(MENAFN- KNN India)
New Delhi, Dec 16 (KNN) Micro, small, and medium enterprises (MSMEs) are essential to India's economic growth, contributing significantly to GDP, employment, and innovation.
However, their share in the economic pie has stagnated in recent years, despite numerous government initiatives aimed at improving credit access, formalisation, and employment within the sector.
The MSME Ministry had set an ambitious target to increase the sector's contribution to the Gross Domestic Product (GDP) to 50 per cent by 2025.
Unfortunately, this target now seems unattainable, as the lingering effects of the COVID-19 pandemic continue to weigh heavily on MSMEs.
From contributing 32.2 per cent of GDP in FY15, MSMEs' share dropped to 30.5 per cent in FY20, further declining to 27.3 per cent in FY21 during the pandemic.
While there was a slight rebound to 30.1 per cent in FY23, the sector's share still falls short of pre-pandemic levels.
In contrast, the corporate sector has shown a remarkable recovery. The corporate profit-to-GDP ratio for all listed enterprises reached 5.2 per cent in FY24, the highest since 2011, compared to just 1.7 per cent in FY20.
From FY21 to FY24, Nifty 500 firms saw their profit after taxes (PAT) grow at a compounded annual growth rate (CAGR) of 34.5 per cent, while GDP growth was only 10.1 per cent.
The agricultural sector has also seen a shift in its GDP share. It surged during the pandemic, nearing 19 per cent in FY21, before slowing to 16 per cent in FY24, below the pre-pandemic level of 16.8 per cent in FY20.
Despite these challenges, credit to MSMEs has been growing steadily. The share of credit outstanding to MSMEs by scheduled commercial banks has remained almost constant, at 16.57 per cent in FY24, down slightly from 16.94 per cent in FY16.
Absolute credit figures have risen, with outstanding credit growing from Rs 12.1 trillion in FY16 to Rs 27.2 trillion in FY24.
The government's efforts, such as launching the Udyam portal in 2020 to formalise MSMEs, have yielded some positive results. By FY24, 3.93 million new MSMEs had registered, and the Udyam Assist Portal had 18.5 million informal enterprises.
These MSMEs employed 74.4 million people in FY24, marking some progress in formalisation.
However, the overall recovery for MSMEs remains sluggish, and the sector's challenges persist despite various policy interventions.
(KNN Bureau)
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