Moonis Rehman | 06 May, 2025
With over 63 million units contributing nearly 30% to India’s GDP, MSMEs are not just participants but major players in the country’s economy. From manufacturing plastic and paper products to tools, OEM components for large businesses, and food products, they are the second largest employment generator in the country and empower the industrial backbone of our country. Yet, many MSMEs fall short of their growth potential due to lack of awareness or support mechanisms.
The Indian government has classified MSMEs based on their turnover and the amount of investment they make in plant and machinery or equipment. In a recent update, the government has revised the definition of MSMEs and now all those businesses that have a turnover of up to Rs. 500 crore and investments up to Rs. 125 crore are classified as MSMEs giving more and more businesses the opportunity to get into the MSME category and avail numerous benefits such as tax relief, getting collateral free loans or easier access to credit. Earlier the turnover and investment limit was much lower thereby leaving many fast growing businesses out of the bracket.
MSMEs, as often has been reported, lack the awareness to fully leverage the different schemes introduced by the government from time to time. This knowledge gap combined with the financial constraints prevents them from performing to their full potential and in contributing more effectively to the growth of the economy.
A major concern is that MSMEs are family run-businesses who are hesitant to go digital or in utilising several government schemes for expansion. They are more comfortable in their traditional ways of doing business, be it in getting credit or in installing the latest machinery or software for operations.
To address the challenges about access to credit, the Indian government has introduced several credit guarantee schemes especially tailored for MSMEs. Some of the prominent schemes are:
Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) - through this scheme MSMEs can get collateral-free loans of up to ₹5 crore.
Emergency Credit Line Guarantee Scheme (ECLGS), launched during the pandemic, provided much-needed working capital to MSMEs hit by the crisis.
Credit Linked Capital Subsidy Scheme (CLCSS) can be used for technology upgradation.
The Stand-Up India scheme was introduced to support SC/ST and women entrepreneurs.
MUDRA loans under the Pradhan Mantri Mudra Yojana caters to micro and small units that are in need of initial funding.
Apart from the government schemes for credit accessibility, there are many NBFCs as well that provide collateral free loans to MSMEs and help in bridging the credit gap with faster processing and flexible terms.
While it is well-known that MSMEs face challenges in accessing capital but at the same time it is equally important for them to be made aware about the various government schemes available. They should take full advantage of these government initiatives and should embrace technology, adopt digital tools only then they will be able to utilise their resources to the fullest. By actively seeking and leveraging these resources, MSMEs can contribute more effectively to the growth of our economy.
