Modelling Growth in Indian MSMEs: An Empirical Approach Using Fixed Effects and GMM Estimator

Using econometric techniques, this paper investigates the determinants of growth in Micro, Small, and Medium Enterprises (MSMEs) in India. Using a balanced panel dataset of 560 fast-growing Indian MSMEs from 2014–2018, the study employs Fixed Effects (FE) estimation and the Generalized Method of Moments (GMM) to model the relationship between firm growth and various firm-specific and macroeconomic variables. According to the report, macroeconomic factors like inflation and the corporate tax rate, productivity metrics, business size, and internal financing all greatly impact MSME growth. On the other hand, there was little to no statistical relevance between leverage and GDP growth. The results provide policy implications for focused interventions in emerging economies and advance our understanding of the fundamental dynamics of MSME development.