The role of MSMEs in post-pandemic economic recovery in India

The COVID-19 pandemic delivered an unprecedented economic shock globally, and India’s Micro, Small, and Medium Enterprises (MSMEs) bore a disproportionate brunt of this impact. As engines of inclusive growth, MSMEs contribute nearly 30% to India’s GDP and employ over 110 million people. This research investigates the pivotal role played by MSMEs in India’s economic rebound post-pandemic, using a growth decomposition model to quantify their GDP contribution, employment recovery, export resurgence, and financial revival. The study, grounded in robust secondary data from government reports and economic surveys, reveals that MSMEs not only regained momentum by FY 2022–23 but also led the resurgence in key sectors such as textiles, pharmaceuticals, and agro-products. Further, aggressive credit infusions under schemes like ECLGS and structural reforms including Udyam registration and turnover-based classification fueled sectoral resilience and formalization. Findings highlight that MSMEs added up to 3.26 percentage points to GDP growth in 2021–22 and nearly recovered 25 million lost jobs by 2023.