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Formalisation is accelerating, but still incomplete

The number of registered MSMEs has jumped from 2.5 crore in March 2024 to over 6.2 crore by March 2025, thanks to initiatives like the Udyam and Udyam Assist platforms. This surge in registration is crucial for unlocking benefits such as credit access and government schemes. However, 35% of micro enterprises remain unregistered, primarily due to lack of awareness and apprehension about regulatory scrutiny.

Credit Access: A Persistent and Uneven Challenge

Despite improvements, access to timely and adequate credit remains one of the most pressing issues for MSMEs. While formal borrowing is common among small and medium enterprises, 12% of micro enterprises still rely on informal credit sources. The study estimates a ₹30 lakh crore addressable credit gap, with the highest burden falling on the services sector and women-led businesses.

Women Entrepreneurs: On the Rise but Needing Support

Women now own 26.2% of proprietary MSMEs—a sign of growing inclusivity. However, 41% of women-led enterprises identified credit access and intense competition as the biggest challenges to growth. While 76% of them have accessed credit, the higher perceived obstacles call for targeted support mechanisms and policy interventions.

Market Access and Digital Agility: The Next Frontier

MSMEs face increasing pressure from large firms and lack access to newer markets. Nearly 70% of respondents still rely on traditional marketing methods, with only 13% tapping into digital marketing. This gap highlights a missed opportunity, especially as the sector’s share in India’s exports has risen to 45.7% in FY2024.
Initiatives like ONDC (Open Network for Digital Commerce) and the Government e-Marketplace (GeM) are showing promise in democratizing digital access. But widespread adoption remains key.

Infrastructure, Compliance, and Skills: The Productivity Trifecta

One-fourth of MSMEs cited lack of skilled labour as a major issue. The challenge is especially pronounced in sectors like defence equipment, RMG, hotels, and tiles. Inadequate infrastructure and low tech adoption further affect productivity—particularly in manufacturing-heavy sectors such as auto components and logistics.
Compliance remains burdensome, especially for manufacturing MSMEs, who face complex and resource-heavy statutory requirements.

The Way Forward

The Indian MSME sector is clearly on an upward trajectory. Formalisation, digital readiness, and entrepreneurial diversity are laying the groundwork for long-term resilience. However, systemic support in the form of credit enablement, market linkage, compliance easing, and digital upskilling remains essential.
With focused, data-driven policies and public-private collaboration, MSMEs can not only overcome current roadblocks but also lead India’s charge toward becoming a $5 trillion economy.
At GramPro Business Services, we understand that navigating the challenges of formalisation, market expansion, recruitment, and digital transformation can be overwhelming for MSMEs. That’s why we offer end-to-end support tailored to the unique needs of growing enterprises. From business advisory services for registration and compliance, to Human Capital Management (HCM) solutions for efficient recruitment; from marketing and branding services that boost visibility, to IT solutions that accelerate digital adoption—our goal is to empower MSMEs with world-class expertise at affordable rates. As India’s MSME ecosystem evolves, GramPro remains a committed partner in your journey toward resilience, innovation, and long-term success.

Note:
The findings in this blog are derived from the comprehensive 2025 SIDBI report, “Understanding Indian MSME Sector: Progress and Challenges,” supported by CRISIL Intelligence and based on ground-level insights from more than 2,000 enterprises across India.