Theme • MSME Growth & Financial Inclusion
Nurturing MSMEs to empower India’s Economic Growth
A strategic perspective by CA. Krishna Kanhaiya, CEO of Mirae Asset Financial Services, exploring the macroeconomic engine of MSMEs, the $1 Trillion export frontier by 2028, FinTech co-lending innovations, and the Atmanirbhar Bharat vision in Amrit Kaal.
Introduction: The Unquestioned Backbone of the Indian Economy
The Micro, Small and Medium Enterprises (MSMEs) in India are universally recognized as the backbone of the national economy. Across policy documents and economic discourse, phrases such as "engine of growth" and "powerhouse of enormous opportunities" are frequently employed to describe this vibrant sector. There is substantive empirical justification for these accolades.
According to official Udyam registration data, there are over 20 Million registered MSMEs operating across India, providing direct livelihood and employment to over 140 Million people. The sector generates over 30% of India’s Gross Domestic Product (GDP) and accounts for approximately 48% of total national exports. More importantly, the future growth potential remains unprecedented: latest macroeconomic forecasts project that the Indian MSME sector will contribute nearly USD 1 Trillion in merchandise exports by the year 2028.
Despite their undeniable contribution to national output, MSMEs face acute vulnerabilities. Whenever an external macroeconomic crisis occurs—whether the liquidity disruption of demonetization or the demand shock of the COVID-19 pandemic—MSMEs are impacted disproportionately due to thin working capital cushions, absence of hard assets, and delayed buyer realizations.
Emerging Opportunities: "China Plus One" & Atmanirbhar Bharat
The contemporary geopolitical and geo-economic landscape has created unprecedented tailwinds for Indian manufacturing and allied services. Foremost among these is the emergence of the "China Plus One" strategy. Global manufacturing conglomerates, having experienced severe supply chain disruptions during recent global shocks, are aggressively seeking to diversify their production bases away from concentrated geographic centers. India has emerged as a premier destination of choice.
This global diversification, coupled with the Union Government's sustained push for "Atmanirbhar Bharat" (Self-Reliant India) and the "Make in India" initiative, presents extraordinary market opportunities for domestic MSMEs. By integrating into global supply chains, Indian enterprises can absorb cutting-edge technology, adopt world-class quality frameworks, and benchmark production against international peers.
Furthermore, India's ongoing digital revolution—characterized by ubiquitous broadband connectivity, cloud software platforms, and the Unified Payments Interface (UPI)—is empowering MSMEs to dramatically enhance operating efficiency, automate inventory controls, and access national markets through platforms like ONDC and B2B e-commerce networks.
Strategic Levers to Catalyze All-Round MSME Growth
To fully capitalize on these macro tailwinds, the author outlines five essential operational and regulatory pillars that must be strengthened across the ecosystem:
1. Regulatory Simplification
Transitioning toward self-certification mechanisms, expanding digital compliance architectures, deepening single-window industrial clearances, and expanding institutional credit guarantee programs (CGTMSE) to streamline ease of doing business.
2. Operating Infrastructure & Clusters
Investing in modern physical infrastructure—transportation corridors, logistics parks, and continuous power/water utilities. Fostering public-private industrial clusters enables smaller firms to pool resources, achieve scale economies, and share advanced tooling.
3. Continuous Skill Development
Encouraging MSMEs to adopt a self-funding, disciplined approach to human capital. Building sector-specific training hubs and partnering with academic institutions ensures that the workforce stays ahead of automation and changing market demands.
4. Technology & R&D Allocation
MSMEs must allocate dedicated budgets toward research, software adoption, and automation. Government subsidies for digital infrastructure and e-commerce onboarding will provide the catalyst needed to build a durable competitive edge.
Bridging the Credit Chasm: FinTechs, NBFCs & Co-Lending
Despite significant policy focus, a persistent dearth of credit continues to stifle last-mile enterprise potential. Traditional frontline commercial banks have historically struggled to service the MSME sector due to deep-seated structural barriers: remote geographic reach, high transaction servicing costs, and an inability to underwrite borrowers who lack conventional audited track records or immovable real estate collateral.
New-age Non-Banking Financial Companies (NBFCs) and FinTech platforms are revolutionizing credit delivery. By deploying machine-learning algorithms on alternative data—such as GST return velocities, UPI merchant cash flows, and e-way bill streams—FinTechs effectively evaluate creditworthiness in hours rather than months. Recognizing this technological edge, leading commercial banks are now aggressively entering into Co-Lending partnerships with NBFCs. This hybrid architecture combines the low-cost balance sheet of Tier-1 banks with the agile, last-mile underwriting expertise of NBFCs, delivering "right finance at the right price."
Supply Chain Financing (SCF) as a Liquidity Engine
Traditional balance-sheet lending is increasingly yielding to dynamic Supply Chain Financing (SCF). By discounting vendor invoices against the balance-sheet strength of anchor corporate buyers via platforms like TReDS, MSMEs obtain instantaneous liquidity, short-circuiting the vicious cycle of delayed receivables and freeing up cash flow for factory expansion.
Conclusion: Leading India's Economic Charge in "Amrit Kaal"
Indian MSMEs represent a formidable powerhouse of untapped economic potential. They are not merely ancillary suppliers; they are the primary engines of job creation, grassroots innovation, and equitable wealth distribution across the nation.
By synchronizing regulatory simplification, modern cluster infrastructure, continuous labor reskilling, technological adoption, and FinTech-led credit access, India can unleash the full power of its entrepreneurial spirit. In doing so, MSMEs will lead India’s charge toward becoming an economic titan during "Amrit Kaal", turning the vision of an "Atmanirbhar Bharat" into a glorious living reality.