While the share of micro, small and medium enterprises (MSMEs) in the manufacturing sector has remained fairly constant, their contribution to overall exports has declined despite the recovery in FY22, according to a joint report by U GRO Capital and Dun and Bradstreet (D&B).
While talking about the lending ecosystem, the ‘MSME Sampark Bi-annual report revealed a need to bolster MSMEs’ export capabilities and support by various stakeholders, especially considering the persistent weakness in external demand.
Notably, following the pandemic, the contribution of MSMEs to India’s gross value added (GVA) decreased as India’s overall growth declined. The noteworthy increase in the contribution of MSMEs to GVA from FY21 to FY22 signifies a substantial rebound for these businesses from the pandemic, it added.
The report, however, stated that MSMEs are all set to gain from 7 per cent projected growth for FY24 and they are likely to make more capex and hire more people amid the ongoing geopolitical crisis across the globe.
The report stated that post-pandemic, good recovery was seen in smaller entities, though at a slower pace than the larger ones: over 50 per cent of entities with turnovers less than Rs 10 crore witnessed year-on-year (YoY) growth of over 10 per cent, compared to 60 per cent for higher turnover entities.
Shachindra Nath, Founder and Managing Director, U GRO Capital, said: “This report highlights the critical role that MSMEs play in shaping the destiny of the Indian economy. It takes a deep dive into the nuances of the MSME sector, shedding light on its resilience, innovation, and the pivotal role it plays in fostering economic growth and employment.”
The study showed a dip in business and sales activity in the year of the pandemic, followed by a massive 77 per cent of customers showing resumption of activity in the first year after the pandemic and over 68 per cent of customers showing over 10 per cent YoY sales growth in the second year after the pandemic.
As a result, risk levels have fallen and delinquency rates have improved in the MSME segment which, in turn, is improving the prospects of borrowings by MSMEs.
Avinash Gupta, MD and CEO – India, D&B said, “India aims to be a USD 30 trillion economy by 2047, roughly eight times increase in two decades. MSMEs contribute nearly a third of India’s GDP. MSMEs must scale up significantly and quickly, necessitating an estimated USD 11.5 trillion financing requirement in fixed assets.”
