For the MSME sector, bridging the credit gap remains a crucial element but the focus also needs to be on deregulation, enhancing physical and digital connectivity, and putting in place an export strategy that enables them to broaden their market exposure and scale up, the Economic Survey said on Monday.
The sector continues to face extensive regulation and compliance requirements and faces significant bottlenecks with access to affordable and timely funding being one of the core concerns.
It says Licensing, Inspection, and Compliance requirements that MSMEs have to deal with, imposed particularly by sub-national governments, hold them back from growing to their potential and being job creators of substance.
The Survey says threshold-based concessions and exemptions create the unintended effect of incentivising enterprises to cap their sizes below the thresholds and therefore, calls that threshold-based incentives must have sunset clauses.
Share of MSMEs in manufacturing output stands at 35.4%
Highlighting the importance of the MSMEs, the Economic Survey said the MSME sector in the Indian economy stands with an all-India manufacturing output of 35.4%.
The Gross Value Added (GVA) per worker increased from ₹1,38,207 to ₹1,41,769 and Gross Value of Output (GVO) per establishment increased from ₹3,98,304 to ₹4,63,389 showing increased productivity and labour efficiency.
It highlighted the success of the Udyam Registration portal that has received 4.69 Crore registrations as of 5 July 2024, playing an instrumental role in formalizing MSMEs by providing a simple, online, and free registration process based on self-declaration.
The Survey notes that there has been significant growth between FY20 to FY24 in the amount and number of guarantees for MSMEs with Union Budget 2023-24 allocating ₹9,000 Crore to the Credit Guarantee Fund Trust, aiming to enable an additional ₹2 Lakh Crore in credit with reduced costs.
