystem has been the large number of informal and unregistered enterprises operating outside the institutional framework.
To address this issue, the government accelerated formalisation through the Udyam Registration Portal and the Udyam Assist Platform (UAP).
As of March 2026, more than 7.9 crore enterprises have been brought into the formal economy through these digital platforms. Of these, around 4.72 crore enterprises are registered on the Udyam Portal, while another 3.21 crore informal micro enterprises have been onboarded through the Udyam Assist Platform.
The UAP, launched in January 2023, specifically targets Informal Micro Enterprises (IMEs) lacking formal registration and financial documentation. Registration allows such enterprises to access institutional finance, government schemes and Priority Sector Lending benefits.
The inclusion of retail and wholesale traders under MSME guidelines since July 2021 has further expanded the sector’s formal coverage.
The Ministry has also introduced provisions to encourage business expansion. MSMEs moving into higher classification categories are allowed to continue receiving non-tax benefits for three years, reducing fears among small businesses about losing support after scaling operations.
Credit Access Remains Central to MSME Growth
Access to affordable and timely credit continues to be one of the most critical issues for MSMEs, especially for first-generation entrepreneurs and rural enterprises.
To address this, the government has introduced several financial support mechanisms.
Credit Guarantee Scheme (CGS)
The Credit Guarantee Scheme, implemented through the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), provides collateral-free and third-party guarantee-free loans to micro and small enterprises.
In Union Budget 2025-26, the guarantee coverage ceiling under the scheme was increased from ₹5 crore to ₹10 crore for banks.
The Ministry also introduced special provisions for enterprises promoted by transgender entrepreneurs. These units are eligible for enhanced guarantee coverage of up to 85 per cent along with a 10 per cent concession in guarantee fees.
Self-Reliant India (SRI) Fund
The Self-Reliant India Fund was launched with a planned corpus of ₹50,000 crore to provide equity support to MSMEs through a Fund of Funds model.
The structure includes ₹10,000 crore from the government and ₹40,000 crore mobilised through private equity and venture capital investments.
Managed by NSIC Venture Capital Fund Limited, the SRI Fund had supported 682 MSMEs with investments worth ₹15,442 crore as of November 2025.
Union Budget 2026-27 further allocated an additional ₹2,000 crore to strengthen the scheme and expand risk capital support for micro enterprises.
Emergency Credit Line Guarantee Scheme (ECLGS)
Introduced during the COVID-19 pandemic, the ECLGS played a major role in supporting struggling MSMEs and business enterprises.
As of January 2023, guarantees worth ₹3.61 lakh crore had been issued under the scheme, benefiting 1.19 crore borrowers.
According to a State Bank of India (SBI) research report, nearly 14.6 lakh MSME accounts were prevented from becoming non-performing assets due to the scheme. Most of these belonged to micro and small enterprises.
Strengthening Legal Protection Against Delayed Payments
Delayed payments remain one of the most serious operational challenges for MSMEs, which often function with limited working capital.
The MSMED Act, 2006 provides legal safeguards by mandating that buyers must make payments to micro and small enterprises within 45 days of accepting goods or services.
To resolve disputes related to delayed payments, 161 Micro and Small Enterprises Facilitation Councils (MSEFCs) have been established across states and Union Territories.
SAMADHAAN Portal
The Ministry launched the SAMADHAAN Portal in 2017 to enable enterprises to file and monitor delayed payment complaints online.
The portal automatically refers cases to the concerned MSEFCs, reducing dependence on physical processes and intermediaries.
A dedicated sub-portal introduced in 2020 tracks payment dues from Central Ministries, Departments and Central Public Sector Enterprises (CPSEs).
Since May 2020, dues amounting to ₹1.65 lakh crore have reportedly been paid to MSMEs through this monitoring mechanism.
The Ministry further strengthened the system in June 2025 with the launch of an Online Dispute Resolution (ODR) Portal for fully digitised settlement of delayed payment cases.
Digital Platforms Expanding Market Access
Digitalisation has become a major driver of MSME competitiveness and market expansion.
Under the Digital India initiative, the Ministry has developed multiple online platforms to help MSMEs with registration, financing, procurement, grievance redressal and market access.
These include Udyam Portal for MSME registration; Government e-Marketplace (GeM) for public procurement; Trade Receivables Discounting System (TReDS) for invoice financing; MSME Champions Portal for grievance redressal; MSME SAMBANDH for procurement monitoring; PMEGP Portal for entrepreneurship schemes; PM Vishwakarma Portal for artisan support; and Online Dispute Resolution platform.
The Ministry said these digital systems are helping small enterprises integrate into formal supply chains while improving transparency and reducing operational barriers.
PMEGP Driving Self-Employment
The Prime Minister’s Employment Generation Programme (PMEGP) remains one of the flagship schemes for promoting entrepreneurship and self-employment.
Implemented through the Khadi and Village Industries Commission (KVIC), the scheme supports new micro enterprises in non-farm sectors through credit-linked subsidies.
The maximum project cost eligible for subsidy is ₹50 lakh for manufacturing units and ₹20 lakh for service and business sectors.
For special category beneficiaries – including SC/ST communities, women, minorities, ex-servicemen and people from hill and border regions – subsidies reach up to 35 per cent in rural areas.
Between FY 2021-22 and FY 2025-26, PMEGP supported more than 5.8 lakh projects.
During this period bank loans exceeding ₹60,000 crore were sanctioned; margin money subsidies worth over ₹13,450 crore were disbursed; nearly 36.3 lakh employment opportunities were generated
PM Vishwakarma Supporting Traditional Artisans
The PM Vishwakarma Scheme, launched in 2023, focuses on traditional artisans and craftspeople engaged in 18 recognised trades.
The scheme provides PM Vishwakarma certificates and ID cards; skill training programmes; daily training stipends of ₹500; toolkit incentives up to ₹15,000; market linkage support; and collateral-free loans up to ₹3 lakh at concessional interest rates.
As of March 2026 more than 30 lakh artisans had registered under the scheme; around 26.7 lakh beneficiaries completed skill verification; over 23.7 lakh completed basic training; nearly 5.9 lakh loans worth about ₹5,050 crore were approved; and more than 25.8 lakh e-vouchers were issued for toolkit support.
The Ministry views the scheme as a major initiative to preserve traditional skills while enabling artisans to integrate into modern markets.
Expanding Equity and Growth Support
The Union Budget 2026-27 introduced additional measures to strengthen the MSME ecosystem, including ₹10,000 crore SME Growth Fund; additional allocation to the SRI Fund; and mandatory implementation of TReDS across Central Public Sector Enterprises.
These steps are aimed at improving liquidity, encouraging equity financing and ensuring faster payments for small businesses.
Building the Foundation of a Self-Reliant Economy
The Ministry said its MSME strategy is built around improving access to finance, formalisation, legal protection, digital integration and entrepreneurship development.
The Ministry believes continued coordination between digital platforms, financial institutions, state governments and grassroots agencies will be essential to ensure that support reaches last-mile entrepreneurs, artisans, rural traders and first-generation business owners.
As India pushes towards becoming a $5 trillion economy and achieving the goals of Viksit Bharat 2047, MSMEs are expected to remain at the centre of the country’s economic transformation – driving employment, local manufacturing, innovation and inclusive growth from the grassroots upward.
