The new playbook for Indian MSMEs

India’s micro, small, and medium enterprises (MSMEs) have long been the quiet workhorses of our economy, contributing close to 30% of GDP and making up 40% of national exports. However, more than that, they are the places where millions find work and where much of India’s entrepreneurial energy begins. 

For decades, the sector’s image was one of small workshops, steady local markets, and incremental growth. But the reality of 2025 tells a different story. Today’s MSMEs are younger, leaner, and far more connected to the world—digitally, financially, and commercially.

From local to global in record time

Consider this: In 2020–21, MSME exports stood at Rs 3.95 lakh crore. Four years later, they have climbed to Rs 12.39 lakh crore, more than tripling in value in under half a decade.

The number of exporters has also surged, from roughly 53,000 to more than 1.73 lakh. That’s not just a statistic—it’s a shift in mindset. Small manufacturers from places like Tiruppur, Morbi, Coimbatore, and Rajkot are embracing global markets with the same confidence and capability once associated only with larger enterprises.

They are equipped with better skills, sharper product specialisation, and the democratisation of digital trade tools. Selling on an e‑marketplace, transacting instantly via UPI, and fulfilling international orders is no longer an exception—it’s becoming routine.

Smaller scale, sharper focus

Look closely and you’ll notice another shift. New MSMEs are starting leaner than before. Teams are smaller, but talent is sharper. Processes are more technology-intensive. The focus is not merely scaling up production—it’s scaling up value. 

The Prime Minister’s Employment Generation Programme (PMEGP) offers a telling snapshot of how MSME priorities are shifting. Back in FY21–22, it helped more than 1.03 lakh new units get off the ground, disbursing nearly Rs 3,000 crore in subsidies.

Since then, the headcount of assisted enterprises has gradually declined, but the investment per unit has climbed—hitting its peak in FY23–24. 

In the current financial year, subsidies of about Rs 599 crore have already supported 20,273 units—meaning, in barely four months, they have committed nearly a quarter of last year’s disbursement, which underscores both the rising capital needs of new ventures and the faster pace at which they are now deploying funds.

Digital is the great leveller

Digital payments have moved from being a convenience to the backbone for MSMEs. In August 2025, UPI crossed the 20 billion transaction mark for the first time, moving Rs 24.85 lakh crore in value, a 34% jump in volume over last year.

More tellingly, 64% of all UPI payments are now peer‑to‑merchant, showing how deeply kirana stores, repair shops, local sellers, and exporters have embedded real-time payments into their daily trade.

The Government e-Marketplace crossed a historic Rs 15 lakh crore in cumulative GMV since its 2016 launch, with small businesses accounting for a significant share of that growth. Together, these platforms are dismantling barriers of geography and scale—letting a home-based apparel seller in Jaipur supply a customer in Chennai, or even Berlin, with the same efficiency as a local order.

Policy support and new infrastructure

Policy reforms are giving these businesses room to grow. The Union Budget 2025 raised MSME investment thresholds, widened the safety net of credit guarantee schemes, and adjusted procurement rules in favour of smaller players.

Infrastructure investment is also taking a more strategic form. In Coimbatore, a Rs 200 crore technology centre will soon open its doors, offering MSMEs access to automation labs, robotics workstations, prototyping, and digital manufacturing tools. These are resources that once required deep corporate pockets—now placed within reach of smaller enterprises.

Environmental responsibility is making inroads, too. Many MSMEs are adopting green manufacturing practices to meet global sustainability norms. As buyers worldwide demand cleaner supply chains, MSMEs that embrace sustainability are positioning themselves for long-term competitiveness.

When subsidy isn’t enough

Schemes like PMEGP provide a foundation, but the reality is that modern MSMEs often need much more to cover machinery costs, implement digital systems, or break into new markets. Meeting those needs calls for credit solutions designed around business realities—fast disbursals timed to demand cycles, repayment schedules adapted to seasonal revenue, and risk assessments that value skills and execution track records over just collateral.

From volume to value: The new playbook

The emerging MSME model rests on four key pillars: 

• Continuous skilling: Over 36.5 lakh people have been trained by government institutions by mid-2025, acquiring advanced manufacturing, design, and innovation skills.
• Tailored credit: Financing that adapts to sector, stage, and seasonal dynamics can propel smaller enterprises into larger roles.
• Digital‑first operations: ONDC, UPI, and GeM are transforming how MSMEs sell, transact, and fulfil orders.
• Sustainability: Environmentally conscious operations are becoming both a business necessity and a sales advantage internationally.

The road ahead

In many ways, the MSME sector is no longer playing catch-up—it’s starting to set the pace. We are seeing entrepreneurs who treat technology as second nature, who speak the language of global markets, and who understand that a small team can still deliver big impact if it’s skilled, connected, and adaptive.

Digital access and bold policymaking have opened doors that didn’t exist a decade ago. It’s no longer about whether these enterprises can compete—it’s about how fast they can seize the opportunities in front of them.

If the last four years tell us anything, it’s that India’s MSMEs are ready to outgrow the label of “small” without losing their agility. And if that momentum is met with the right flow of capital at the right time, today’s surge in exports, innovation and jobs could be remembered as merely the first chapter of a much bigger growth story.

Y S Chakravarti is the Managing Director and CEO of Shriram Finance