A Study of the Challenges of the Indian MSME Sector

Micro, Small, and Medium Enterprises (MSMEs) form a vital backbone of the Indian economy, contributing approximately 30% to the country’s GDP, 35% to manufacturing output, and around 46% to exports. The sector also sustains employment for over 110 million people across 63–73 million enterprises. Despite this significance, Indian MSMEs grapple with multifaceted challenges including limited access to finance, infrastructure deficiencies, low technological adoption, market access constraints, regulatory burdens, human resource and skill shortages, and a glaring credit gap of approximately ₹30 lakh crore. Regulatory compliance also imposes high costs estimated at over ₹13 lakh per year, due to nearly 1,450 obligations, many with stringent penalties. Based on primary surveys, expert insights, and recent literature, this study examines these persistent hindrances in-depth and proposes strategic, actionable measures including financial inclusion, digitalization, infrastructure development, skill enhancement, and regulatory streamlining, to strengthen the MSME sector’s resilience and growth trajectory. The findings of this review paper offer valuable implications for policymakers, industry stakeholders, and entrepreneurs aiming to foster inclusive and sustainable economic development.