Chapter-1 : MSME Outlook - Defining the economic growth

Economy during the year under review

Global growth at 3.6% for CY 2018, due to weak global trade, lower investments and rising global trade tensions

India’s GDP growth rate at 6.8% in FY 2019, as against 7.2% in FY 2018

Low global economic inflation and accommodative monetary policies expected to revive growth

MSME Today




of GDP


employment generation


diverse products and services


contribution to the all India exports during FY 2019 (up to Nov 2018)

MSME Credit

Outstanding credit of SCBs to MSME sector as at end of FY 2019 at ₹15.77 lakh crore with 19.1% growth vis-à-vis March 2018#

Outstanding assistance of NBFCs to MSME sector at ₹1.62 lakh crore as at end of FY 2019#

Outstanding credit to the sector as per MSME Pulse Report* stood at ₹21.7 lakh crore as at end of FY 2019

#Expert committee on MSME

*covers individuals and entities with exposure up to ₹100 crore

Policy enablers in FY 2019 to elevate the sector to next level

  • Expert Committee on MSME sector provided valuable suggestions for development of MSMEs.
  • Initiatives under MSME Outreach Programme are:

Access to Credit

  • Fintech foray “PSBLoansin59minutes”, of 5 PSBs led by SIDBI, to ease and accelerate the credit flow to MSME sector
  • 2% interest subvention on fresh & incremental credit for MSMEs registered under GST
  • Mandatory registration on TReDS platform of all companies with a turnover of > ₹500 crore

Access to Markets

  • Mandatory procurement by PSUs from MSMEs raised from 20% to 25%
  • All CPSUs to compulsorily procure through GeM portal

Technology Upgradation

  • 20 Technology Centres and 100 Extension Centres at the cost of ₹ 6,000 crore envisaged

Ease of Doing Business

India ranks 63rd in World Bank’s Ease of Doing Business which propelled from 77th position in previous year; major guiding factors include:

  • Starting a business - Abolishment of filing fees associated with SPICe company
  • Starting a business - Abolishment of filing fees associated with SPICe company
  • Dealing with construction permits - Streamlining the process of issuance of construction permits
  • Trading across borders - Made easier like enabling post clearance audits, integrating trade stakeholders in a single electronic platform
  • Resolving insolvency - Easier resolution by promoting reorganization proceedings in practice

Making a case for fostering MSME growth

Improved MSME density can boost socio-economic development

  • MSME sector in India is second only to China, the latter having 73.28 million small and micro enterprises*
  • Density of MSMEs per thousand people in India is 48 as compared to ~52 in China, but lower than Lower Middle-Income countries like Indonesia where the MSME density is 238**
  • Significant scope for scaling up of MSME density in India; this could address various social and economic issues

Can make significant contribution to exports

  • MSME contribution to exports >45% during last 4 years with 5% & 8% growth, in USD terms, in FY 2017 & 2018 respectively
  • Boost in credit to MSME (approx. 20% of Adjusted Net Bank Credit) would add significant value to the critical growth component of exports

Can be a major enabler for USD 5 trillion economy

  • With 99% of manufacturing units being MSMEs, the sector can drive the share of manufacturing to GDP to 25%
  • Special policy push required to enable Prime Minister’s vision to make India a USD 5 trillion economy by 2025

*China MSME Finance Report 2018

** MSME Economic Indicators 2019, SME Finance Forum

What can push MSME growth

Adequate Bank Credit

MSME credit gap in India is estimated at ₹25.8 lakh crore

MSME credit is only 20% of Adjusted Net Bank Credit

SCBs reported incremental credit of ₹ 2.53 lakh crore to MSME sector with growth rate of approx. 19% during FY 2019

MSME sector requires double-digit growth in credit flow in coming years to reduce the estimated credit gap

Accelerated formalization

7.9 million MSMEs are registered with UAM portal (October 2019) and approx. 1.25 crore registered under GST

Removal of data asymmetry due to formalization would accelerate the inclusion of MSMEs in formal channels and fuel growth of the sector

Outlook for FY 2020


Comfort of political stability


Focus on rural income growth expected to improve private consumption and demand position


Revival in credit flow to Industry sector, especially large industries envisaged; this will create demand down the supply chain, thus benefiting small enterprises


Improvement in portfolio quality concerns of PSBs, exit of some PSBs from PCA mechanism and recapitalization support would lead to a credit revival


₹ 15 lakh crore disbursement opportunity in digital lending over next 5 years*


India’s GDP growth for FY 2020 projected at 7% by IMF

*BCG report on Digital Lending