Micro, Small and Medium Enterprises (MSMEs) are backbone of the economy - we often hear people saying this, and facts confirm it as well. As per United Nations data, they account for 90% of businesses, 60 to 70% of employment and 50% of GDP worldwide. In India also, the MSME sector is playing a crucial role in uplifting the economy, employing over 110 million people and contributing over 50% of total exports and 33% to the country’s GDP.

The Union Commerce Minister last week said that if India wants to achieve the aim of 1 trillion dollars in product exports, our banks must ensure improved and inexpensive loans to MSMEs. During a meeting, which was attended by top officials of 21 banks, the minister rightly pointed out this Achilles heel of the MSME sector. Indian small businesses have long been reeling under the challenge of credit crunch, which is still the biggest issue for the sector.

According to latest RBI data, however, credit by scheduled commercial banks to micro and small enterprises under priority sector lending grew by 14.5% to Rs 16.17 lakh crore in May 2023 from Rs 14.13 lakh crore during May 2022. Out of Rs 20.20 lakh crore bank credit under priority sector lending, 14.5% of total non-food bank credit was deployed in the MSME sector. While this latest figures are encouraging, they hardly give a lasting picture.

The strength of its grassroots businesses reflects the real strength of an economy, and ensuring adequate and affordable credit to the MSME sector is a must not only to boost exports, but also to create sustaining livelihoods for millions of our jobless youths and promote equitable and sustainable growth of the national economy. While MSMEs hold the potential to transform the Indian economy, it is only easy and affordable credit that can transform our MSME sector.

I invite your opinions.