Citing the World Bank’s Financial Sector Assessment Report (2025), the survey noted that 27 per cent of MSMEs identify lack of finance as their biggest obstacle, primarily due to limited collateral and weak documentation—constraints that continue to weigh heavily on micro and first-time borrowers.
Despite these challenges, MSMEs account for 35.4 per cent of India’s manufacturing output, 31.1 per cent of GDP, and nearly 48.6 per cent of total exports, underlining the systemic risk posed to the economy if credit gaps persist.
Exports surge despite financing constraints
Even as credit access remains uneven, government data shows MSME exports have surged to ₹12.39 lakh crore in 2024–25, up from ₹3.95 lakh crore in 2020–21, contributing around 45–46 per cent of India’s total exports.
The number of exporting MSMEs has jumped more than threefold over four years, rising from 52,849 in 2020–21 to 173,350 in 2024–25, with key shipments spanning handicrafts, textiles, leather, apparel, and engineering goods. MSMEs contributed 45.73 per cent to exports in 2023–24, increasing further to 45.79 per cent by May 2024.
MSMEs dominate employment, supply chains
According to the survey, India has over 7.47 crore MSMEs employing more than 32.8 crore people, making the sector the second-largest employer after agriculture. The survey said MSMEs play a critical role in supply-chain integration, local value addition, and inclusive regional development, especially as India positions itself for deeper global manufacturing integration.
Credit growth improves, but gaps remain
The Economic Survey noted that MSME lending was the primary driver of industrial credit growth in the first half of FY26, significantly outpacing large industry credit. This was aided by revised MSME classification norms introduced in April 2025, which expanded eligibility for priority sector lending, along with targeted budget schemes and jewellery-backed small business loans.
NBFCs continued to act as key last-mile lenders, maintaining strong double-digit credit growth to MSMEs, particularly for microenterprises.
Survey pushes cash-flow lending, digital finance
To mitigate credit risk and sustain growth, the survey called for a rapid expansion of cash-flow-based lending models, especially for micro and first-time borrowers lacking traditional collateral. It also stressed the need to accelerate digital lending partnerships to ensure timely, affordable, and wider access to formal finance.
With MSMEs driving exports, employment, and manufacturing, the survey cautioned that closing the credit gap is no longer a sectoral issue but a macroeconomic imperative.
