MSMES in India - Bridging the gap of credit supply (Chapter 17)

Abstract

In an economy, entrepreneurship has often recognized the economic demand and the required factors of production essential to meet that demand. Thus a substantial contribution of micro, small and medium enterprises leads towards creation of employment opportunities, enhancing the GDP growth along with improving the exports. The total number of MSMEs in India account to 55.8 ml with 47.6ml being unregistered and 44.1 ml being engaged into service enterprises. According to the MSME Annual Report 2017, MSME employment stands at 124 million with 31 percent contribution to GDP and 45 percent to the total Indian exports. The total finance demand stands at 87.7 in INR trillion as per the IFC Report 2018. WBG-lntellecap Analysis estimates the overall debt supply to the sector, through informal and formal sources at 69.3 in INR trillion. The current article attempts to study the credit growth at the aggregate level and the role of government, banks and NBFCs in extending the credit to the MSMEs thus providing them with an enabling environment. The study also reveals that the MSMEs registered annual growth rate of 4.35 percent during the period of 2006-15. There also arises a need for MSMEs to explore other avenues to fulfill the credit needs. The share of NBFCs in supply of credit shows an increasing trend since year 2015. For strengthening the financial position of MSMEs thus it becomes imperative to work collaborate towards bridging the gap of credit supply.