6 Major Challenges faced by the MSME Sector in India

The Micro, Small and Medium Enterprises (MSME) sector is contributing significantly to the country’s GDP. These enterprises are provided extra support by the government in the form of various schemes and funds so that the country’s economy follows an upward trend. We know that the pandemic has slowed down the progress and MSMEs are badly hit. The lockdowns pushed many small businesses to shut down. Lack of sales, funds and human resources during the pandemic was a huge setback to the MSME sector. There are more challenges that the Micro, small and medium enterprises face, pandemic or no pandemic. Let’s discuss the major challenges faced by the MSME sector in India:

Challenges faced by the MSME Sector
Challenges faced by the MSME Sector

1. Financial challenges faced by the MSMEs in India

MSMEs not only provide support to the Indian economy but also help generate employment opportunities. Most of the time, it is the financial challenges that top the hurdles faced by the MSME owners. In India, the people who are handling MSMEs are generally from poor and uneducated backgrounds. They are unaware of the opportunities provided by the government to support MSMEs. The lack of financial expertise makes them suffer and their small businesses struggle hard to survive.

2. Lack of skilful workforce in MSMEs in India

In India, to hire low-wage labour, the employer ignores the skills required to run the business. As a result, the low skilled people manage the business leaving a little prospect for development. The MSME owners hardly take any effort to train their employees. It leads to the degradation of the reputation of the enterprise which further translates to low outputs. 

3. Most Indian MSMEs are Unaware of digitisation

MSMEs are called the Backbone of India because they contribute over 8% to the nation’s GDP and over 45% to the total manufacturing output. MSMEs in India also contribute more than 40% of India’s total exports. Despite this, Indian entrepreneurs are proud to stay away from digitisation. The MSME owners continue to use the age-old methods of doing business without any ambition to match global standards. The outdated methodology combined with the unskilled workforce exhibits an ugly portrayal of Indian MSMEs.

MSMEs in India
MSMEs in India

4. Insufficient and incompetent marketing

In the era of social media and digital marketing, many MSMEs in India believe in the manual dealing of commodities. The reason can be superstitions, lack of knowledge of advanced technology or scarcity of financial sources. Inadequate understanding of the advanced modes of marketing is a huge drawback. No matter how good your product is, if marketing fails, your business is bound to collapse.

5. No knowledge of the global market

Indian MSME owners are unaware of the strategic approach used by their global competitors. They manage their businesses to trade only within the local community. While their global competitors plan to reach for the skies, our Indian entrepreneurs don’t want to come out of the local coop. They do suffer. This difference needs to be minimised so that Indian entrepreneurs stand at par with their competitors in the global market.

6. Ease of doing business is an illusion

India has secured a respectable place in the World Bank’s ‘Ease of doing business’ index report. It means that starting a business in India should be rather effortless but honestly, it is not. From applying for a loan to getting licenses, MSMEs experience a lot of difficulties. The complicated process discourages people, sometimes to the limit of quitting the idea of starting a new business.

Challenges should not deter you from venturing into the MSME sector. Join the communities and help centres that cater to the requirements of starting micro, small and medium enterprises(MSMEs).

Growth Matters Forum is a community for business owners to explore ideas, streamline growth and create an impact. Join the community here.

This blog post is part of the blog challenge ‘Blogaberry Dazzle’ hosted by Cindy D’Silva and Noor Anand Chawla in collaboration with VoxBox.

16 Comments Add yours

  1. ghazala786 says:

    Informative post , having technical knowledge , and upgrading skills helps to flourish the buisness, but sadly many don’t pay emphasis to this .

    Liked by 1 person

  2. Satabdi says:

    Quite an informative and actionable post! The point about MSMEs staying away from digitization is surprising since our government has been pushing it so aggressively.

    Liked by 1 person

  3. Harjeet Kaur says:

    I have no clue about business but I understood all you have shared Aditi, as it is in layman’s terms. Even I wrote about role of women in MSME

    Liked by 1 person

  4. When we know that MSMS sector is second largest sector after agriculture and contributing immensely in our country’s economy than why people hesitate to contribute. Well government had taken lot of steps and hopefully we will see some change which leads to their in future

    Liked by 1 person

  5. Dr. Surbhi Prapanna says:

    I agree that Indian MSME owners are unaware of the strategic approach used by their global competitors and They manage their businesses to trade only within the local community. I am sure joining support community can help them a lot to grow and also help them in handle their struggle with peace and support.

    Liked by 1 person

  6. Vasumathi says:

    Nicely put together that one can refer to if they are planning to start a small or medium business. Lack of information is main reason behind most of these – maybe one can even start a small/medium business which focuses on offering support to these industries 😉

    Liked by 1 person

  7. Madhu Bindra says:

    The problem with most MSMEs is that they don’t want to take risks. You have to move with the times and be ready to take risks. How things worked 20 years back will not be how they work now.

    Liked by 1 person

  8. Ritu says:

    As an MSME owner myself, I couldn’t agree more. there is still a largely unorganized sector and one that is rooted in its old ways. I have often struggled with clients over digitization.

    Liked by 1 person

  9. Ruchie says:

    I totally agree that yes, in India MSME sector is facing some major challenges and glad that you have shared the right pointers. Very informative post!!

    Liked by 1 person

  10. rgvdudeja says:

    That’s very poignant ma’am. A true picture of MSME business in India. More than the capital, I think government needs to run a massive training campaign. The points of digitization, global markets are very valid.

    Like

  11. rgvdudeja says:

    That’s very poignant ma’am. A true picture of MSME business in India. More than the capital, I think government needs to run a massive training campaign. The points of digitization, global markets are very valid.

    Like

  12. Being a small business owner myself, I know that these are real struggles. And these affect the businesses so much. The biggest has surely been the tools that can be used and are available to make life easy.

    Like

  13. Yes I know these are struggles as I have seen my best friend going through it, But Government should help us as a global market, the digital market is really important.

    Like

  14. Being the second highest category contributing to the country’s economy MSMEs need to up the game by getting into digital ways of marketing and process managing

    Like

    1. Aurora M says:

      There is such we learn when we read n write. I think there is lot to explore n understand in this matter.

      Like

  15. What an informative post! I was saddened to know that the MSME owners still use the age-old methods of doing business without any ambition to match global standards. We really need to change this and I think the first step should be to get rid of the outdated methodology. Second step should be to provide training to unskilled workforce.

    Like

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