MSME segment in India and factors that impact its growth

The MSME sector is a major contributor to the growth of India’s economy and there are approximately 6.3 crore MSMEs that are driving this growth.

MSMEs already contribute 29% towards the GDP through their national and international trade. The growth of MSMEs itself is increasing rapidly in our country which helps in employment as well as in the development of backward and rural areas.

MSMEs help in creating jobs that will often directly benefit the poor and vulnerable, particularly women and youth, thereby directly reducing poverty, increasing income, and positively impacting household investments in education and health over time.

Also, the Government of India has envisioned doubling the Indian economy to US$ 5 trillion in five years. To achieve this goal, career opportunities for the young population must be generated and MSMEs have the potential to serve as a key employment generator. 

Therefore, the government has taken up the promotion of MSMEs to create new jobs in the sector. Further, the government aims to enhance MSMEs’ share in exports and its contribution to GDP.

Factors that Impact MSME Growth

Since MSMEs are so important to the economy, let us look at the factors that impact their growth.  

1. Government Schemes: Various government schemes are the key drivers for the growth of the MSME sector as these boost the morale of small manufacturers and service providers with various benefits to grow their business.
2. Digital India: Increase in the acceptance of the internet and our country moving towards digitization helps the growth of MSMEs. This is especially true for the e-commerce platforms that give these MSMEs a level playing field and many operating benefits. 
3. Financing: Various schemes of the government and collateral-free financing from the NBFCs as well to the MSMEs is a key booster for the growth of their units.
4. Additional benefits: Ecommerce platforms like Flipkart have supported MSME sellers and handicraft manufacturers through various benefits, ranging from financial to health to insurance. This encourages MSMEs and supports their growth.

Health and financial benefits to sellers are drivers of growth

During a time of economic crisis, Flipkart extended its support to their marketplace sellers with various health and financial benefits. Key benefits were as follows:

1. Flipkart insured its transacting sellers with COVID insurance cover that included Hospitalization and Consultation benefit between 50,000 to 3 Lakhs and 100% premium cost of this insurance was borne by Flipkart.
2. Flipkart made relaxation in its policies and performance metrics that included a waiver of storage fee, cancelation fee and seller protection fund claim benefits.

Such benefits from giant eCommerce platforms like Flipkart for its sellers, in turn, impact the growth of MSME in India, providing them with a cushion in difficult times.

The Way Forward

In current times enterprises need to adopt best practices to offer innovative solutions, with a focus on information and skill development of various stakeholders.

Regular support from the government and big platforms like Flipkart will be key drivers of MSME growth in India which in return will contribute to the GDP and overall prosperity of the country and all its stakeholders.