10 Major Problems Faced by MSME Sector and Their Impacts

 

The MSMEs have been affected internally and externally, hindering their growth and sustainability in the country. There are many problems faced by the MSME sector in India despite their potential to become a major contributor to the development of our economy. It can be due to adequate technologies, market exposure, expertise, etc. 

 

This article will help you understand the many challenges the MSMEs are going through in trying to stay afloat and how MVikas is catering to the needs of this sector through our B2B Marketing Platform. 

 

Throwback

 

Let's have a throwback!

 

• In the Fiscal Year of 2022, 8.59 lakh women led by MSME were registered on the Udyam Portal, which accounted for 17% of the total registration. 

 

• The MSME is responsible for creating 120 million jobs and generating wealth at the grassroots level. 

 

• In India, there are a large number of registered MSMEs, amounting to 7.9 million MSMEs. 

 

• The country's GDP amounted by the MSME is 33%. So, 63.4 million MSME units contribute about 6.11 manufacturing GDP to the services GDP, about 24.63%. 

 

What is MSME?

 

The MSME stands for Micro, Small, and Medium Enterprises, contributing hugely to the country's industrial development. These enterprises engage in the production, development, and processing of goods and services. 

 

It is divided into three categories by the Micro, Small and Medium Enterprises Development Act of 2006. 

 

There are: 

 

Micro

 

The investment in the machinery or equipment doesn't exceed, and there is no turnover of more than one crore. 

 

Small

 

Here, the enterprises don't invest in equipment and machinery worth more than ten crores and have no turnover of more than 50 crores. 

 

Macro 

 

It refers to enterprises that don't invest more than 50 crores in machinery and equipment and have no turnover of 250 crores. 

 

The Role of MSME in the Country 

 

As per the reports from the Ministry of Statistics & Programme Implementation, the share of Gross value added of MSME in India's Gross Domestic Product (GDP) during the consecutive years of 2019-20, 2020-21 and 2021-22 was  30.5%, 27.2% and 29.2%. 

 

Manufacturing was 36.6%, 36.9%, and 36.2% during 2019-20, 2020-21, and 2021-22. 

 

According to the Directorate General of Commercial Intelligence and Statistics (DGCIS) reports, the share of MSME exports in 2020-21, 2021-22 and 2022-23 was 49.4%, 45.0% and 43.6%. 

 

From the Udyam Registration Portal registered between 01.07.2020 and 01.08.2023, the number of people employed in MSME is under 12,36,15,681.

 

Let's dive in to understand the problems faced by the MSME in India!

 

Top 10 Major Problems Faced by MSME Sector in India

 

Below are the top 10 challenges these small and medium-sized organisations face that lead to unproductivity and unsustainability. Check out each challenge to get a better idea. 

 

1. Lack of Strategic Planning 

 

What led to the downfall of an organisation?

 

There can be various reasons. However, one of the major reasons is the absence of strategic planning. Many people open a business without a clear roadmap. So, without having a clear roadmap, many end up with missed opportunities and inefficiencies. 

 

2. Financial Drawback 

 

One of the major problems MSMEs face is the inability to obtain financial support. Regarding finances, one troubling fact is that only about 16% of the MSMEs get timely financial support. 

 

What about the others?

 

Well, they are left to depend on their resources. It is common in both small and large businesses. 

 

3. Lack of Innovation 

 

Most small and medium-sized businesses in India still rely on old technologies, hampering their growth and competitiveness. 

 

There is a lack of entrepreneurs with new ideas, which leads to a struggle to adapt to the ever-changing market and attract potential customers. Moreover, it leads to inefficiency. 

 

4. Regulatory 

 

In India, one major problem MSMEs face is regulatory challenges. 

 

Many startups and existing businesses feel like they are navigating a complex maze due to excessive rules and paperwork required, leading to more hurdles. So, many organisations face these issues to fulfil all these regulators, hindering their growth and sustainability. 

 

5. Inadequate Productivity 

 

What pained the most is that despite the ability to produce more and contribute to the GDP of our country, many MSMEs face productivity challenges. 

 

The reasons for this are outdated technologies and lack of knowledge, which lead to the inability to produce goods or services efficiently. Ultimately affecting their growth, reducing income generation, and even fewer job opportunities. 

 

6. Competitiveness

 

Since day one, many MSMEs have faced these challenges due to inadequate financial support, technologies, and even workforce, forcing them out of the markets. 

 

Despite the potential to wane it off successfully, other factors, too, play a crucial role, like globalisation and the rise of e-commerce. Even in industries like agriculture, garments, and tourism, many small businesses are left to navigate these hurdles, making it hard to stay afloat. 

 

7. Lack of Expertise

 

Regarding India, the major problem MSMEs face is a lack of expertise. India's MSMEs are far behind compared to other MSMEs due to their dependency on inadequate skilled workers. 

 

You can see many businesses depend on workers who ask for a low budget and lack higher skills, affecting their growth in the long term. 

 

8. Low Infrastructure 

 

Despite being called the 'World's back office,' India's MSME faces huge challenges due to poor infrastructure. Limited access to reliable power, transportation, and outdated facilities leads to other issues during operations. 

 

9. Inadequate Standardised Policies

 

Another crucial problem MSMEs face in India is the lack of standardised policies. There are small MSME policies in our country. There is a lack of consistent rules that fit the needs of each business, especially regarding MSME development and entrepreneurship promotion programs. 

 

10. Lack of Professionalism 

 

A major issue for MSMEs is the lack of a professional approach to handling their ongoing business, like poor communication, unreliable services, and poor customer trust. All these factors play a crucial role. Ultimately, it might lead to corruption and abuse of power. 

 

How is MVikas Helping the MSME in India? 

 

Today, Mvikas is India's First 5PL Company in Industrial goods, offering our clients the best solutions by providing the platform to buy and market their interests without any hindrance. Through this platform, you can connect effortlessly as a buyer or seller. 

 

Here, we provide the growth and support you need to expand or reach your business nationally or internationally. Our services range from Procurement to logistics, and we have a range of products at a competitive price. 

 

Benefits 

 

1. Enhance your online presence, exposing you to a larger market.
2. Allows you to operate your business at a low cost. 
3. Increases your presence in the market, increasing your ROI. 

 

Conclusion 

 

To conclude, these are some of the top 10 problems MSMEs face in India, hampering their growth and competitiveness in this dynamic market. However, there are many schemes that the government of India introduces to help these small and medium-sized enterprises be exposed to the active call. 

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