NO MATTER HOW many laws and compliances you make online, there is always the inspector who will come knocking,” says a ruefully smiling Ramesh Yadav (name changed on request), who heads a local SME industry association, when asked to name the challenges for small entrepreneurs.

“Add to these the problems of delay in payments,” Yadav points out. “An entrepreneur has to have guts or big dreams to start a business. Otherwise, why will they put their money and deal with all these challenges? Would it not be better to just invest the capital in mutual funds and enjoy an easy life?” he asks.

Yadav lists the struggles of micro, small, and medium enterprises (MSMEs), which contribute nearly a third of India’s gross domestic product (GDP) and are the largest non-farm employer. Yet, several of them remain mired in problems too granular for policymakers in New Delhi to identify and resolve. “The sector plays a critical role in job creation, industrial output, and entrepreneurship. However, MSMEs face structural challenges that limit their ability to scale,” says Arun Singh, Global Chief Economist, Dun & Bradstreet.

Boosting these businesses—makers of everything from bangles to automobile components—could unlock a new cycle of economic growth for India.

OVERCOMING DEMONETISATION

Data suggests that five years after the Covid-19 pandemic, MSMEs have largely recovered, with improved strength and productivity. By 2023-24, 73.4 million MSMEs were registered under the Udyam and Udyam Assist platforms, marking a 12.84% increase from the previous year. Employment has also risen. The Annual Survey of Unincorporated Sector Enterprises conducted by the Ministry of Statistics and Programme Implementation found that in 2023-24, there were 73.4 million informal sector establishments employing 120 million workers.