Five in every 100 businesses are micro businesses, as per a MSME report by U GRO Capital and Dun & Bradstreet. 94% of these micro-enterprises operate in an unorganised manner, the report added. Also, there has been a 2.2x rise in micro businesses registered with UDYAM from FY2020 to FY2022. However, there has been a dip in the same period for both small and medium businesses.
The report stated that micro-enterprise registrations saw the highest increase (FY22 over FY20) in Himachal Pradesh, while small firms exhibited this trend in Bihar and medium firms in Jharkhand. Other states that have seen a rise in micro businesses are Madhya Pradesh, Bihar, Uttarakhand and Haryana.
According to a survey, which was part of this report, there was a drop in gold loans and a higher proportion of term loans among the 10,000 micro businesses that were surveyed. This means that there has been ‘a gradual journey into the fold of mainstream lending.’
It also highlighted that the ticket size of loans to micro and small enterprises has increased while it has dipped for medium firms in 2023 in comparison to 2022. In terms of challenges, as compared to medium enterprises, micro businesses have witnessed a rise in the delay of payments from July 2022 to June 2023.
In the case of small businesses, the report stated that optimism amongst small businesses for demand and profitability has spiked in Q3 2023. Moreover, small businesses are also highly optimistic about capital investments, “despite the rising lending rates and hiring employees, which bodes well for the overall growth momentum.” Small businesses are gearing up for growth in response to robust domestic demand.
Understanding the needs of MSMEs will be crucial to achieving a growth rate of 7.2% in FY23. “A robust MSME activity will be pivotal to India’s growth story. The noteworthy increase in the contribution of MSMEs to India’s Gross Value Added (GVA) from FY21 to FY22 signifies a substantial rebound for these businesses from the pandemic,” as stated in the report. The report on the global economy said that 2024 will witness a mild slowdown amid weak external trade.
Since its inception in 2020, MSME registrations on UDYAM have increased by 2.4 times, while they have generated 1.6 times more employment opportunities in FY23. Maharashtra, Tamil Nadu and Uttar Pradesh have the largest registrations of MSMEs amongst the states and also have the largest share of employment generated. However, states like Karnataka, Madhya Pradesh, Telangana, and Andhra Pradesh have a disproportionate share. Avinash Gupta, MD & CEO-India, Dun & Bradstreet, said, “India aims to be a $30 trillion economy by 2047, roughly an 8x increase in two decades. MSMEs contribute nearly a third of India’s GDP. It is imperative that MSMEs scale up significantly and quickly, necessitating an estimated $11.5 trillion financing requirement in fixed assets.”
“We have observed that the business optimism of MSMEs has soared to the highest level since 2022, indicating improvement in performance even in the face of a difficult external environment. Moderate delinquency rates and low sector risks have also improved MSMEs borrowing prospects. The government’s continued thrust on formalization is furthering the formal credit penetration in the sector,” he added.
