The role of MSMEs in promoting employment and entrepreneurial opportunities pan-India remains indubitable.
The role of MSMEs in promoting employment and entrepreneurial opportunities pan-India remains indubitable. The RBI Governor recently noted that MSMEs have become the growth engine of the economy, given their tremendous network of 63 million enterprises, contributing to around 30% of nominal GDP and 48% of exports.
But worldwide, MSMEs have been badly battered by the pandemic-related crisis. In India, however, MSMEs were already struggling during the past few years due to policy-related reforms such as the introduction of GST in July 2017 and Demonetisation in November 2016. As these disrupted business operations, liquidity issues plus lack of adequate and timely credit access hit MSME operations hard. For any business, big or small, credit is indispensable, without which normal operations are hampered.
Addressing Credit Barriers
Moreover, credit is imperative for economies to grow. Since the vast majority of MSME workers are semi-skilled or unskilled, adequate credit access helps MSMEs drive social and financial inclusion. But lack of access to funds has created a credit gap of approximately $240 billion for MSMEs.