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India’s economy is worth over $2 trillion. The Micro, Small and Medium Enterprises (MSMEs) are the main pillars. The MSMEs in India number over 60 million and they assume much importance as India intends to increase the share of manufacturing in the country’s Gross Domestic Product (GDP) to 25 per cent in the next seven years.
It is obvious that growth requires funds and MSMEs find it very difficult to raise it at the appropriate time. Therefore, most entrepreneurs are compelled to keep their business operations on a minor scale, even when they are competent and desirous of scaling up.
Times are gradually changing. The MSMEs are adapting new technologies and have been able to comply with the relevant norms. Thus, the banks sense an opportunity to lend to this segment. There is a considerable increase in the numbers of MSME loans in Indian banking. Loans to business in the below-INR-10-lakh segment has seen a nearly 32 per cent increase. This is expected to grow further,
but the number of MSEs get credit from the formal banking system stands at five million.
The lack of clear information about the MSME unit’s financial situation and viability makes banks hesitate to put forth credit facility to it. The government as well as the private sector need to prompt the MSMEs to get credit ratings. In addition, they need to invest in upgrades, generate awareness about long-term effects and the need to adopt cloud-based solutions.
Although India’s MSME base is the second largest in the world, after China, the manufacturing MSMEs contribute only 8 per cent to the country’s GDP, compared to China’s 60 per cent. If India has to emerge as the next manufacturing powerhouse, it has to reduce the gap. The “Make In India”
initiative, along with FDI inflow can boost the SME sector.[/vc_column_text][/vc_column][/vc_row]
