CONCEPT NOTE ON

ENTERPRISE DEVELOPMENT
MSME and Informal Employment in Urban Landscape

[DATE]
[COMPANY NAME]
[Company address]
Table of Contents:

1. Context 2

2. Existing Scenario 2-4

3. Challenges faced by MSMEs 4

3.1 Formalisation and Inclusion of MSMEs 5-6

3.2 Access to Finance 6-8
3.3 Access to Markets 9
3.4 Access to Technology 9
3.5 Infrastructure Bottlenecks 10
3.6 Skill Development 10
Women-led Enterprises – Challenges and Way Forward 11-12

4. Way Forward 12
Annexure 1: Evolution of MSMEs in India 14
Annexure 2: Schemes and Initiatives Support Women Entrepreneurs and 15-17
MSMEs

1
 1. Context

Micro, Small and Medium Enterprises (MSMEs) play a significant role in job creation,
inclusive growth and poverty alleviation.1 The importance of small and medium enterprises
(SMEs) as a source of jobs is internationally recognised, and therefore, creation of an enterprise
culture in a country or society, by promoting awareness among young people about the
opportunities and challenges of entrepreneurship and self-employment, has a significant role
in shaping their future and that of their country's economic and social development.2

Due to their considerable number, and contributions to growth and employment, MSMEs
in India have a pivotal role to play in India’s developmental trajectory. The national vision
of Viksit Bharat 2047 is associated with transformation in all facets of life. MSMEs have
significant potential to contribute to the goal of building developed and progressive India by
2047, by bringing changes to the lives of all marginalised groups, including women, and
traditional craftspeople. At the same time, MSMEs are complementary to large industries as
ancillary units and this sector contributes significantly in the inclusive development of the
country. MSMEs are widening their domain across sectors of the economy, producing diverse
range of products and services to meet demands of domestic as well as global markets.

2. Existing Scenario

India’s enterprise landscape is dominated by micro, small and medium enterprises

(MSMEs). According to National Sample Survy 73rd Round of 2015-16, The MSME universe
is estimated to be 63.3 million. At the same time, till date, there are about 28.5 million ‘Udyam’
registered MSMEs and another 20 million on Udyam Assist Platform (UAP).3 Thus, there is a
sizeable number of relatively small-sized enterprises that exist in this country.

MSMEs contribute significantly to growth, employment and exports. According to

estimates, MSMEs contribute around 30% of India’s GDP, over 45% of India’s exports. They
are the second largest employment provider after agriculture. In 2022-23, the non-agriculture,
unincorporated enterprises employed about 110 million people, of which more than 50% have
been employed in urban areas.4 Udyam and UAP registered enterprises report to employ more
than 200 million people as of date. Notably, MSMEs are making significant employment
impact and have substantial employment generating potential.

Despite their importance, significant productivity gap exists between MSMEs and large
firms and a majority of the enterprises in India are micro in size. On average, in the MSME
segment, labour productivity, or value added per worker, is half that of their larger peers.5 The
lower productivity of small enterprises is often attributed to the fact that they are unable to take
advantage of economies of scale. Data on Udyam shows that nearly 83% of the MSMEs in
India have a turnover value of less than INR2.5 million and more than 90% have an investment
value of less than INR 1 million. Moreover, nearly 90% of the persons are employed in micro

1
Evolution of definition of MSMEs is presented in Table A1 Annexure 1.
2
International Labour Organization (ILO) Recommendation 189 on job creation in small and medium sized
enterprises.
3
https://udyamregistration.gov.in/Government-India/Ministry-MSME-registration.htm
4
Period: October 2022-September 2023; ASUSE, 2022-23 report.
5
OECD, accessible at https://www.oecd-ilibrary.org/docserver/92fce2ff-
en.pdf?expires=1724231265&id=id&accname=guest&checksum=B2FA0C50F06367E68B55EEE550DAEE3A;
SME Finance Forum, accessible at https://www.smefinanceforum.org/post/a-microscope-on-small-businesses

2
enterprises. It therefore becomes important to provide additional support to foster development
and growth of MSMEs for them to scale up.

Promoting entrepreneurship and enterprise development is an important component for

harnessing employment potential of MSMEs. Enterprise development is the process of
nurturing enterprises to help them grow, scale and improve their operations. It entails a)
creating enabling environments focused on improving the policy and regulatory frameworks;
b) promoting entrepreneurship and business development, for creating jobs and reducing
poverty; and c) building sustainable and responsible workplaces, through focused programs
and enterprise-level practices.6 There are several definitions highlighting the different
components of enterprise development (see Box 1). The main goal of enterprise development
is to create sustainable businesses that grow and lead to job creation, which, in turn, contributes
to economic growth. For this, there is a need to address challenges and provide an enabling
environment to foster growth and development of enterprises.

Box 1: Definitions of Enterprise Development

“Sustainable enterprises should innovate, adopt appropriate environmentally friendly technologies,
develop skills and human resources, and enhance productivity to remain competitive in national
and international markets’’. ILO-Labour Conference, 2007.
“Enterprise development is the act of investing time and capital to help people establish, expand or
improve business. Enterprise development helps people earn a living or find a way out of poverty,
and leads to long-term economic growth for themselves, their families and their communities.”
University of Stellenbosch Business School, 2013.
“Enterprise Development is the process of increasing the capacity of individuals, families, groups
and organizations to supply useful goods and services profitably to the market. It supports the
development of essential business skills, enabling individuals to adapt to changing market
conditions, and maintain business growth. Support may be directed at improving services for
entrepreneurs, such as savings and credit; management training; marketing linkages; and
technology transfer - or improving the policy, regulatory or operating environment that enables
business to thrive.” Department for International Development (DFID), 2000.

3. Challenges faced by MSMEs

The MSMEs in India face multiple challenges, however, six key challenges are identified, that
include (i) formalization and inclusion, (ii) access to finance, (iii) access to market, (iv) access
to technology, (v) infrastructural bottlenecks and (vi) inadequate skilling/ re-skilling. This
paper discusses the key challenges faced by MSMEs specifically in India, proposes some
solutions to address those challenges and brings out some good practices from states,
sectors and schemes.

Figure 1: Components of Enablers of Enterprise Development

6
International Labour Organization (ILO), accessible at https://www.ilo.org/resource/enterprise-development

3
 Components
• Enabling environments Enablers
• Promoting entrepreneurship • Formalisation and inclusion
and business development
• Access to finance
• Building sustainable and
responsible workplaces • Access to markets
• Access to technology
• Infrastructure development
• Skilling

3.1 Formalisation and Inclusion of MSMEs

One of the biggest challenges facing the MSME segment in India is the large size of the
informal sector, which accounts for half of India’s economic output and more than three-
fourth of employment. As per the latest estimates, unincorporated enterprises accounted for
gross value added of nearly INR 15 trillion in 2022-23.7 The informal sector is associated with
low productivity, poor retainment of skilled manpower, poor governance, regulatory
compliances, as well as poverty and income inequality. To address the challenges related to
formalisation and inclusion of MSMEs, there are three interventions. One, identification of
MSMEs; two, creating representation and identity and these enterprises and three, improving
visibility by fostering the right linkages.

In the year 2020, the definition of MSMEs based on dual uniform criteria of investment in plant
and machinery and turnover, for MSMEs in Manufacturing as well as Services Sector has been
enacted to give MSMEs a distinct identity. The Udyam registration portal, launched on 1st
July 2020 has been a pathbreaking step in the formalization of MSMEs, which has helped
in identification of enterprises.8 Within the time period of four years, more than 49 million
enterprises have registered on the portal.9 Moreover, the Udyam Assist Platform (UAP) has
been instrumental in formalization of close to two million informal micro enterprises. Since
Udyam registration is the gateway to the schemes specially designed for MSMEs by centre,
RBI and states, MSMEs are encouraged to register on the portal. Moreover, Udyam Portal has
application programming interface (API) integrations with more than 35 other portals in
Government of India and further onboarding with self-help groups (SHGs) and Central Board
of Direct Taxes (CBDT) will take it to further saturation. The process needs to be strengthened
with greater impetus by states.

Figure 2: Enabling Growth Journey of MSMEs through Formalisation (2020-23)

7
ASUSE 2022-23.
8
It was launched on 1st July 2020. Total number of Udyam registered enterprises are listed in Figure A1 in
Annexure 1.
9
This includes both Udyam and Udyam Assist Platform (UAP) registration. The UAP was launched in 2023 to
support informal sector enterprises in their journey to formal registration.

4
Source: Ministry of Micro, Small & Medium Enterprises

Strengthening representation and identity of MSMEs is important to create a more

equitable space for enterprises. Every state can establish its own dedicated MSME Ministry.
Currently, Gujarat has a Commissionerate for MSMEs, while states like Odisha, Tamil Nadu,
Madhya Pradesh, Haryana, West Bengal, and Uttar Pradesh operate through MSME
departments which are located in different ministries. Every state has MSME-Development
Facilitation Offices (DFOs) as a part of the Central government and supported by District
Industrial Centre (DIC) at the state level. Establishing a separate MSME Ministry in every state
would ensure focused attention on the unique challenges and opportunities faced by MSMEs
and would also ensure dedicated resources for the purpose.

Due to the small size and large number, creating visibility for enterprises through
recognition, creating linkages and capacity building at state and sector level and is
important. This requires three-step intervention. One, mapping the region as well as sector
specific opportunities for growth of MSMEs. For instance, in the north east, tourism, food
processing, handloom and handicraft MSMEs can be recognised and promoted. Two,
strengthening the existing linkages of entrepreneurs in various sectors between MSME clusters,
industry associations and various financial and technical stakeholders. For e.g. pharma,
electronics clusters in Maharashtra; automobile, leather in Tamil Nadu and engineering,
pharma in Gujarat have relatively active industry associations having strong linkages. Three,
setting-up region/state wise panel of experts; who can be mentors to guide existing and
potential entrepreneurs. A common multilingual support desk for MSMEs and aspiring
entrepreneurs. As the regulatory and compliance ecosystem for MSMEs can be quite
cumbersome at times, it is quite logical to provide a 7 day-a-week support mechanism for
MSMEs to navigate the right path of formalisation and also benefit from the government
support systems, while being system compliant. It will boost the confidence of the MSMEs and
also sensitise them on government initiatives. It is further desirable that physical extensions of
this system are established across the country.
3.2 Access to Finance

Access to finance remains an intractable problem for MSMEs. There are both supply side
and demand side issues. One the supply side, stringent lending criteria, perceived risk and
limited understanding of their unique needs within the banking sector, which render it
unprofitable for commercial banks to focus on such enterprises as their main debt clientele.
Additionally, new dimensions such as lack of standards for small and micro-enterprises
hindering green financing options have emerged. On the demand side, poor financial literacy,
lack of adequate collateral and lack of awareness of schemes and policies are additional

5
challenges that lead to low credit access for MSMEs. The following measures may be
considered for better access to finance for MSMEs.
There is a need for tailored financing products for MSMEs. As each MSME is unique, its
credit needs are also distinct. However, our financial system lacks tailored financial products
specifically designed for MSMEs. To address this issue, Commercial Banks and NBFCs in
association with Fin-Techs can be leveraged to offer solutions by providing customized
financial services that address the unique needs of these businesses. Through personalized
lending solutions, digital payment systems, supply chain financing, and alternative credit
scoring, FinTech enables MSMEs to access more relevant and flexible financing.

Seed fund support to Micro enterprises for capex and Pre-opex Making the way to
enterprise development a more attractive one, as a step forward from schemes like PM
Vishwakarma, SVANidhi and Mudra, a one-time seed fund support to unique Micro-
enterprises may be extended as grant or a soft loan which may be repaid over a period of 3-5
years. It will be a big boost for first generation entrepreneurs particularly coming from weaker
sections of the society.

There is a need to enhance limit of priority sector loans for MSMEs. To facilitate dedicated
flow of funds from the banks for MSME sector, the existing priority sector lending (PSL) target
of 7.0% of adjusted net bank credit (ANBC) or credit equivalent to MSMEs need to be
increased to around 10% for Commercial banks and Small Finance Banks. Further, there is no
target for Foreign Banks with less than 20 branches in India, which need to be reviewed and a
target in the range of 3-5% may be fixed for such banks under PSL targets. A sub-target for
priority sector loans for micro enterprises or women-headed MSME may also be fixed, as a
measure to promote such enterprises.

Strengthening capacity of Banks and NBFCs to be sensitive to the requirements and terms
of credit for MSMEs. Aligning with the Union Budget for 2024-25, it is crucial to strengthen
the capacity of banks and NBFCs to evaluate MSME proposals effectively, reducing the over-
reliance on collateral security, especially under schemes like CGTSME where Banks seem to
ask for collateral security in the form of a mortgage or Personal Guarantee even though the
loan is covered under the CGTSME scheme. This is a definite deterrent to the micro-
enterprises.

Establishing robust green financing mechanism for long-term economic sustainability

and environmental responsibility. The recent Union Budgets advocate mobilizing resources
through green financing mechanisms such as green bonds, green loans, in line with a global
shift towards environmental, social, and governance principles (ESG). As MSMEs involve
many sectors having carbon footprints, there is huge opportunity to raise resources through
green bonds, which are raised specifically to support green industries, projects, or economic
activities that meet specified conditions. India is one of the top 10 countries in green bond
issuance and the Securities Exchange Board of India (SEBI) has come out with detailed
regulations on Green Bonds among others, which include definition, external review, tracking
of proceeds, and disclosure requirements. In view of this, raising funds by MSMEs through a
robust green bond market would provide long-term capital as well as would offer stability and
long-term returns to the investors. However, to raise resources through this route would require
credit worthiness rating of the MSMEs, which could be explored through credit enhancement
mechanism such as Partial Credit Guarantee Scheme or an alternate credit rating framework
for MSMEs like the Finance, Income and Trade (FIT) ranking developed by CRISIL, Online
PSB loans Ltd (OPL) and SIDBI. The private commercial banks shall also be mandated to fund
the MSMEs on such alternate frameworks.

6
There are existing programmes, which are contributing to enterprise development and
promotion of entrepreneurship, especially among vulnerable groups. . Prime Minister
Employment Guarantee Programme (PMEGP) is a major credit-linked subsidy programme
aimed at generating self-employment opportunities through establishment of micro-enterprises
in the non-farm sector by assisting traditional artisans and unemployed youth in rural as well
as urban areas. Under the Scheme, during FY 2023-24, 89,118 micro units have been assisted
with Margin Money subsidy of approximately INR 30 billion, generating estimated
employment for around more than 0.7 million persons. This scheme has done particularly well
in supporting women-led enterprises and there are interesting cases of success from states like
Jammu and Kashmir.10

There is a case for mandating domestic financial institutions and banks for earmarking
certain percentage of their lending portfolio for MSME lending. For ensuring competitive
terms of finance in terms of cheaper interest rate and longer repayment period, this could be
done by using corporate social responsibility (CSR) funds. There is a need for bringing in
private finance from big private corporate sectors for MSME funding with affordable terms of
finance. Towards this, appropriate incentive packages may be developed. As indicated in the
union budget, there is a need to creating a new assessment model for MSMEs, that takes into
account business practices and digital footprint for MSMEs to assessing credit worthiness of
MSMEs.

For enabling collateral free loans, innovative solutions need to be formulated. For instance,
through digital public infrastructure (DPI) and open banking mechanisms such as Account
Aggregator (AA) framework, information collateral can be used to replace physical collateral.
The first phase of the AA rollout (April 2022–January 2023) in India has resulted in early
positive benefits to the MSME sector. Out of the total loans disbursed during the period, about
38% of the unsecured business loans were disbursed to MSMEs.11 There are also dedicated
programmes like the Start-up Village Entrepreneurship Programme (SVEP) under MoRD
aimed at supporting entrepreneurship in rural areas in the non-farm sector. The strategy is to
promote knowledge about business feasibility, management and to provide access to loan
finance for start-up as well as scaling-up the existing enterprise. Other programmes like the
Women Enterprise Acceleration Fund of INR 12.25 billion, aided by the World Bank supports
individual and group enterprises for credit guarantee, interest subvention, prompt repayment
and collateral support. About 15-20% of the new entrepreneurs are able to get bank loan
through these programmes. More such initiatives should be launched in partnership with
multilateral development banks and international financial institutions.

There is a need to improve financial literacy and business skills. Often entrepreneurs
struggle with routine protocols of banking. Bringing uniformity in application formats for all
the banks and disseminating information on ratios and parameters in easy to understand formats
(including infographics, videos, etc.) will improve understanding. High school and graduate-
level courses and training programmes on preparing business plans for diversification,
expansion by focusing on new products, services and new markets may be introduced.
Financial literacy should also become an essential component of higher education curriculum,
focusing on practical issues related to banking and finance.

Additionally, platforms for crowdfunding and global market access provide alternative funding
sources, while financial management tools aid in better planning and decision-making.

10
https://www.deccanherald.com/india/jammu-and-kashmir/jammu-kashmir-takes-lead-in-job-creation-under-
pmegp-2934277; https://www.deccanherald.com/india/jammu-and-kashmir/women-entrepreneurs-redefining-
success-in-kashmir-2814664
11
For details see https://icrier.org/pdf/adbi-open-banking-systems-enhancing-financial-access-micro-small-and-
medium-sized-enterprises-case.pdf

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 3.3 Access to Markets
Inability to adequately access both domestic and international markets is a crucial
challenge impeding growth and development of MSMEs. This is because MSMEs often do
not have relevant information on markets, and market trends, product standards and
requirements and other business opportunities. For this, there is a need to provide support to
MSMEs to address the market access challenges.
To improve access to markets and information, state capacity can be expanded by
empowering institutional structures through chambers of commerce/ Industry
associations, positioning them as key outreach partners. Business membership
organizations (BMOs) and associations have a significant role to play in improving MSMEs
access to markets. By leveraging these local organizations, the government can ensure better
dissemination of information related to markets, schemes and other initiatives like outreach
and trade promotion programmes. The BMOs which are engaged in technology development,
capacity building, marketing support, export documentation, consortia approach and other
collective measures for promotion and development of MSMEs should be encouraged through
right incentives.

The cost of information is higher for MSMEs. It is both costly and difficult for micro and
small enterprises to conduct market research, therefore the government may publish
research/studies stating the market trends in emerging sectors and various product categories
in different regions of India and also offshore markets. This should be available on the public
platform through which new entrepreneurs may gain knowledge to be applied in their
existing/new ventures.

There is also a need to disseminate more information and provide onboarding support to
MSMEs for platforms like the Government e-Marketplace (GeM) and Open Network for
Digital Commerce (ONDC). Micro and small enterprises find it challenging to navigate
through these portals. There is a need to simplify these portals from the perspective of micro
and small enterprises.

Digitalization is rapidly transforming market access for businesses, but MSMEs could be
at a disadvantage without affordable, equitable and fair access to technology. When
MSMEs have limited access to, or understanding of, these technologies, their prospects of
acquiring and utilizing these for their benefit is reduced. Small size is a constraint on key inputs
requiring specialized knowledge such as technology and skills.12 MSMEs need to adopt
digitalization and online presence (developing their websites) to increase the visibility and
recognition. Capacity building initiatives and programmes should be launched to assist firms
in accessing wider markets through right use of digital technologies.

3.4 Access to Technology

It is important to note that MSMEs cannot develop in the new and technology intensive
sectors on their own. They need special design support, initialization in manufacturing by
common facility centres, mentoring and financial support. The sectors need to be identified
more so to integrate the MSMEs to global value chains (GVC) in the light of industry 4.0.

There is a need for identifying priority sectors, for sector-specific interventions that
contribute in diversifying value chains, improve value added component in trade and
promote Make in India initiative. Some of the sectors are solar, carbon fibre manufacturing,
biodegradable plastic materials, various paper products, technical textiles, electronics system
design and manufacturing (ESDM) sector, mechatronics, low cost automation printed circuit

12
ABD-ADBI (2015). Integrating SMEs into Global Value Chains: Challenges and Policy Actions in Asia.

8
board (PCB) manufacturing, Advanced machining, high-speed power looms. etc. Similarly
there are huge scope in defence production, service sector, medical tourism, event management,
etc. The sector specific interventions need to be designed to include MSMEs to enable
seamless technology transfer between large industry and MSMEs. Integration of MSME
clusters with Industrial corridors can be a case in point.

Additionally, connecting MSMEs and Startups can be promoted for a win-win

partnership by establishing platforms that can facilitate networking and collaboration.
MSMEs often have a deep understanding of market needs but may lack the resources for
research and development (R&D). Startups can fill this gap by providing innovative solutions
or by working together on R&D projects. Startups can partner with MSMEs to leverage their
established market presence, customer base, and supply chains, while MSMEs can benefit from
the innovative solutions, technology, and agility that startups offer. For this, startups can
become suppliers or service providers to MSMEs, offering cutting-edge technologies, software,
or products that MSMEs can integrate into their operations. MSMEs can also help startups
scale their production and operations by providing manufacturing, distribution, or logistical
support. Startups can pilot their innovations with MSMEs and receive valuable feedback and a
market-ready platform for testing.

3.5 Infrastructural Bottlenecks

Major infrastructure challenges include access to physical and digital infrastructure in

the country. A majority of the industrial clusters were developed decades ago and need to be
upgraded for better connectivity. This is particularly true to cluster in semi-urban areas.
Additionally, facilities like power, road connectivity and water connectivity remain unreliable
or poor. Additionally, with sustainability requirement, there is a need for waste management
facilities, among other things.

To address these issues, first, there is a need for infrastructure mapping. There should be
detailed information on all industrial clusters, with the number of units and available facilities.
This will enable ascertaining status quo. These clusters can then be upgraded in a phased
manner.

There are cluster development initiatives such as the Micro & Small Enterprises Cluster
Development Programme (MSE-CDP) scheme for development and upgradation of
infrastructure. Cluster development is a key strategy for enhancing the productivity and
competitiveness of MSE. One of the purposes is to create/ upgrade infrastructure facilities in
new/existing clusters for MSEs. Additionally, the objective is to set up Common Facility
Centres (for testing, training, raw material depot, effluent treatment, complementing
production processes, etc) and enable units switch to sustainable and green production
processes and products. There is dedicated intervention for MSEs in Sikkim and north-east
region. The effective governance of such infrastructure to the benefit of MSMEs should be
ensured through awareness, capacity building, exposure and continued support to the members
of the clusters.

3.6 Skill Development

Lack of adequate skills is a crucial challenge that requires all round intervention.
Programmes specifically designed for enterprise growth and development, sustainable
practices, financial literacy and technology adoption and usage are required for sustainable
enterprise development. This issue is discussed in detail in the 2nd sub-group on skilling.

Apart from these six major challenges, MSMEs faced other issues, operational and
regulatory barriers, that often hinder their growth and development. Some of these

9
emerge due to lack of adequate information and knowledge on policies, while others require
more systematic interventions like single-window systems and support in establishing and
closing businesses, among others things.
Minimum/No compliance requirement for Micro enterprises for first 3 years of
commencement. Regulatory hurdles lead to significant mortality rate among Micro
enterprises, which are generally constrained with resources and time. It would be more inviting
for new entrepreneurs to set-up enterprises if they are not stuck in the regulatory affairs. They
may be encouraged to provide self-declaration while being assisted/handheld to formalise
themselves over the period.

It is important to emphasise that the above-mentioned challenges pose far more severe
obstacles for MSMEs owned by women as compared to men. In addition, there are some
obstacles that are faced exclusively by women (women-exclusive challenges). Predominant
amongst them are the cultural and social norms that disadvantage women and their
entrepreneurial ventures in the labour market. These norms prescribe what is socially
acceptable of women’s behaviour and what choices are available to them. They tend to result
in limited endowments (education, asset ownership, networks), discrimination (legal and
financial) and other restrictions (mobility, location, family responsibilities) for women, thereby
exacerbating the challenges faced by them in operating their businesses. Box 2 discusses the
challenges and way forward specifically for women-led enterprises.

10
Box 2: Women-led Enterprises – Challenges and Way Forward

Women-led enterprises are crucial for achieving inclusive economic growth and sustainable
development in India. Empowering Women-Led Enterprises aligns with the vision of Viksit Bharat
2047, which aims for a developed and prosperous India. There are approximately 15.7 million women-
run enterprises in India, constituting about 22% of the overall entrepreneurial landscape. This number
has the potential to rise to 30 million with further support1. Women entrepreneurs are becoming
increasingly prominent in India's startup ecosystem, which is the third largest globally. The percentage
of startups led by women has grown from 10% in 2017 to 18% recently, highlighting a significant shift
in the entrepreneurial landscape.

The current scenario of women-led entrepreneurship in India is a mix of progress and challenges.
Women entrepreneurs or women-led enterprises face challenges from both the demand and supply sides
when accessing credit. On the demand side, the lack of documentation means there is no recorded
evidence of the credit demand from women entrepreneurs. Many women hesitate to seek credit due to
fear of denial or initial difficulties securing loans from Self-Help Groups (SHGs) or formal banks. They
often rely heavily on personal funds or borrow from relatives and friends, showing a reluctance to
increase household debt. Additionally, there are information gaps, as many women lack knowledge
about the right credit sources or products. In cases of household emergencies, assets acquired by women-
led enterprises are often the first to be liquidated.

On the supply side, women face challenges in accessing credit from financial institutions. Many women
entrepreneurs are first-time borrowers with no recorded credit history, and they often cannot offer
meaningful collateral. Their business or financial information is often incomplete or under-reported,
making it difficult to assess their creditworthiness. Long processing times by the financial institutions
often lead entrepreneurs to abandon their plans. Loan amounts are often insufficient, and lending terms
do not align with actual business cycles, leading to enterprise failure. To overcome these hurdles, it is
essential to identify potential entrepreneurs among self-help group members, capture their credit
requirements accurately, and match this demand with appropriate credit supply sources.

A five-point strategy is suggested to address some of these challenges.

1. Promoting Community Engagement, involving local communities in identifying potential

women entrepreneurs. Awareness programs can also be conducted to highlight the benefits of
women-led enterprises.
2. Building Capacity and Providing Handholding Support, for skill development and
entrepreneurship training at the grassroots level. Local mentorship networks can also be
established to support women entrepreneurs.
3. Improving Access to Finance, by facilitate access to microfinance and low-interest loans for
women entrepreneurs and encouraging the formation of Self-Help Groups (SHGs) to provide
collective financial support.
4. Fostering Market Linkages, by creating platforms for women entrepreneurs to showcase and
sell their products and establishing partnerships with local businesses and e-commerce
platforms.
5. Implementing Public Procurement Policy under MSME effectively, for promotion and
development MSEs by supporting them in marketing of products produced and services
rendered by them. Out of the total annual procurement from Micro and Small Enterprises, 3 per
cent from within the 25 per cent target shall be earmarked for procurement from Micro and
Small Enterprises owned by women. It is required to emphasize the need for effective
implementation of the policy to benefit women entrepreneurs.

By implementing these state-specific interventions and leveraging central government schemes, we can
create a supportive ecosystem for women-led enterprises, contributing to the overall vision of Viksit
Bharat and the achievement of SDG goals. There are several existing schemes and programs both at
central and state-level aimed at promoting women-led enterprise. These are listed in Annexure 2.

11
 4. The Way Forward

Enterprise development and entrepreneurship, with focus on MSMEs are key

components for realising the Viksit Bharat 2047 vision of the country. Given the role of
MSMEs in growth, employment generation and their export potential, MSMEs have the
potential to become the engine of development for the country. At present, enterprises faces
several bottlenecks including large size of informal sector, issues with access to finance, market
and technology, infrastructural bottlenecks and lack of requisite skills. In addressing each of
these challenges, states have a significant role to play.

Formalisation and inclusion of MSMEs is a key priority and for that, Udyam registration
and UAP has yielded immense benefits. There is a need to strengthened the existing
mechanism with a more integrated approach – linkages with other government platforms and
initiatives and greater impetus at state-level. For greater representation, it is recommended that
state-level ministries be created. Moreover, there is role for adopting a focus-state and focus-
sector-wise approach for improving visibility of MSMEs.

For addressing the financial access issue, a more widespread approach involving centre,
states and the private sector is required, along with right technological interventions.
Apart from credit-linked schemes, there is a need to incentivise private sector and tap CSR
funds. Some states have benefited from certain schemes more than others. Use cases and
success stories should be shared to understand what worked in certain cases, particularly at the
state-level. There is a need for assessing MSMEs credit worthiness with different parameters,
such as cash flow information, when compared to large enterprises. Importantly, there is a need
to improve financial literacy, and that requires interventions at the state-level.

To expand and grow, MSMEs need better market access – both domestically and
integrating in international markets. There is a need for creating better linkages, particularly
through industry bodies for flow of market information. MSMEs must make better use of
digital technologies, for improving market access. There is also need for support to onboard on
existing platforms like GeM and ONDC.

Access to technology is also essential to enterprise development and a sector-specific

approach is required for improving technology access. These sector-specific interventions
should aim to contribute towards diversifying value chains, improving value added component
in trade and promoting the Make in India initiative. There is merit in connecting start-ups and
MSMEs for a win-win outcome.

There is a need to address infrastructural bottlenecks, by first mapping the infrastructure

and then identifying gaps and problem areas. Infrastructure requirements go beyond
physical infrastructure to include digital infrastructure, which is equally important for growth
and development of enterprises. Additionally, with increased focus on sustainability, there is a
need to ensure that clusters are upgraded for environmental sustainability.

Finally, enterprise development is deficient without focus on women-led enterprises. The

aim should be to reduce gender disparities in the workforce, encourage innovation, and create
a more inclusive and equitable society. Additionally, it helps in building a diverse talent pool,
driving sustainable development, and improving the quality of life for women and their
communities.

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Annexure I: Evolution of MSMEs in India

Table A1: Definitions of MSMEs in 2006 and 2020

Definition as per MSMED Act 2006
Enterprise Investment in Plant and Investment in Equipment
Machinery
(Services)
(Manufacturing)
Micro Up to Rs.25 lakh Up to Rs.10 lakh
Small Above Rs.25 lakh up to Rs.5 Above Rs.10 lakh up to Rs.2 crore
crore

Medium Above Rs.5 crore up to Rs.10 Above Rs.2 crore up to Rs.5 crore
crore

Revised definition in 2020

Enterprise (Both Investment in Plant and Turnover
Manufacturing and Machinery or Equipment
Services)

Micro Not exceeding Rs. 1 crore Not exceeding Rs. 5 crore

Small Not exceeding Rs. 10crore Not exceeding Rs. 50 crore
Medium Not exceeding Rs. 50crore Not exceeding Rs. 250crore

Subsequent to the amendment, Ministry of MSME has launched Udyam Registration Portal on
01.07.2020 where MSME may register themselves for accessing the benefit of the scheme. As
on 21.08.2024, total registrations on the portal have reached 2.85 crore with an employment of
18.71 crore. Among the total registrations, 97.25% belong to micro category, 2.51% belong to
small category and 0.23% belong to medium category. The year wise registrations are given
below in Figure A1.

Figure A1: Number of MSMEs registered on Udyam Registration Portal

120
Number of registrations in 00

100 96.06

80 72.38
thousand

60 51.4
36.78
40 28.41

20

0
2020-21 2021-22 2022-23 2023-24 2024-25 (up to
21.08.2024)

Source: Udyam Portal.

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 Annexure 2: List of Schemes and Initiatives Support Women Entrepreneurs and
MSMEs

Government Schemes supporting Women Entrepreneurs

1. Pradhan Mantri Jan Dhan Yojana (PMJDY): This financial inclusion program aims to
provide every household with access to banking services, including savings accounts,
credit, and insurance. It is crucial for women entrepreneurs to manage their finances
effectively.
2. Pradhan Mantri MUDRA Yojana (PMMY): This scheme provides financial support to
micro and small enterprises, including those led by women. It facilitates access to credit
through various financial institutions, helping women entrepreneurs start and expand their
businesses.
3. National Rural Livelihood Mission (NRLM): This program focuses on promoting self-
employment and organization of rural poor into self-help groups (SHGs). It empowers
women by providing them with skills and financial assistance to start their enterprises.
4. Stand-Up India Scheme: This initiative aims to provide loans to women and SC/ST
entrepreneurs to establish Greenfield enterprises. It encourages women to take the
entrepreneurial plunge by offering financial support.
5. National Urban Livelihoods Mission (NULM) aims to reduce poverty by enabling poor
households to access gainful self-employment and skilled wage employment opportunities.

Programs Implemented to Promote Women Entrepreneurship:13

1. To promote the flow of both equity and debt to women-led startups, 10% of the fund in the
Fund of Funds for Startups Scheme operated by the Small Industries Development Bank of
India (SIDBI) is reserved for women-led startups.
2. Women Capacity Development Programme (WING) is a unique Capacity Development
Program for women-led startups, to identify and support both aspiring and established
women entrepreneurs in their startup journeys. The workshops are open to a variety of
business sectors including Tech, Construction, Product, Machine, Food, Agriculture,
Education, etc. The workshops serve as a platform for emerging women entrepreneurs and
other stakeholders to discuss the key challenges facing women entrepreneurs. WING
workshops create a conducive environment to share best practices and experiences in
overcoming challenges and to gain insights learned from the business models adopted in
the Indian context.
3. A Virtual Incubation Program for Women Entrepreneurs was conducted in collaboration
with Zone Startups to support women-led tech startups with pro-bono acceleration support.
4. Deendayal Antyodaya Yojana-National Urban Livelihoods Mission (DAY-NULM) aims
to bolster Women-Led Enterprises in India through the SHG ecosystem.
5. ASCEND Startup Workshop Series and Women for Startups Workshops: The Government
organized a series of startup workshops - ASCEND (Accelerating Startup Calibre &
Entrepreneurial Drive), for the entrepreneurs, aspiring entrepreneurs, and students from
North-eastern region. In addition, the workshops are conducted with a specific focus on
women entrepreneurs across the north-eastern states. The workshops have witnessed
participation from ecosystem stakeholders such as government officials, startups, aspiring
entrepreneurs, investors, academic institutions, etc.
6. Women Entrepreneurship Platform (WEP): Women Entrepreneurship Platform (WEP) was
launched by NITI Aayog in 2018 as an aggregator platform on a public-private partnership

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https://pib.gov.in/PressReleaseIframePage.aspx?PRID=2002100

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 model to build a comprehensive ecosystem supporting women entrepreneurs across India.
WEP aims at empowering women entrepreneurs by overcoming information asymmetry
and providing continuum of support across six ecosystem needs - Access to Finance;
Market Linkages; Training and Skilling; Mentoring and Networking; Compliance and
Legal; and Business Development Services. For this, WEP adopts a wide array of
interventions with a focus on convergence and collaboration with varied stakeholders.
7. SuperStree Podcast: With a vision to inspire a greater number of women across all regions
in India to become entrepreneurs, the SuperStree video podcast series has been launched
on women in the Indian Startup Ecosystem. The podcast spreads awareness related to
innovations from women and to further strengthen women entrepreneurship in the country.
8. Through various awareness programmes and capacity building programmes organized by
the Government, and through print media and social media platforms, the Government also
creates awareness about the existing schemes which support micro, small and medium
entrepreneurs, including women entrepreneurs.
9. BIRAC (under BioNEST and EYUVA schemes) has set up dedicated Bioincubation
centres for women entrepreneurs that provide incubation space and mentoring (business,
Intellectual Property, legal) specifically to women students/scientists/entrepreneurs as well
as support women Self Help Groups (SHGs).
10. BIRAC’s WInER Award fellowship (Women In Entrepreneurial Research), in partnership
with TiE-Delhi NCR: Under this award programme, women entrepreneurs working on
ideas that impact large sections of the society are provided financial support along with
other benefits including mentoring, handholding, an opportunity to go through an intensive
accelerator programme.
11. Under the Startup Accelerators of MeitY for Product Innovation, Development and Growth
(SAMRIDH) scheme, the Ministry of Electronics and Information Technology (MeitY)
supports a dedicated women-led accelerator program hosted by Zone Startups.
12. Under the Technology Incubation and Development of Entrepreneurs (TIDE) Scheme of
MeitY, financial assistance is provided to Institutions of Higher Learning to strengthen
their Technology Incubation Centres for enabling young entrepreneurs to create technology
startup companies for commercial exploitation of technologies developed by them.
13. The States’ Startup Ranking on support to startup ecosystems is primarily an exercise to
identify good practices across all the Indian states. The evaluation includes a specific
provision to gauge the formulation and implementation of policies and special incentives
to promote women-led startups in each state. The particular action point has witnessed
active engagement and thereon reporting of measures undertaken by participating States
and UTs.
14. To identify the depth, quality and spread of innovation, inclusivity and diversity, and
entrepreneurship in country, the Government instituted the National Startup Awards
(NSA). NSA recognizes and promotes startups across 20 sectors and special categories. All
four editions of the NSA (2020, 2021, 2022 and 2023) have featured a special category and
award for women-led startups.
15. Ministry of MSME has taken several steps to support women owned Micro, Small and
Medium Enterprises (MSMEs) in the country to increase women’s participation. The
details of the programs implemented in this direction are as under:
a. Special drives for registration of women owned MSMEs under Udyam Registration
Portal have been undertaken.
b. Various fiscal incentives are provided to women entrepreneurs under the Credit
Guarantee Scheme for Micro and Small Enterprises.

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 c. To encourage entrepreneurship among women, the Ministry also implements a number
of programs such as:
d. ‘Skill Upgradation & Mahila Coir Yojana’ under Coir Vikas Yojana, which is an
exclusive training program aimed at skill development of women artisans engaged in
the Coir sector.
e. The Ministry also implements Prime Minister’s Employment Generation Programme
(PMEGP), which is a credit-linked subsidy programme aimed at generating self-
employment opportunities through establishment of micro enterprises in the non-farm
sector by helping traditional artisans and rural/urban unemployed youth. Under the
scheme, women are provided higher subsidy vis-à-vis non special category.
f. Participation of women entrepreneurs in trade fairs under Procurement & Marketing
Support Scheme is subsidized.

Several state governments in India have launched initiatives to promote women-led

enterprises, aiming to empower women economically and socially. Here are a few notable
examples:

1. Maharashtra: The state has introduced the “Tejaswini Rural Women Empowerment
Programme,” which focuses on enhancing the entrepreneurial skills of rural women
through training and financial support.
2. Tamil Nadu: The “Amma Two Wheeler Scheme” provides subsidized loans to
women to purchase two-wheelers, facilitating their mobility and enabling them to
engage in entrepreneurial activities.
3. Karnataka: The “Udyogini Scheme” offers financial assistance to women
entrepreneurs, particularly those from economically weaker sections, to start and
expand their businesses.
4. Kerala: The “Kudumbashree Mission” is a prominent initiative that supports women
through micro-enterprises, self-help groups, and skill development programs,
significantly contributing to women’s economic empowerment in the state.
5. Rajasthan: The “Rajasthan Mahila Nidhi” scheme provides microfinance to women
entrepreneurs, helping them to start and grow their businesses.
6. Andhra Pradesh: The state offers the “YSR Cheyutha” scheme, which provides
financial assistance to women entrepreneurs from marginalized communities to start
and expand their businesses.
7. Gujarat: The “Mission Mangalam” initiative supports women entrepreneurs through
self-help groups (SHGs), offering training, financial aid, and market linkages.

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