MSMEs Poised for Major Boost in India’s GDP by 2027: U Grow Report

A U Grow report anticipates the contribution of Micro, Small, and Medium Enterprises (MSMEs) to India’s GDP to grow from the current 30% to 40% by 2027. This growth is pivotal for India’s ambition to become a developed nation by 2047, driven by increased formalization and women-led enterprises.

India's Micro, Small, and Medium Enterprises (MSMEs) are expected to significantly enhance their contribution to the Gross Domestic Product (GDP) over the coming years, a recent report by U Grow reveals. Presently, MSMEs account for around 30% of India's GDP, with predictions indicating a rise to 40% by 2027.

The report emphasized the essential role MSMEs will play in transforming India into a developed nation, or 'Viksit Bharat,' by 2047. Between FY18 and FY22, the MSMEs' contribution has hovered around 29-30%. By 2027, their GDP share is anticipated to increase to 35-40%, underscoring the sector's criticality in achieving Viksit Bharat by 2047.

A driving force behind this potential growth is the rapid formalization of MSMEs via the UDYAM portal, launched in FY21. The portal's registration numbers have nearly doubled annually, facilitating small businesses' access to government aids such as financial support, subsidies, and market opportunities. The report also highlighted the rising significance of women-led MSMEs, indicating that one in five UDYAM-registered MSMEs is spearheaded by women, contributing similarly to job creation.

However, the report identified that women-led MSMEs are typically smaller, accounting for only one in ten rupees of investment and turnover. Despite MSMEs' substantial economic role, their share in commercial credit remains low, at 6.3% in FY24. Nonetheless, this represents a 60 basis point improvement from FY19. The central government has affirmed its commitment to MSME support, reflected in the Union Budget for 2024-25, which includes comprehensive measures to promote labor-intensive manufacturing and MSME growth.

The report's conclusion pointed towards the significant impact of technology adoption and digitalization in further formalizing the MSME sector, enhancing their credit and market access.

(With inputs from agencies.)