As per the report, the trend of sales recovery is continuing strongly across sectors, indicating that the pandemic is fading into the past
Bengaluru: Micro, small and medium enterprises (MSMEs) continue to recover post-pandemic, with over 50% of businesses recording more than 10% year-over-year (YoY) growth in sales from May 2021 to March 2024, as per a report by business decisioning data provider Dun & Bradstreet and non-banking financial company UGRO Capital.
The MSME Sampark Report examined over 39,000 MSMEs (including 12,000 micro-sized businesses) across seven key sectors over a three-year period.
The study reveals credit penetration appears healthy across all sectors, with light engineering being the dominant sector, followed by electrical equipment and food processing.
Also, small businesses under the micro segment have shown steady and increasing credit penetration, higher contribution of term loans, and larger ticket-sized (> Rs 10 lakh) loans. The ticket size of large loans taken out by MSMEs has increased post-pandemic and has risen from 24% in fiscal year (FY) 2021 to 40% in FY24.
The report finds that despite high interest rates, credit growth to MSMEs remains robust. While overall non-food bank credit grew by around 20% in FY24, credit extended by scheduled commercial banks to micro and small businesses increased by 14.7%, and to medium businesses by 13.3%, both outpacing the growth for large industries, which stood at 6.5%.
“As India’s contribution to globalgross domestic product (GDP) is projected to double by 2029 compared to 2019, the growth prospects and accompanying shifts in consumption patterns will require MSMEs to adapt through innovation, technology adoption, and strategic changes,” said Avinash Gupta, managing director, Dun & Bradstreet India.
“MSMEs contribute around 30% to India’s GDP, but their share in non-food credit remains relatively low at around 6.0% in FY24. Government initiatives aimed at digitalisation and incorporating MSMEs’ digital footprints into credit decisions are expected to further enhance their access to credit, technology, and markets.” he added.
Small businesses are rapidly moving into the formalisation lane, and this can be seen from the number of MSMEs registering on the Udyam portal nearly doubling every year since its launch in FY21.
Women MSMEs account for 20% of total MSMEs registered on Udyam. This share increases when informal micro enterprises (IMEs) are considered. As of January 2024, more than 71% IMEs were owned by women, and were contributing to more than 71% of employment since the portal’s inception in January 2023.
The report further highlights an improvement in the debt-to-turnover ratio of MSMEs across seven sectors for the quarter ending March 2024, compared to the quarter ending September 2023. This improvement is supported by an increase in the share of regular term loans from 57% in 2020 to 88% in 2023, along with a significant rise in larger ticket loans for micro enterprises, growing from 19% in 2020 to 40% in 2023.
“In the Union Budget for 2024-25, the government reiterated its focus on the development of MSMEs and labour-intensive manufacturing by offering a comprehensive package that includes funding, regulatory changes, technology support, and initiatives for women entrepreneurs,” said Arun Singh, chief global economist at Dun & Bradstreet. “The initiatives taken towards technology adoption and digitalisation will further support the formalisation of MSMEs and improve their access to credit and markets.”
