Why MSMEs are the Key to Boosting the Indian Economy?

January 12, 2024
Updated on

Micro, Small and Medium Enterprises (MSMEs) have long been regarded as the engine of economic growth and a means of achieving more equitable development. The MSME sector’s labour density is much higher than that of large corporations. In most economies, MSMEs account for over 90% of total enterprises and are credited with generating the highest job growth rates and a significant share of industrial production and exports. The sector has shown admirable adaptability and innovation in surviving the recent pandemic, and it has a lot of room to develop in the future. MSMEs in Indian economy have also been responsible for providing goods and services at lower costs, which has helped the country to become more competitive in the global market.

MSMEs have also been instrumental in promoting innovation and technological advancement in the country. This has enabled India to compete effectively with other countries in terms of technology. MSMEs also help provide access to capital, finance and marketing support to new entrepreneurs. This has encouraged new entrepreneurs to start their own businesses and contribute to the country’s economic growth. Let’s have a look at some contributions from the MSMEs in Indian economy. India is also a vast and diverse market, which provides MSMEs with the potential to reach a large customer base and grow their businesses with the right strategies and financial support. An MSME in India can take advantage of the opportunities available to them and reach their full potential.

Contributions of the MSME sector to the Indian Economy

Their contribution of MSMEis multifaceted, impacting various aspects of economic development. MSMEs are crucial for employment generation, providing livelihoods to a significant portion of the population. Additionally, they foster entrepreneurship, enabling individuals to translate their innovative ideas into tangible businesses. MSMEs contribute substantially to the country’s GDP, acting as catalysts for economic growth. Their nimbleness and flexibility make them essential in adapting to changing market dynamics and contributing to the overall resilience of the economy. Moreover, MSMEs are often the backbone of local economies, promoting regional development and reducing regional imbalances. The government’s focus on supporting and promoting MSMEs through policies and schemes further underscores their significance in driving inclusive and sustainable economic development in India. Here are some of the contributions of the MSMEs in Indian economy.

Employment Generation

The MSME sector’s contribution to the Indian economy is crucial. In India, the MSME sector, second only to agriculture, provides job opportunities for a huge population. Four people are projected to be employed for every lakh invested in fixed assets in the small-scale sector. MSMEs are important not only because they create jobs at a low cost but also in the industrialisation of rural and underdeveloped regions, reducing regional imbalances and ensuring an equal distribution of national income and wealth.

MSMEs are also beneficial for employment generation among women, who often lack access to the formal sector. It also provides employment to women who are unable to find jobs in the organised sector due to a lack of skills or education. Therefore, MSMEs provide women with an opportunity to earn an income while taking care of their families and are thus a vital source of income generation for women in rural areas.

Export contribution

The MSME sector stands as a cornerstone in fortifying the Indian economy, making significant strides not only in domestic markets but also on the global stage. The sector accounts for around 50% of the nation’s exports. There is a projection that it will significantly enhance its contribution, aiming to constitute at least 60% of India’s ambitious target of achieving $2 trillion in exports of goods and services by the year 2030.

In an effort to foster and amplify their contribution to international trade, several initiatives and incentives have been introduced. Products crafted by MSMEs receive global exposure through participation in international exhibitions, with the government shouldering logistics costs. To enhance the export capabilities of these enterprises, comprehensive training programs on packaging standards and techniques are conducted across various regions in collaboration with the Indian Institute of Packaging. Under the MSME Marketing Development Assistance (MDA) Scheme, individuals are provided financial assistance to partake in overseas fairs and exhibitions, facilitating their outreach to a broader international audience. These export promotion measures not only empower MSMEs but also contribute to the overall economic resilience and global competitiveness of India.

Socio-economic impact

MSMEs are the backbone of many economies in the world, providing jobs and income to millions of people. In countries like India, MSMEs account for close to 90% of the total employment. This is especially true in rural areas where MSMEs are the main source of income for many families. MSMEs provide an opportunity for entrepreneurs to start their own businesses and be their own bosses. This provides people with the capacity and freedom to pursue their dreams.

MSMEs are an important source of innovation and growth. They are often the first to adopt new technology, allowing them to stay competitive and provide better services and products to their customers. This boosts economic growth by creating a more diverse and dynamic market. MSMEs are also a source of local wealth and development. When a local business is successful, it brings money and resources into the local community. This can help create jobs, support local businesses, and provide resources for the community.

Therefore, MSMEs are an important part of any society as they provide an opportunity for people to contribute to the economy and society, fostering a sense of pride and ownership. This can have a positive effect on the overall quality of life in a community. MSMEs also play a vital role in providing access to basic goods and services that the people of a country need. These goods and services can range from food to healthcare and education. They can also provide access to basic utilities such as water and electricity.

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Evolving opportunities for an MSME in India

An MSME in India has immense potential for development and growth. The sector is the backbone of the Indian economy and contributes around 30% to the country’s GDP. MSMEs offer a variety of opportunities for entrepreneurs in India. The government of India encourages MSMEs to develop and grow by providing various incentives such as tax reductions, loans and subsidies. This has led to an increase in the number of small businesses in India.

MSMEs offer a great opportunity for entrepreneurs to set up businesses in a variety of sectors such as manufacturing, trading and services. These businesses are relatively small and require less capital to start. This makes them an attractive option for entrepreneurs who are looking to start or expand their businesses without having to invest a large amount of money. The government of India also provides policy support to MSMEs by providing easy access to finance and other resources. It also helps MSMEs access global markets and export their products and services. This has opened up new opportunities for MSMEs to grow and develop.

MSMEs also have the potential to create employment opportunities in India. This can be done by setting up manufacturing units and providing services. This can help to reduce the unemployment rate in India and reduce poverty. Overall, MSMEs in India offer a variety of opportunities for entrepreneurs. With the right support, these businesses can be successful and contribute to the growth and development of the country.


The contribution of MSMEs in Indian economy has been enormous, especially towards job creation and rural industrialisation, due to their low capital intensity and high labour absorption. This sector is ideally suited to draw on the strengths of our conventional skills and expertise by infusing technology, resources, and creative marketing practices. This is an excellent time to start small-scale ventures, as the outlook appears optimistic. One necessity to get a business up and running is the infusion of capital.

Kinara Capital has been striving to make capital accessible to all small business owners without any hassles or delays. Kinara’s customised loan products are the best option for the various business needs of MSMEs. The interest rates start at 21% per annum on a reducing rate basis. The loan tenure ranges from 12 months to 60 months, depending on the product, and you can avail of a loan of up to Rs. 30 Lakhs. Get a quick eligibility check on Kinara’s website or myKinara App and get one step closer to availing of a collateral-free business loan. If you have any queries, give us a missed call at 080-68264454 to talk to our in-house customer support team.

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