How the Electrical Industry is Powering Economic Development?

May 7, 2024
Updated on

The electrical industry is a vast and complex sector that plays a vital role in the Indian economy, contributing around 1.5%  to the GDP. It encompasses the production, distribution, and utilisation of electrical energy and touches the lives of people throughout the country.

Within the electrical industry, there are a variety of businesses that operate, ranging from multinational corporations to micro, small, and medium enterprises (MSMEs). The burgeoning demand within the electrical industry is intricately linked to the rapid upswing in construction activities. With urbanisation and infrastructure projects on the rise, there is an intensified requirement for electrical systems, equipment, and services. As new residential, commercial, and industrial ventures emerge, extensive electrical installations encompassing wiring, lighting, power distribution, and advanced technologies become imperative.

This heightened construction boom places significant pressure on the electrical sector to cater to escalating needs, including energy-efficient solutions, smart technologies, and sustainable power sources. The industry’s continuous innovation to meet modern construction demands underscores its pivotal role in ensuring safe, efficient, and compliant electrical setups, spotlighting the intertwined growth of both sectors.

MSMEs play a significant role in the electrical industry, accounting for a large share of the industry’s output, employment, and exports. They are involved in all aspects of the electrical industry, from manufacturing to distribution to retail.


MSMEs are involved in the manufacturing of a wide range of electrical products, including transformers, switchgear, cables, and lighting fixtures. They play a key role in meeting the demand for electrical products in India.


MSMEs are also involved in the distribution of electrical products. They sell electrical products to retailers, wholesalers, and end-users. They play a key role in ensuring that electrical products are available to consumers throughout India.


MSMEs are also involved in the export of electrical products. They export electrical products to countries around the world. They play a key role in promoting India as a leading exporter of electrical products.

The global electrical industry presents an intensely competitive space, as companies relentlessly attempt to seize a greater market slice. This cutthroat competition resonates significantly in the Indian context, where a dynamic blend of factors fuels this industry’s growth. From the generation, transmission, and distribution of electricity to the manufacturing of electrical equipment and provision of services, their involvement spans a wide spectrum of activities.

Zooming in on India’s landscape, several states emerge as true powerhouses. Gujarat, Maharashtra, Tamil Nadu, Rajasthan, Karnataka, and Uttar Pradesh shine brightly on the map as paramount power producers. Collectively, they command a substantial majority of the nation’s installed power capacity. These states act as the driving gears of India’s electrical industry and intricately steer the nation’s progress in this vital sector.

What is the Role of MSMEs in the Electrical Industry?

MSMEs play a pivotal role in shaping India’s electrical industry across manufacturing, trading, and service sectors. These nimble entities contribute to the industry’s vibrancy and innovation in various ways:


MSMEs are the backbone of electrical equipment manufacturing. They produce a wide range of products, including wires, cables, switches, transformers, and other components. Their agility allows them to cater to niche markets, develop specialised products, and adapt to changing customer demands swiftly. This diversity in manufacturing fuels healthy competition and innovation within the industry.


In the trading sector, MSMEs often act as intermediaries, sourcing electrical products from manufacturers and supplying them to various consumers, from individual consumers to larger businesses. Their localised presence and personalised approach help bridge the gap between manufacturers and end-users, ensuring the timely availability of products and solutions.


MSMEs also contribute to the service segment of the electrical industry. They offer installation, maintenance, repair, and other technical services to consumers. These services are crucial for ensuring the proper functioning of electrical systems and equipment. MSMEs’ proximity to customers allows them to offer personalised and prompt services, enhancing customer satisfaction.

MSMEs are important for the electrical industry for several reasons. They are often more flexible and agile than MNCs, allowing them to quickly adapt to changing market conditions. They also have close ties to local communities, which can give them a competitive advantage in access to raw materials and labour. MSMEs in the electrical industry play a number of important roles in the economy. They help to:

  • Create jobs: MSMEs in the electrical industry employ millions of people around the world. These jobs provide essential income and support for families and communities.
  • Drive economic growth: Small businesses help to drive economic growth by providing goods and services that are essential for businesses and consumers. They also help to create new markets and opportunities for innovation.
  • Adopt Innovation: MSMEs are often at the forefront of innovation in the electrical industry. They are constantly developing new products and services that meet the needs of businesses and consumers. This helps to keep the industry competitive and dynamic.
  • Provide access to electricity: MSMEs help to provide access to electricity to people in rural areas and other underserved communities. This is essential for improving the quality of life and economic opportunities in these areas.

The role of MSMEs in the electrical industry is likely to become even more important in the future. As the demand for electrical equipment and services grows, MSMEs will be needed to meet this demand. They will also be needed to continue to innovate and develop new products and services that meet the needs of businesses and consumers.

Activities that MSMEs in the Electrical Industry are Involved

MSMEs have played an increasingly important role in the electrical industry in recent years. This is due to many factors, including the growth of the global market for electrical products, the increasing demand for customised electrical products, and the rise of e-commerce.

Manufacturing Electrical Equipment

MSMEs manufacture a wide range of electrical equipment, including transformers, generators, circuit breakers, and switchgear. These products are used in a variety of applications, including power generation, transmission, and distribution. 

The manufacturing of electrical equipment is a complex process that requires a high level of skill and expertise. MSMEs in this sector must comply with strict safety and quality standards.

Wiring and Installation

Small businesses also provide wiring and installation services for electrical systems in homes, businesses, and other buildings. This includes installing new electrical systems, upgrading existing systems, and repairing electrical faults.

Wiring and installation is a specialised field that requires a deep understanding of electrical codes and standards. MSMEs in this sector must be able to work safely and efficiently in a variety of environments.

Maintenance and Repair

MSMEs also provide maintenance and repair services for electrical systems. This includes inspecting electrical systems for potential problems, troubleshooting faults, and repairing or replacing damaged components.

Maintenance and repair is an essential service that helps to keep electrical systems operating safely and efficiently. MSMEs in this sector must be able to identify and diagnose problems quickly and effectively.

Distribution and Sales

MSMEs in the electrical industry also distribute and sell electrical equipment and supplies. This includes selling electrical products to businesses and consumers, as well as providing technical support and advice.

Distribution and sales are an important part of the electrical industry, as it helps to ensure that electrical products are available to those who need them. MSMEs in this sector must have a strong understanding of the electrical market and be able to meet the needs of their customers.

As the electrical industry continues to grow, the role of MSMEs is likely to become even more important. MSMEs will be essential for meeting the growing demand for electrical products and for providing customised solutions to customers.

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7 Emerging Trends in the Electrical Sector

The electrical sector is constantly evolving, with new trends always emerging. Some of the latest trends in the electrical sector include. 

The Rise of Renewable Energy: 

Renewable energy is becoming increasingly popular as businesses and consumers look for ways to reduce their reliance on fossil fuels. This is driving growth in the solar and wind power sectors. Governments and businesses increasingly invest in renewable energy projects to reduce carbon emissions and transition to a more sustainable energy mix.

Energy Storage Solutions

With the intermittent nature of renewable energy sources, there was a growing focus on energy storage technologies. Advancements in battery technology and other energy storage systems are being explored to store excess energy generated from renewables for later use during periods of low generation.

Smart Grids and Grid Modernisation

Smart grids are being deployed worldwide to optimise energy distribution and enhance grid reliability. Smart grid technologies, such as advanced metering systems, real-time data analytics, and demand response mechanisms, are being used to collect real-time energy usage data. 

This data can be used to identify and address problems in the grid, manage demand, and prevent outages. The development of smart grids has the potential to revolutionise the electrical industry and can help to reduce costs and make the grid more sustainable. They are expected to positively impact the progress of the electrical industry significantly in the coming years.

IoT in Electrical Devices

The Internet of Things (IoT) connects billions of devices to the Internet, which has a major impact on the electrical industry. Smart home technologies, intelligent lighting systems, and connected appliances are becoming more prevalent, offering consumers enhanced energy efficiency and convenience. IoT devices can also collect energy usage data, which can help reduce the cost of energy consumption.

Electric Vehicles (EVs)

The rise of electric vehicles influences the electrical sector significantly. EV charging infrastructure was being expanded to support the growing adoption of electric vehicles, and the electrification of transportation was seen as a crucial step towards reducing greenhouse gas emissions and achieving sustainable mobility.

Electrification of Industries

Numerous industries are considering the possibility of electrifying their operations to reduce their carbon impact. Electrification has the potential to improve energy efficiency and decrease emissions. For instance, India Railways has committed to electrifying its entire rail infrastructure, increasing its reliance on renewable energy, and working towards achieving carbon neutrality by 2030.

Energy Efficiency and Conservation

Improving energy efficiency remained a priority for both consumers and industries. Energy-efficient electrical appliances, lighting, and building systems are embraced to lower energy consumption and operational costs.

The Role of Government in Supporting MSMEs in the Electrical Sector

Provide access to financing

MSMEs often face difficulty accessing finance, as they are considered higher risk than larger businesses. Governments can help address this by providing MSMEs access to loans, grants, and other financial assistance.

Provide training

MSMEs in the electrical sector often need training in order to stay up-to-date with the latest technologies and regulations. Governments can help to provide this training by funding training programs or by providing grants to MSMEs to send their employees to training courses.

Create market opportunities

MSMEs in the electrical sector often face challenges in accessing market opportunities. Governments can help to address this by providing MSMEs with access to government procurement contracts or by helping them to export their products.

Create a favourable regulatory environment: 

MSMEs in the electrical sector often face a complex and burdensome regulatory environment. Navigating through various regulations, permits, and compliance requirements can be burdensome, potentially impeding their growth and innovation. These complexities may lead to resource-intensive efforts to ensure adherence, diverting focus from core business activities.

Simplifying and streamlining regulations could empower these enterprises to thrive more effectively within the industry. Governments can help address this by simplifying regulations and providing MSMEs with better access to information about regulations. By taking these steps, governments can support MSMEs in the electrical sector and help create a favourable regulatory environment for MSMEs.

Financing for MSMEs in the Electrical Industry

Financing for MSMEs in the electrical industry plays a critical role in sustaining their growth and operational activities. Given the capital-intensive nature of the sector, MSMEs often require substantial funding for various purposes, including equipment acquisition, infrastructure development, working capital, and technological upgrades. Traditional lending institutions, such as banks and credit unions, offer loans and credit lines tailored to the specific needs of MSMEs.

Specialised financing options like trade finance, invoice discounting, and equipment leasing cater to the unique requirements of the electrical industry. As the financial landscape evolves, digital platforms and fintech solutions are also emerging as convenient avenues for MSMEs to secure loans and access capital swiftly. Government initiatives and industry associations further contribute by providing subsidies, grants, and favourable interest rates to support MSMEs’ financial stability and expansion in the electrical sector.

Despite these opportunities, MSMEs often face challenges in accessing financing due to factors like stringent eligibility criteria, lack of collateral, and limited credit history. This has led to the rise of alternative financing models, including peer-to-peer lending and crowdfunding, which enable MSMEs to connect directly with potential investors. Collaborative efforts between financial institutions, governments, and industry bodies are crucial to ensure a diverse range of financing options, allowing MSMEs in the electrical industry to overcome financial barriers and thrive in a competitive market.

Non-Banking Financial Companies (NBFCs) play a significant role in providing financing to MSMEs in the electrical industry. NBFCs bridge the gap between traditional banks and MSMEs by offering specialised financial solutions tailored to the unique needs of these enterprises.

NBFCs often have more flexible lending criteria compared to traditional banks, which can be advantageous for MSMEs that may face challenges in meeting stringent requirements. They offer various financing options such as working capital loans, equipment financing, trade finance, and invoice discounting. This range of solutions addresses the diverse financial needs of MSMEs in the electrical sector, enabling them to manage cash flow, acquire necessary equipment, and execute projects effectively.

NBFCs leverage technology to streamline the loan application and approval process. This digital transformation allows MSMEs to access financing more quickly and with less paperwork, improving their overall experience. Additionally, NBFCs sometimes have a deeper understanding of specific industries, like the electrical sector, enabling them to provide more relevant financial advice and solutions.


The electrical industry is a crucial part of the global economy. It provides power for homes, businesses, and transportation systems. The industry is also undergoing a major transformation as it moves towards renewable energy sources and smart grid technologies. Non-banking financial companies (NBFCs) are increasingly important in this transformation. They provide financing for renewable energy projects, smart grid technologies, and other initiatives that are helping to make the electrical industry more efficient and sustainable.

For example, NBFCs provide collateral-free loans to solar panel installers, electric vehicle manufacturers, and smart grid infrastructure developers. They also provide working capital loans to small businesses upgrading their electrical systems. As the electrical industry continues to transform, NBFCs will play an increasingly important role in financing the new technologies and projects needed.

NBFCs like Kinara Capital can provide financing to borrowers without collateral. Kinara empowers MSMEs to invest in technology, expand their market presence, adopt advanced digital solutions, streamline operations, and enhance cost-effectiveness. As a digital lender, Kinara Capital is committed to providing MSMEs with easy access to credit and a wide range of customer-friendly products and services tailored to their specific needs. To simplify the loan application process, entrepreneurs can download the myKinara app and start their digital business loan application today. With Kinara Capital, MSMEs can embark on their digital growth journey confidently. Also, we have a dedicated customer support team available between Monday – Friday (9.30 AM – 6.00 PM) at our toll free number 1800-103-2683 for any questions or assistance. This ensures that entrepreneurs can get the help they need throughout the loan process.

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