Bridging the Credit Gap: Unlocking MSME Potential in India

India's MSME sector offers a lending opportunity of Rs 28 lakh crore, with policy interventions and tailored financial solutions seen as key drivers for growth. Despite a recent slowdown, MSMEs remain pivotal to the economy, contributing significantly to GDP and exports.

India's Micro, Small, and Medium Enterprises (MSME) sector represents a significant lending opportunity, driven by a credit gap estimated at Rs 28 lakh crore, as revealed by a recent Mavenark report. This gap underscores the potential for growth within the sector, pending appropriate policy interventions.

As of March 2024, India's MSME lending market stands at approximately Rs 35 trillion. While FY2024 witnessed a 22% growth in MSME credit, the early months of FY2025 experienced a slowdown, attributed to changing market conditions and regulatory concerns over debt levels and asset quality. Despite this, MSMEs play a critical role in the economy; in FY2022, they contributed 29.2% to India's GDP, with projections to reach 40-50% by FY2030.

MSMEs accounted for 45.7% of India's exports in FY2024, highlighting their impact on economic growth and international trade. To meet financing demands, financial institutions offer various credit products, including loans against property and unsecured business loans. The report emphasizes the importance of governmental and institutional policy initiatives in improving credit access and suggests that resolving the credit gap could position MSMEs as a significant growth engine for India.

(With inputs from agencies.)