Small and Medium Enterprises (SMEs) have been the driving force behind India's GDP growth and economic development. According to the Ministry of Micro, Small & Medium Enterprises, India has more than 7.9 million MSMEs as of March 27, 2022. Small businesses have been the reason for economic growth in India and the world. 

That's why the United Nations General Assembly declared June 27 as 'Micro, Small and Medium Enterprises Day' worldwide. This is a day to celebrate the economic contribution of SMEs to the nation and the number of opportunities they create for innovation and change.

To support the revolutionary changes by SMEs, the Government of India has announced several reforms to support SMEs nationwide. Some of these reforms include Prime Minister's Employment Generation Programme (PMEGP), Entrepreneurship and Skill Development Programme (ESDP) Scheme, Credit Guarantee Scheme for Micro and Small Enterprises (CGTMSE) and The Micro, Small and Medium Enterprises Development Act, 2006 (MSMED Act).

Also Read: 10 Powerful Tips to Grow Your Small Business in India

Here's everything you should know about SMEs and their contribution to the growth of the Indian economy.

Top 4 Contributions of MSMEs to the Indian Economy

1. Increased Employment Opportunities

Did you know that small business are India's second-largest provider of employment opportunities? Yes, they provide maximum employment opportunities in rural and semi-urban areas. This is because small businesses are labour-intensive, unlike capital-intensive corporate industries. According to information from the MSME Ministry's Udyam Portal, 93,94,957 persons were employed by the MSMEs registered on the portal in FY 2022.

Therefore, government loans for MSMEs have supported small businesses with various loan schemes and motivated financial institutions to do the same. Increased employment impacts the overall economy positively, and economic prosperity becomes a reality.

2. Successful Utilization of Resources

When employment opportunities increase, resources are utilized successfully. Especially in rural and semi-urban areas, small businesses help develop the region by tapping into regional resources, manual skills, and raw materials. In turn, rural areas are developed, the standard of living rises, demand and supply are positively impacted, and economic growth is the ultimate result! Innovation, creativity and growth usually happen when the resources are successfully utilized at optimum levels.

3. Contribution to Foreign Exchange Trade

Because of globalization and trade-friendly policies, small businesses have a market abroad too! The internet and e-commerce platforms have increased the scope for demographic reach, target audience and demand. This ultimately has a significant impact on the foreign exchange market and trade.

Small and Medium Enterprises are vital when it comes to exports. According to a report, in FY 2021, MSMEs were responsible for 49.5% of India's exports. Some significant items exported are rice, shoes, clothes, castor oil, etc. The earnings from this trade ultimately result in GDP growth because demand is also created in the local market. In fact, according to a recent report, India's E-commerce exports may reach $125 billion by 2030. This is the power of SMEs.

4. Responsible for Developing the Service Sector

Developing countries like India have been majorly sustained by SMEs, especially in the service sector. You know some of the big companies in India, but how much do you know about the grocery store, boutique store, electronic store, etc., across your street? These are the businesses that have been the primary contributors to the growing GDP in India. Did you know that the service sector contributes to 58% of India's GDP? According to a recent report, the Agriculture and Industry sector accounts for 16% and 26% of India's GDP growth, respectively. This means the service sector captures half of the market and will continue to grow with the opportunities available. It's a prudent time to invest, start a small business, and learn some tips and tricks from nearby service stores.

One of the best ways to start a business is to get funding for small businesses. 

How can small business owners get funding? 

There are many options available, including government schemes for MSMEs, loans for MSMEs from lenders like Godrej Capital. You can get tailored business loans as per your requirements. 

Also Read: Understanding Different Financing Options Available in India

How can Loans for MSMEs Help Small Businesses?

So you've decided to join the ranks of India's thriving small business community! Funding is a crucial first step, and there are a variety of business loan options available to fit your needs.

Interest Rates: Business loan interest rates will vary depending on the lender, loan amount, and your creditworthiness. Carefully compare rates to find the most affordable option for your business.

Collateral-Free vs. Secured Loans: While some lenders require collateral, like property, for larger loans, many offer collateral-free options for smaller amounts. This can be attractive for startups or businesses with limited assets.

Not a Mortgage Loan: Business loans differ from mortgage loans. Business loans are typically used for short-term needs like equipment or inventory, while mortgage loans like Loan Against Property or Business Loan Against Property can be used for various business needs.

Plan Your Payments: Use a business loan EMI calculator to estimate your monthly repayments. This will help you understand the financial commitment and ensure your business can comfortably afford the loan.

Finding the Right Loan: Research different lenders and government schemes for MSMEs (Micro, Small & Medium Enterprises) to find a loan with competitive interest rates, flexible repayment terms, and features that suit your business goals.

Conclusion

Small and Medium Enterprises are the backbone of our economy. Starting a small or medium-sized business is one of the wisest decisions today! You will be participating in the development of the Indian economy. The opportunities, return on investment and profit is high in this sector! 

If you want to start your own business, understand the excellent benefits of a Loan against property for business. If you don’t have a property to mortgage, business loans can help you with collateral-free loans.

Ready to take the next step? Apply online 

Also Read: A Complete Guide to the Different Types of Loans Available in India

Disclaimer: The names used in this article are fictitious and are used for representational purposes only.

The contents of this article is for information purpose only & not a financial advisory. For more details, please refer to the product or service document and/ or connect with our customer representative before making any financial decision. 

The information is subject to update, completion, revision and amendment and may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Godrej Capital or its affiliates to any requirements. 

Godrej Capital or its affiliates shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.