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Challenges Faced By MSME In India

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Challenges Faced By MSME In India


Micro, Small, and Medium Enterprises (MSMEs) are the most robust economic development and employment drivers. The MSME sector also contributes to the growth of the Indian economy, with a vast network of about 63.38 million enterprises. The industry contributes about 45% to manufacturing output, more than 40% of exports, and over 28% of the country’s GDP while creating employment for about 111 million people, which in terms of volume stands next to the agricultural sector. MSME, as a whole, has a lot of potential for growth, innovation, contribution to the economy, and further job creation. Let’s have a look at some of the major problems faced by micro and small enterprises are as follows:

Types of challenges faced by the MSME Sectors

  • Inadequate Access to Market

MSMEs have struggled to access broad markets for various reasons like lack of adequate capital, inadequate use of marketing tools, lack of awareness of the more general economic environment. The MSMEs have not scaled the business for want of access across the domestic and the global market. The Ministry of MSME has always uplifted and facilitated MSMEs by transforming them into a digitally empowered community. The MSME Databank web portal makes it is easier to get an online Census of the MSMEs in India.

MSME In India

Technological advancements have the strength to make or break a business. If MSMEs adopt new technologies, they can become more competitive, cost-effective, and accessible to the market. Lack of adoption will only make the company and its existence obsolete and under threat.

  • Access to Funding

The overall MSME credit infrastructure has various bottlenecks; long sanction process, high rates, collateral requirements, delay in disbursements. The inability to access funds at a reasonable rate and promptly hinders the growth. However, business owners can apply for an MSME loan and use the funds to expand and grow their business. The introduction of MSME Databank enables the monitoring of various loan schemes and policies structured specifically for MSMEs so that the government can pass on the benefits directly to small business owners.

If your goal is to run a scalable business, you’ll need to build a strong team of experienced professionals willing to stay with the company for a long time. A lot of MSMEs fail to devote quality Human Resources to the growth agenda. These MSMEs are often so thinly staffed, making it very difficult to allocate these resources to work on long and midterm projects.

  • Lack of Experience in Using External Experts

A good consultant or vendor often saves time and effort and helps by bringing expertise and talent. However, most MSMEs are dependent on the capabilities of the founders of the core team. The standard builds or buys dilemma makes them feel better to do things in-house with their staff. Often, an in-house team may not have the required experience and knowledge the time, effort, and costs escalate.

  • Over-reliance on Existing Clients

Some companies stick to large or critical clients and let the business run on autopilot. However, this can limit their business and ability to maximize their potential. This also results in high concentration risk as over-reliance can prove disastrous if the clients ever move away. The MSMEs should always look at their clients across sizes, geographies, and industries wherever possible. They should still work on building the brand value and focus on adding new clients and retaining the existing ones. Fund constraints hamper the use of marketing channels to create a strong sales funnel.

MSMEs faced various challenges such as economic slowdown, raw materials cost increasing, stricter competition, etc., but they have still overcome these challenges and survived.

However, the havoc created by the pandemic lockdown has resulted in the most extended lockdown in India, causing a significant threat to the survival of many small-scale companies. Only those MSME will emerge as real winners if they can transform their way of doing business in a fast, precise, and cost-effective manner and show credibility and trust in sufficing the consumer’s needs efficiently.

Eula Boone

I have written professionally since 2010 and have been an investor since 2015. My finance blog, economydiva.com, is one of the most visited blogs in the world, with more than 3 million readers a month. I love sharing what I know about investing, saving, and managing money and providing practical tips on how to be a smart and savvy money manager.