Year-End Review of the MSME Sector: Addressing Challenges for Sustainable Growth in 2025

The Micro, Small, and Medium Enterprises (MSME) sector remains the backbone of the Indian economy, contributing significantly to employment, GDP, and exports. With over 6.30 crore enterprises, the MSME sector generates employment for 24.14 crore people and plays a pivotal role in fostering entrepreneurship, innovation, and inclusive growth. However, while significant strides have been made in 2024, the sector continues to face multiple challenges that hinder its full potential, especially in improving employment quality, access to finance, market penetration, and technological advancements.

Key Achievements in 2024

The Ministry of MSME has introduced numerous initiatives that have strengthened the sector:

1. PM Vishwakarma Scheme – Over 24.77 lakh artisans and craftspeople were registered, with Rs. 2197.72 crore sanctioned in collateral-free loans.

2. Formalization of MSMEs – As of December 2024, 5.70 crore MSMEs are registered on the Udyam and Udyam Assist Platform (UAP), ensuring formalization for better access to government schemes and finance.

3. Credit Guarantee Scheme – 19.90 lakh guarantees amounting to Rs. 2.44 lakh crore were approved to enhance credit availability.

4. Khadi and Village Industries (KVI) – KVI sales grew fourfold over the last decade, reaching Rs. 1.55 lakh crore in FY 2023-24, reflecting growing demand and sustainability of traditional industries.

5. Digital Empowerment – The launch of the MSME-TEAM initiative aims to digitally enable 5 lakh MSMEs, enhancing their market reach through e-commerce.

Challenges Faced by the MSME Sector

Despite these accomplishments, several pressing issues continue to affect MSMEs, hampering their growth and employment potential.

1. Access to Credit and Finance

Credit Constraints: While initiatives like the Credit Guarantee Scheme have expanded, many MSMEs, especially micro-enterprises, still struggle to secure loans due to inadequate collateral and credit history. The total credit gap for MSMEs is estimated to be over Rs. 20 lakh crore.

Delayed Payments: MSMEs face delays in receiving payments from large corporates and government agencies, which severely impacts cash flow and operational sustainability.

Policy Suggestion:

Enforce stricter penalties on delayed payments by public and private entities. Introduce incentives for prompt payments to MSMEs.

Expand the TReDS (Trade Receivables Discounting System) to cover a larger number of small enterprises.

2. Technological Upgradation and Innovation

Limited Technology Adoption: A large portion of MSMEs continues to operate with outdated technology, reducing competitiveness in global markets. The CREATE centre set up in Leh and MSME Hackathon 4.0 is a step in the right direction, but the outreach remains limited.

Policy Suggestion:

Increase the reach of the ZED (Zero Defect Zero Effect) certification to promote quality and environmental standards across all MSMEs.

Strengthen partnerships with technology institutes and provide incentives for technological adoption.

3. Market Access and Global Competitiveness

Market Fragmentation: MSMEs, particularly in rural areas, face difficulty accessing domestic and international markets due to limited exposure and lack of marketing infrastructure. While the Public Procurement Policy mandates 25% procurement from MSMEs, awareness and participation remain low.

Policy Suggestion:

Expand the MSME-TEAM initiative to focus on export readiness by providing training and financial support for international certifications.

Encourage MSMEs to participate in international fairs and develop online export hubs to facilitate market linkages.

4. Skill Development and Employment Quality

Skill Gaps: Despite employing over 24 crore people, MSMEs often lack access to a skilled workforce. The Entrepreneurship Skill Development Programme (ESDP) benefited 1.40 lakh people in 2024, but this remains insufficient for the scale of the sector.

Low Wages and Informal Employment: Many MSMEs operate informally, offering low wages and minimal social security benefits, contributing to employment vulnerability.

Policy Suggestion:

Expand skill development programmes with sector-specific training and public-private partnerships.

Introduce incentives for MSMEs that formalize and offer minimum wages and social security benefits.

5. Infrastructure and Cluster Development

Inadequate Infrastructure: The MSE Cluster Development Programme (MSE-CDP) supported 609 projects, but the coverage remains small compared to the overall number of MSMEs.

Connectivity Issues: Rural-based MSMEs suffer from poor logistics, affecting supply chain efficiency.

Policy Suggestion:

Increase the number of Technology and Extension Centres to provide affordable infrastructure and technical support in Tier II and Tier III cities.

Develop MSME parks in collaboration with state governments, offering affordable facilities and better connectivity.

6. Digital Divide and E-Commerce

Low Digital Penetration: MSMEs are lagging in digital adoption, restricting their access to e-commerce and digital payments. While 6.58 lakh MSMEs have been digitally enabled under the Vishwakarma scheme, the overall penetration is low.

Policy Suggestion:

Provide subsidies for digital tools and training under the MSME-TEAM initiative to enable broader digital adoption.

Encourage the creation of digital platforms tailored to MSMEs, ensuring ease of onboarding and cataloguing.

Conclusion: The Road Ahead

The MSME sector is undoubtedly at the heart of India’s economic growth story. The achievements in 2024 showcase the government's commitment to empowering MSMEs. However, addressing persistent challenges such as access to finance, market access, technological upgrades, and skill development will be crucial in unlocking the full potential of this sector. A holistic, integrated approach that combines policy support, private sector collaboration, and international cooperation will ensure that MSMEs continue to thrive and contribute significantly to employment and economic resilience in India.

As we look ahead to 2025, the focus must shift towards enhancing productivity, quality, and global competitiveness while ensuring inclusive growth across rural and urban enterprises.

Business and Social Problems: The Intertwined Path to Progress

In today's interconnected world, the boundaries between business and society are increasingly blurred. Companies are no longer judged solely by their profit margins; their contributions to solving social problems have become equally critical. From poverty and education to environmental sustainability, businesses have a pivotal role in shaping a more equitable and sustainable world.

The Relationship Between Business and Social Problems

Businesses operate within the framework of society. The health, stability, and prosperity of communities directly influence market dynamics, workforce availability, and consumer demand. Conversely, societal issues such as inequality, lack of education, or environmental degradation can undermine business growth. This reciprocal relationship underscores the necessity for businesses to address social challenges.

A 2023 Deloitte Global Survey found that 76% of consumers believe that businesses have a responsibility to positively impact society. Additionally, 88% of millennials consider a company's social and environmental commitments when deciding where to work, according to a Nielsen study. This shift in perspective highlights the growing alignment between business interests and societal welfare.

Key Intersections Between Business and Social Issues

1. Economic Inequality – Businesses can reduce inequality through fair wages, inclusive hiring practices, and local development initiatives.

2. Education and Skill Development – Companies invest in skill development to bridge workforce gaps, enhancing employment and productivity.

3. Environmental Challenges – Sustainability initiatives not only address climate change but also drive innovation and cost reduction.

4. Healthcare Access – Corporate healthcare programs improve employee well-being, enhancing productivity and societal health.

How Businesses Can Solve Social Problems

1. Corporate Social Responsibility (CSR)

CSR initiatives allow businesses to invest in local communities, supporting education, health, and sustainability. For instance, Tata Group’s CSR initiatives in India focus on rural development, healthcare, and education, impacting over 10 million lives annually.

2. Social Entrepreneurship

Businesses founded on social missions, like Grameen Bank in Bangladesh, use innovative business models to address poverty. Grameen’s microcredit model has empowered millions of women and families, proving that financial inclusion can drive economic transformation.

3. Public-Private Partnerships (PPP)

Collaborations between businesses and governments solve large-scale issues like infrastructure and public health. Pfizer’s collaboration with Gavi (The Vaccine Alliance) has provided over 700 million vaccines to developing nations, tackling preventable diseases.

4. Sustainable Development Goals (SDGs)

Many businesses align their strategies with the United Nations’ SDGs to address poverty, hunger, and climate action. Unilever’s Sustainable Living Plan focuses on reducing environmental footprint and improving health and well-being, driving market growth while addressing critical social challenges.

5. Inclusive Business Models

Inclusive businesses integrate low-income populations into their value chains. For example, Nestlé’s Dairy Farming Initiative in Africa trains small-scale farmers, increasing productivity and creating income opportunities.

New Perspectives on Business and Social Problems

1. Stakeholder Capitalism

The rise of stakeholder capitalism suggests that businesses should prioritize stakeholders—employees, communities, and the environment—alongside shareholders. Companies like Patagonia embed social and environmental causes into their core business strategy, gaining customer loyalty and long-term growth.

2. ESG (Environmental, Social, and Governance) Investing

Investors are increasingly directing funds toward companies with strong ESG performance. In 2024, global ESG investments surpassed $50 trillion, reflecting the belief that sustainable businesses are more resilient and profitable.

3. Shared Value Model

Coined by Michael Porter and Mark Kramer, the shared value model posits that businesses can generate economic value by addressing social issues. Danone’s water initiatives in emerging markets not only provide clean water but also create local employment.

4. Impact Investing

Venture capitalists now actively fund social enterprises that aim to address societal challenges while achieving financial returns. The Rise Fund, a global impact investment fund, manages over $5 billion to drive social and environmental change.

Case Studies: Businesses Driving Social Change

1. Microsoft’s Global Skills Initiative

In response to increasing automation and job displacement, Microsoft launched a $25 million AI for Accessibility program, helping people with disabilities enhance their employability. This program has reached over 27 countries.

2. Tesla’s Renewable Energy Mission

Tesla’s drive to accelerate the world’s transition to sustainable energy has reduced carbon emissions by over 13.4 million metric tons annually, demonstrating how innovation can align profitability with environmental goals.

3. Mahindra Group’s Nanhi Kali Initiative

Mahindra Group’s project provides education to underprivileged girls in India. Since its inception, the program has supported 500,000 girls, promoting gender equality and long-term social mobility.

Challenges and Considerations

While the synergy between business and social good is evident, challenges persist:

Short-Term Profit Pressure – Some businesses struggle to justify long-term social investments to shareholders.

Greenwashing – Some companies exaggerate their social impact, leading to skepticism and reputational risks.

Scalability – Implementing solutions at scale can be challenging without strong governance and partnerships.

The Future of Business and Social Problems

The fusion of business and social problem-solving is not just a trend—it’s a necessity for long-term growth and societal well-being. As businesses increasingly adopt holistic strategies, the divide between profitability and social responsibility narrows. The future belongs to companies that recognize their role in shaping a better world while driving economic success.

By embracing innovation, collaboration, and sustainability, businesses can emerge as powerful agents of change, ensuring prosperity for both society and the bottom line.