Posted by Mumbai: While the world celebrates MSME Day 2025, MSMEs in India confront this dark reality of being unable to achieve their true potential. India’s MSMEs, through their distinctive businesses and innovative ideas, are among the big contributors to India’s economy. Yet, their potential and growth has been marred by many challenges and complex regulatory issues, leading to their failures.
MSME’s contribution and count
The overall contribution of MSMEs to India’s economy has steadily increased over the years. The MSME sector reportedly employs over 20.70 crore people. In total, 4.78 crore MSMEs registered in 2024 through the Udyam Registration Portal and Udyam Assist Platform. Out of which, 24.77 MSMEs are registered under the PM Vishwakarma scheme. They contribute over 30% to India’s GDP and 45% to the total manufacturing output.
Backbone of India’s economy
“MSMEs form the backbone of India’s economy, contributing nearly 30% to GDP and employing over 110 million people. They drive innovation, enable livelihoods, and sustain local economies across urban and rural India,” says Neha Juneja, CEO and Co-Founder of IndiaP2P.
“India’s MSMEs are the backbone of our economy, driving innovation, creating jobs, and contributing nearly 30% to our GDP and close to half of our exports,” says Sanjay Tripathy, CEO and Co-founder of BRISKPE – a cross-border payments platform.
Challenges and impact
Despite such a significant contribution to India’s economy, the questions remains – why MSMEs in India fail to make big? The reasons for their failure are quiet obvious and evident.
India’s MSMEs continue to face key challenges in the areas of finance, healthcare, insurance, labour laws, taxes, regulations and compilance and policy-matter. In fact, over 50,000 MSMEs have deregistered due to shutdown in 2024, as per reports.
According to a TeamLease Regtech’s latest report titled ‘Decoding Compliance for Manufacturing MSMEs in India,’ — MSMEs face over Rs 13 lakh annual burden, more than 1,000 regulations, and 50% risk of imprisonment.
“The data reflects an urgent need for reimagining compliances for unshackling India’s MSME entrepreneurs. India’s policymakers need to reduce the disproportionately high compliance burden, deeply entrenched hostility, and the menace of inspector raj,” says Rishi Agrawal, Co-Founder and CEO of TeamLease RegTech.
“Access to timely and affordable credit remains a key barrier to their growth,” says Juneja, whose RBI-certified platform, enables financial access for women entrepreneurs and MSMEs.
“MSMEs don’t thrive alone. They need access to people, ideas, capital, and the one chance that moves them forward. They form the foundation of India’s economic and social fabric,” says Ankit Mathur, Co-Founder and CEO of Greenway Grameen – a biogas stove maker and sustainable cooking solutions provider.
Through different schemes and initiatives, the Indian government has been trying to bring these MSMEs into a formal, organised sector. However, a substantial number of MSMEs are unregistered and operate informally. Yet, they still employ a sizeable number of people on a contract or ad hoc basis and offer low wage. However without healthcare, insurance or other benefits.
Addressing challenges
“To truly empower this sector, we must prioritise the health and well-being of the employees who are the backbone of these businesses,” says Sudipta Sengupta, Founder and CEO of The Healthy Indian Project – a leading health fact-checking platform combating misinformation in multiple regional languages.
“Providing mandatory health insurance, access to healthcare services, and wellness programmes can significantly improve the quality of life for workers. By partnering with healthcare companies and insurtech providers, MSMEs can create a healthier, more productive workforce,” adds Sengupta.
Although, a majority of MSMEs in India operate domestically, estimates suggest, a significant portion of the 63 million MSMEs contribute to exports. As per some estimates 45% of India’s total exports are from MSME-related products.
Export-orientated MSMEs
Even these export-orientated MSMEs, struggle when it comes to cross-border payments, forex and processing fees and more. With MSMEs contributing nearly 30% to India’s GDP and close to half of total exports, BRISKPE’s Tripathy say,”Ambition alone, won’t take them (MSMEs) global.”
“They truly need frictionless systems, especially for cross-border payments. High forex markups and processing fees, often as high as 8%, eat into their margins and restrict cash flow. These are not just inefficiencies; they are roadblocks to global competitiveness,” points out Tripathy.
Recognition and resilience
Nevertheless, what stands out for India’s MSMEs is their efforts to contribute to the economy despite grappling with those challenges. “Their challenges are real, but so is their potential to transform lives through resilience and creativity,” emphasises Greenway Grameen’s Mathur.
“Building strong links between entrepreneurs and communities unlocks MSMEs’ true potential. These connections provide crucial access to resources and markets that fuel innovation and strengthen resilience,” adds Mathur.
The challenges faced by MSMEs in India are not unknown and certainly not hidden. However, these challenges still need to be addressed with a comprehensive approach and collective efforts of all the stakeholders.
MSME Day 2025
Probably, MSME Day is the perfect occasion for all the stakeholders to come together in their efforts to do more than recognising MSMEs’ contribution. They need conscious efforts and support backed ground work and policy framework that can address those challenges and issues.
“On MSME Day, we recognise their outsized role and the urgent need to support them with policies, capital, and opportunities. A thriving MSME sector is not just good economics — it’s essential for inclusive, resilient, and sustained national prosperity,” states IndiaP2P’s Juneja.
“It’s time we reimagine the support ecosystem around MSMEs—not just payments, but insights, tools, and trusted partners that enable them to scale with confidence,” opines BRISKPE’s Tripathy.
“On MSME Day, let’s focus on building a future where health and prosperity go hand in hand,” concludes The Healthy Indian Project’s CEO Sengupta.