SME Digital World

Category: SME

Msme delinquencies plummet to five-year low

Msme delinquencies plummet to five-year low

Several factors contributed to the significant decline in MSME delinquencies, reaching a five-year low of 1.8%. Improved economic activity in India played a crucial role, enabling small businesses to manage their cash flows more effectively and improve loan repayments. Government initiatives aimed at supporting the MSME sector, such as easier access to credit and subsidies, also contributed to the enhanced financial health of these enterprises.
Furthermore, enhanced monitoring and risk management practices adopted by lending institutions helped in identifying and addressing potential non-performing assets (NPA) early on. Restructuring schemes and proactive engagement with borrowers facing difficulties also prevented accounts from slipping into delinquency. The increased focus on credit risk assessment before disbursing loans also played a key role in reducing the overall delinquency rate. This cautious approach ensured that loans were granted to businesses with a higher probability of successful repayment.
Technological advancements in credit scoring and data analytics have further empowered lenders to make informed decisions. These tools provide a more granular view of the borrower’s creditworthiness, allowing for more accurate assessment of repayment capacity. The combination of a supportive economic environment, proactive government measures, and improved lending practices has collectively led to the notable reduction in MSME delinquencies, signaling a positive trend for the sector.
Regional Performance Overview
The regional performance overview reveals a diverse landscape in the MSME sector across India. While the national average for delinquencies reached a five-year low, certain regions exhibited stronger improvements than others. Western and Southern India demonstrated particularly robust performance, with lower NPA ratios compared to the national average. This can be attributed to the concentration of industries with higher growth rates and better infrastructure in these regions, facilitating smoother operations and improved loan repayments for small businesses.
In contrast, Eastern and Northeastern India faced persistent challenges, with MSME delinquencies remaining relatively higher. Factors contributing to this include limited access to credit, infrastructural bottlenecks, and a slower pace of economic development. These regions often have a higher proportion of micro-enterprises operating in sectors vulnerable to economic fluctuations, which impacts their financial health and ability to service debts. Targeted interventions and policy support are crucial to address these regional disparities and promote balanced growth across the country.
Furthermore, variations in credit risk assessment practices and recovery mechanisms across different states also contributed to the observed differences. States with more proactive monitoring and enforcement of loan agreements generally experienced lower delinquency rates. Addressing these regional imbalances is essential to ensure that the benefits of improved MSME credit quality are distributed equitably across India, fostering sustainable growth and development for all small businesses.
Impact On Lending Policies
The marked improvement in MSME loan portfolios, with delinquencies hitting a five-year low, is prompting a reassessment of lending policies across financial institutions. Banks and non-banking financial companies (NBFCs) are now evaluating their risk appetite and credit assessment frameworks. The reduction in non-performing assets (NPAs) provides an opportunity for lenders to expand their MSME loan portfolios with greater confidence, but also necessitates a nuanced approach to risk management.
Lenders are increasingly focusing on granular data analysis and predictive modelling to identify potential risks and opportunities within the MSME sector. This involves leveraging technology to enhance credit scoring models and monitor borrower behaviour more effectively. While the overall outlook is positive, lenders remain cautious about segments exhibiting higher stress, particularly micro-enterprises and businesses in vulnerable sectors. Consequently, lending policies are being tailored to address these specific risks, with stricter due diligence and enhanced monitoring mechanisms.
Furthermore, the improved financial health of MSMEs is encouraging lenders to offer more flexible loan products and competitive interest rates. This includes exploring innovative financing solutions, such as supply chain financing and invoice discounting, to meet the diverse needs of small businesses. The focus is shifting towards fostering long-term relationships with MSME borrowers and providing them with the necessary support to grow and thrive. However, lenders are also emphasizing the importance of financial literacy and responsible borrowing practices among MSMEs to ensure sustainable credit growth and prevent a resurgence of delinquencies.

May 23, 2025
India’s SMEs forecast for strong April-June growth

India’s SMEs forecast for strong April-June growth

Several factors underpin the optimistic forecast for India’s small and medium enterprises (SMEs) during the April-June quarter. A significant driver is the sustained momentum in domestic demand. Consumer spending remains robust, fuelled by increased disposable incomes and a positive consumer sentiment. This creates a favourable environment for SMEs, which often cater to the local market. Government initiatives promoting entrepreneurship and providing financial assistance also play a crucial role. Schemes like the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) and the Prime Minister’s Employment Generation Programme (PMEGP) facilitate access to credit, enabling SMEs to expand their operations and invest in new technologies.
Furthermore, the ongoing digitisation drive across India empowers SMEs to reach wider markets and improve their operational efficiency. E-commerce platforms provide SMEs with a cost-effective channel to sell their products and services nationwide. Adoption of digital technologies also enhances productivity and reduces administrative burdens. Improved infrastructure, including better road connectivity and logistics, further supports the growth of SMEs by facilitating the smooth movement of goods and services. These infrastructural improvements reduce transportation costs and shorten delivery times, making SMEs more competitive.
A recent report indicates that the easing of global supply chain disruptions is contributing to the positive outlook. This allows SMEs to access raw materials and components more easily, reducing production bottlenecks and improving their ability to meet the increasing demand. The combination of strong domestic demand, supportive government policies, increasing digitisation, improved infrastructure, and easing supply chain constraints creates a conducive environment for growth for India’s SMEs in the April-June quarter.
Sectoral Performance Overview
A detailed report on sectoral performance indicates varied growth trajectories across different segments within India’s SME landscape. The manufacturing sector is expected to witness significant expansion, driven by increased orders from both domestic and international markets. Sectors like textiles, automotive components, and pharmaceuticals are anticipated to perform particularly well, benefiting from government support and a revival in global demand. The services sector is also projected to experience robust growth, fuelled by the increasing demand for IT services, e-commerce, and logistics.
Within the services sector, tourism and hospitality are rebounding strongly, contributing to the overall positive forecast for small and medium enterprises. The agriculture and food processing sectors are likely to see steady growth, supported by government initiatives promoting value addition and export of agricultural products. However, some sectors, such as those heavily reliant on imported raw materials or facing intense competition from larger players, may experience slower growth during the April-June quarter. The overall outlook remains positive, with most sectors expected to contribute to the anticipated expansion of SMEs.
Analysis suggests that SMEs in the technology and e-commerce sectors are poised for particularly strong growth. The increasing adoption of digital technologies across various industries is creating new opportunities for these SMEs. Furthermore, government initiatives promoting digital payments and online transactions are fuelling the expansion of the e-commerce sector, benefiting SMEs that operate in this space. This positive trend is expected to continue throughout the April-June quarter, solidifying the role of technology-driven SMEs in the Indian economy and contributing significantly to the overall growth forecast.
Challenges And Outlook
Despite the promising forecast for India’s SMEs in the April-June quarter, several challenges persist. Access to adequate and timely financing remains a significant hurdle for many small and medium enterprises. While government schemes aim to address this, bureaucratic processes and stringent collateral requirements often hinder SMEs from availing these benefits. The complexity of compliance with various regulations also poses a challenge, particularly for smaller businesses with limited resources to navigate the legal and administrative landscape.
Another concern is the rising cost of raw materials and energy, which can squeeze profit margins for SMEs. Fluctuations in global commodity prices and supply chain disruptions can further exacerbate this issue. Furthermore, intense competition from larger, more established players, as well as from cheaper imports, continues to put pressure on SMEs. Maintaining competitiveness requires continuous innovation, investment in technology, and a focus on improving efficiency. The availability of skilled labour is also a growing concern, particularly in sectors requiring specialised expertise. Addressing this skills gap through vocational training and education programmes is crucial for sustaining the growth of SMEs.
Looking ahead, the outlook for India’s SMEs remains cautiously optimistic. The sustained focus on infrastructure development, digitisation, and ease of doing business is expected to create a more favourable environment for growth. However, addressing the challenges related to financing, compliance, rising costs, and skill gaps is essential for unlocking the full potential of SMEs. A recent report suggests that government policies should be tailored to meet the specific needs of different sectors within the SME landscape. Furthermore, promoting collaboration between SMEs and larger enterprises can foster innovation and knowledge sharing, contributing to the overall growth and competitiveness of the sector. Overcoming these hurdles will be crucial for ensuring that India’s SMEs continue to thrive and contribute to the country’s economic development.

May 22, 2025
Is credit on upi a game-changer

Is credit on upi a game-changer

The Reserve Bank of India (RBI) has enabled the linking of credit lines to the Unified Payments Interface (UPI), revolutionising digital payments in India. This allows users to access pre-sanctioned credit directly through the UPI platform, effectively turning every UPI app into a potential point-of-sale for credit. The process involves a one-time mandate where a user consents to link a specific credit line offered by a bank or fintech lender to their UPI ID. Once linked, users can then use UPI to make payments, with the transaction amount being deducted from their available credit limit instead of their bank account balance.

This innovation significantly expands credit access, particularly for those who may not have traditional credit cards or easy access to consumer lending. Instead of relying solely on debit cards or net banking, users can now leverage credit for their everyday UPI transactions. This has the potential to drive financial inclusion by bringing more individuals into the formal credit ecosystem. The framework emphasizes responsible lending practices, requiring lenders to adhere to regulatory guidelines and transparently disclose interest rates, fees, and repayment terms. This ensures consumers are fully aware of the costs associated with using credit on UPI.

The technology underpinning this system is built upon the existing UPI infrastructure, ensuring interoperability and ease of use. When a user initiates a UPI payment using their linked credit line, the transaction is routed through the UPI network, and the lender approves the payment based on the user’s available credit. The payment is then settled between the merchant’s bank and the lender. This seamless integration leverages the existing digital payments ecosystem, making credit on UPI a convenient and accessible option for both consumers and merchants. The success of this initiative hinges on collaboration between banks, fintech companies, and the National Payments Corporation of India (NPCI) to ensure a secure and efficient user experience.
Potential Benefits for Consumers
For consumers in India, the potential advantages of credit on UPI are considerable. The most immediate benefit is increased credit access. Many individuals, especially those new to the workforce or with limited credit history, find it challenging to obtain traditional credit cards. UPI credit lines offer a readily available alternative, allowing them to make purchases and manage their finances more effectively. This innovation democratises access to consumer lending, extending financial opportunities to a broader segment of the population.

Furthermore, the convenience factor is a major draw. Integrating credit directly into the UPI platform streamlines the payment process. Consumers no longer need to carry multiple cards or switch between different payment apps. The familiar UPI interface simplifies transactions, making it easier for users to adopt and utilise credit on UPI for their daily needs. This ease of use can encourage responsible spending and better financial management, as users have a clear view of their credit usage within their existing UPI app.

The boost to financial inclusion is another significant advantage. By providing access to formal credit channels, UPI credit lines can help individuals build a credit history and improve their creditworthiness. This, in turn, can unlock access to other financial products and services, such as loans for education, housing, or business ventures. Moreover, the transparent and regulated nature of UPI credit promotes responsible lending practices, protecting consumers from predatory lending and ensuring fair terms and conditions. This makes credit on UPI a powerful tool for empowering consumers and promoting economic growth.
Challenges and Concerns Remain
Despite the promising outlook, several challenges and concerns surround the widespread adoption of credit on UPI. One primary concern is the potential for over-indebtedness. The ease of access to credit through UPI could lead some users to accumulate debt beyond their capacity to repay. This risk is particularly acute among vulnerable populations with limited financial literacy. Robust consumer education initiatives and responsible lending practices are essential to mitigate this risk and ensure users understand the terms and conditions of their credit lines.

Another challenge lies in the need for robust risk management systems. Lenders need to develop sophisticated models to assess creditworthiness and manage the risk of default. This requires access to comprehensive data and the ability to accurately predict repayment behaviour. Furthermore, effective fraud detection and prevention mechanisms are crucial to safeguard the system against fraudulent transactions and protect both lenders and consumers. Collaboration between banks, fintech companies, and regulatory bodies is vital to establish a secure and reliable credit ecosystem on UPI.

Data privacy and security are also paramount concerns. Linking credit lines to UPI involves sharing sensitive financial information, raising concerns about data breaches and misuse. Strong data protection measures, including encryption and access controls, are necessary to ensure the confidentiality and integrity of user data. Clear and transparent data privacy policies are also essential to build trust and encourage adoption. Addressing these challenges proactively will be critical to realising the full potential of credit on UPI and ensuring it benefits all stakeholders in India.

May 20, 2025
India’s port rules aid Bangladesh MSMEs, trade, restrictions, exports, small businesses

India’s port rules aid Bangladesh MSMEs, trade, restrictions, exports, small businesses

Recent changes to India’s port regulations are significantly impacting trade dynamics, particularly for Bangladeshi micro, small, and medium enterprises (MSMEs). The revised rules aim to streamline customs procedures and reduce dwell times for cargo, which directly translates to lower transaction costs for businesses engaged in cross-border trade. This efficiency is especially beneficial for smaller enterprises that often struggle with the logistical complexities and financial burdens associated with lengthy port processes.

The improved port infrastructure and updated regulations in India are facilitating smoother movement of goods, reducing delays that previously hampered trade flows. Faster turnaround times for ships and cargo handling equipment mean that Bangladeshi MSMEs can now export and import goods more quickly and predictably. This increased efficiency allows them to better meet delivery deadlines and maintain competitiveness in international markets. The reduced costs associated with port operations also contribute to increased profitability for these businesses.

However, the impact is not solely positive. While the updated port rules offer significant advantages, some challenges remain. Certain MSMEs, particularly those lacking robust infrastructure or technical expertise, may still find it difficult to fully capitalize on these improvements. Additionally, variations in implementation across different Indian ports can lead to inconsistencies in service levels, potentially creating bottlenecks and hindering the overall effectiveness of the reforms. Addressing these challenges through targeted support and standardized procedures is crucial to ensure that all Bangladeshi MSMEs can benefit from the new port regulations.
Boosting Bangladesh’s Msmes
Bangladeshi MSMEs stand to gain considerably from India’s updated port regulations, which provide a platform for enhanced operational efficiency and reduced costs. These improvements enable smaller businesses to compete more effectively in regional and global markets. With quicker turnaround times and streamlined customs procedures, MSMEs can now manage their supply chains more effectively, respond promptly to market demands, and build stronger relationships with international partners.

The benefits extend beyond mere logistical improvements. The reduced financial burden associated with port operations frees up capital for Bangladeshi MSMEs, allowing them to invest in other critical areas such as technology upgrades, workforce training, and product development. This reinvestment can drive innovation, improve productivity, and ultimately contribute to the long-term sustainability and growth of these enterprises. Access to more efficient and cost-effective trade routes can also facilitate market diversification, enabling MSMEs to explore new opportunities and reduce their reliance on traditional markets.

However, realising the full potential of these benefits requires a concerted effort to address existing challenges. Many Bangladeshi MSMEs still face hurdles related to access to finance, technological capabilities, and market information. Targeted support programmes, including financial assistance, training initiatives, and market intelligence services, are essential to empower these businesses to fully leverage the opportunities created by India’s port reforms. Furthermore, strengthening cross-border collaboration and information sharing between relevant agencies in both countries can help to streamline processes and resolve any remaining bottlenecks, ensuring a seamless and efficient trade environment for all.
Trade Restriction Effects
While the enhancements to India’s port regulations offer clear advantages for Bangladeshi MSMEs, existing trade restrictions continue to present considerable obstacles. These restrictions, which may include tariffs, quotas, and non-tariff barriers such as stringent quality standards and complex documentation requirements, can significantly impede the flow of goods between the two countries. For smaller businesses with limited resources, navigating these regulatory hurdles can be particularly challenging, often leading to increased costs, delays, and reduced competitiveness.

The impact of these restrictions is multifaceted. Tariffs, for instance, directly increase the cost of imported goods, making them less affordable for Bangladeshi consumers and businesses. Quotas, on the other hand, limit the volume of goods that can be exported or imported, restricting market access and hindering the ability of MSMEs to scale their operations. Non-tariff barriers, such as cumbersome customs procedures and stringent product standards, can create significant administrative burdens and compliance costs, disproportionately affecting smaller enterprises that lack the expertise and resources to navigate these complexities.

Addressing these trade restrictions is crucial to unlock the full potential of the improved port infrastructure and facilitate deeper economic integration between India and Bangladesh. Reducing tariffs, simplifying customs procedures, and harmonising product standards can significantly lower transaction costs, enhance market access, and promote greater trade volumes. Furthermore, fostering greater transparency and predictability in trade regulations can create a more stable and predictable business environment, encouraging investment and innovation among Bangladeshi MSMEs. By working together to dismantle these barriers, both countries can create a more level playing field and foster mutually beneficial economic growth.

May 19, 2025
Tariff war pressures small businesses

Tariff conflict intensifies strain on MSMEs

The ongoing tariff war has significantly squeezed the profit margins of many small businesses. Increased import costs, resulting from tariffs on raw materials and finished goods, are directly eating into their bottom lines. For MSMEs, which often operate on tight budgets, these additional expenses can be devastating. Many are finding it difficult to absorb these costs without passing them on to consumers, which risks making their products less competitive.

One major area of impact is the rising cost of goods sold. Small businesses that rely on imported components or materials for their manufacturing processes are particularly vulnerable. The tariff war has disrupted supply chains, forcing them to seek alternative, often more expensive, suppliers. This not only increases their direct costs but also adds complexity and uncertainty to their operations.

Furthermore, the uncertainty surrounding global trade has made it difficult for small businesses to plan for the future. Fluctuating tariffs and the potential for further escalation make it challenging to forecast costs and revenues accurately. This can lead to delayed investments, reduced hiring, and a general reluctance to expand operations. The economic impact of the tariff war is felt most acutely by these smaller players, who lack the resources to weather the storm.

Several small businesses are also reporting decreased sales due to the increased prices of their products. As they are forced to pass on the higher costs resulting from tariffs, their goods become less attractive to price-sensitive customers. This decline in demand further reduces their profitability and can lead to job losses. The tariff war is creating a vicious cycle of rising costs, declining sales, and shrinking profits for many small businesses.
Challenges Faced
Beyond the immediate impact on profits, small businesses face a multitude of operational and strategic challenges as a direct result of the trade war. These challenges range from navigating complex regulatory changes to adapting to volatile market conditions, putting immense strain on their limited resources.

Navigating Regulatory Complexity

The constantly evolving landscape of tariffs and trade regulations presents a significant hurdle. Small businesses often lack the in-house expertise to interpret and comply with these changes, forcing them to rely on external consultants or spend valuable time deciphering complex legal documents. This diverts resources away from core business activities and adds to their overhead costs.

The administrative burden associated with tariffs, such as customs declarations and documentation, is also disproportionately heavy for MSMEs. Large corporations have dedicated teams to handle these tasks, but small businesses often rely on a single individual or small team, which can quickly become overwhelmed.

Adapting to Supply Chain Disruptions

The tariff war has caused significant disruptions to global supply chains, forcing small businesses to scramble for alternative suppliers and adjust their production processes. This can be particularly challenging for businesses that rely on specialised components or materials from specific regions.

Finding new suppliers often involves extensive research, negotiation, and quality control checks, which can be time-consuming and expensive. Moreover, alternative suppliers may not be able to offer the same prices or lead times as previous suppliers, further impacting profitability and competitiveness. The uncertainty surrounding future tariffs also makes it difficult for small businesses to commit to long-term contracts with new suppliers.

Access to Finance

The economic impact of the tariff war has made it more difficult for small businesses to access finance. Banks and other lenders are often hesitant to extend credit to businesses operating in uncertain environments, particularly those heavily reliant on international trade. This lack of access to capital can hinder their ability to invest in new equipment, expand their operations, or weather economic downturns.

The increased risk associated with lending to small businesses in the current climate has also led to higher interest rates and stricter lending terms, further burdening their finances. Many small businesses are forced to rely on personal savings or loans from family and friends to stay afloat, which can put them at greater financial risk.
Future Outlook
Looking ahead, the future for small businesses caught in the crossfire of the global trade tensions remains uncertain. Several factors will shape their prospects, including the duration and intensity of the tariff war, the ability of businesses to adapt to changing market conditions, and the availability of government support.

Scenario Planning and Adaptation

A crucial step for small businesses is to engage in scenario planning. By considering various potential outcomes of the trade war, they can develop contingency plans and strategies to mitigate risks. This might involve diversifying their supply chains, exploring new markets, or adjusting their product offerings to reduce reliance on tariff-affected goods. Flexibility and adaptability will be key to survival.

Furthermore, investing in technology and automation can help small businesses improve efficiency and reduce costs. This can make them more competitive in the face of rising input prices. Embracing e-commerce and digital marketing can also help them reach new customers and expand their market reach, reducing their dependence on traditional sales channels.

Government Support and Policy Measures

Government support will play a critical role in helping small businesses navigate the challenges posed by the tariff war. Measures such as tax relief, access to low-interest loans, and export assistance programs can provide much-needed financial relief and support their efforts to diversify into new markets. Streamlining trade regulations and reducing administrative burdens can also ease the compliance burden on MSMEs.

Moreover, government initiatives to promote domestic sourcing and support local industries can help small businesses reduce their reliance on imported goods and build more resilient supply chains. Investing in infrastructure and education can also improve their competitiveness and prepare them for the future of global trade.

Long-Term Implications for Global Trade

The ongoing tariff war has broader implications for the future of global trade. It is likely to accelerate the trend towards regionalisation and localisation of supply chains, as businesses seek to reduce their exposure to geopolitical risks. This could lead to a reshaping of global trade patterns and a shift in the balance of economic power. Small businesses need to stay informed about these trends and adapt their strategies accordingly.

The economic impact of the trade war may also lead to increased protectionism and a weakening of the multilateral trading system. This could create further challenges for small businesses, particularly those that rely on international trade. Building strong relationships with customers and suppliers, and diversifying their market base, will be essential for navigating this uncertain future.

May 14, 2025
Sidbi highlights msme credit gap, sector-focused policies
Sidbi highlights msme credit gap, sector-focused policies
The Small Industries Development Bank of India (SIDBI) recently conducted a survey to assess the progress and challenges faced by Indian Micro, Small, and Medium Enterprises (MSMEs). A key finding highlighted the persistent issue of timely and adequate access to credit. Despite an increase in the overall credit supply to the sector, a significant credit gap remains a major impediment to MSME growth and development.
SIDBI’s report estimates the addressable credit gap for the MSME sector to be approximately ₹30 lakh crore. This substantial gap indicates that a significant portion of the credit needs of MSMEs are not being met by the existing financial ecosystem. This unmet demand can hinder expansion plans, limit working capital availability, and ultimately impact the overall competitiveness of these businesses.
Several factors contribute to this persistent credit gap. These include:
Information Asymmetry: Lenders often lack sufficient information about the creditworthiness and business viability of MSMEs, leading to reluctance in extending loans.
Collateral Requirements: MSMEs often struggle to provide adequate collateral to secure loans, particularly those in the early stages of operation.
Complex Application Processes: The lengthy and complex loan application processes can be daunting for small business owners, discouraging them from seeking formal credit.
Limited Financial Literacy: A lack of financial literacy among MSME owners can hinder their ability to understand loan terms, manage finances effectively, and present a strong case to lenders.
Addressing this credit gap requires a multi-pronged approach involving improved information sharing, innovative financing models, streamlined loan processes, and enhanced financial literacy programs tailored to the specific needs of the MSME sector.
Sector-Specific Policy Recommendations
SIDBI’s analysis extends beyond simply quantifying the credit gap; it also proposes sector-specific policy recommendations to address the unique challenges faced by different types of MSMEs. These recommendations recognise that a one-size-fits-all approach to MSME financing is ineffective and that targeted interventions are necessary to unlock the growth potential of each sector.
Focus on Manufacturing MSMEs:
Technology Upgradation Fund: Establish a dedicated fund to support the adoption of modern technologies and automation in manufacturing MSMEs. This will enhance productivity, improve product quality, and boost competitiveness in the global market.
Infrastructure Development: Invest in the development of industrial parks and clusters with state-of-the-art infrastructure, including reliable power supply, efficient transportation networks, and common facility centres. This will reduce operational costs and improve the overall business environment for manufacturing MSMEs.
Skill Development Programs: Launch targeted skill development programs to address the specific skill gaps in the manufacturing sector. These programs should focus on training workers in advanced manufacturing techniques, quality control, and machine operation.
Support for Service Sector MSMEs:
Digital Infrastructure: Provide access to affordable and reliable digital infrastructure, including high-speed internet and cloud computing services. This will enable service sector MSMEs to expand their reach, improve service delivery, and adopt innovative business models.
Marketing and Branding Support: Offer marketing and branding support to help service sector MSMEs build brand awareness, attract new customers, and compete effectively in the market. This could include access to online marketing platforms, participation in trade fairs, and assistance with developing marketing materials.
Access to Mentorship and Advisory Services: Facilitate access to experienced mentors and advisors who can provide guidance on business strategy, financial management, and operational efficiency. This will help service sector MSMEs overcome challenges and achieve sustainable growth.
Prioritising Agri-Based MSMEs:
Supply Chain Integration: Promote the integration of agri-based MSMEs into the broader agricultural supply chain. This will ensure access to raw materials, reduce post-harvest losses, and improve market access for their products.
Technology Adoption in Agriculture: Encourage the adoption of modern technologies in agriculture, such as precision farming, drone technology, and improved irrigation systems. This will increase agricultural productivity, reduce input costs, and improve the quality of agricultural produce.
Financial Products Tailored to Agriculture: Develop financial products and services that are specifically tailored to the needs of agri-based MSMEs, including crop insurance, working capital loans, and term loans for equipment purchase.
Improving Msme Access To Finance
Enhancing MSME access to finance requires a comprehensive strategy that addresses the various challenges hindering their ability to secure adequate and timely credit. Several key initiatives can be implemented to improve the financial landscape for these businesses.
Strengthening Credit Guarantee Schemes
Credit Guarantee Schemes (CGS) play a vital role in mitigating the risk for lenders and encouraging them to extend credit to MSMEs. Strengthening these schemes can significantly improve credit access. This can be achieved through:
Expanding Coverage: Increase the coverage of existing CGS to include a wider range of MSMEs, particularly those in underserved sectors or regions.
Simplifying Procedures: Streamline the application and claim settlement processes for CGS to make them more user-friendly for both lenders and borrowers.
Enhancing Awareness: Conduct awareness campaigns to educate MSMEs and lenders about the benefits of CGS and how to access them.
Promoting Digital Lending Platforms
Digital lending platforms offer a convenient and efficient way for MSMEs to access credit. These platforms leverage technology to streamline the loan application process, reduce processing times, and lower transaction costs. To further promote digital lending:
Creating a Regulatory Framework: Develop a clear and supportive regulatory framework for digital lending platforms that promotes innovation while ensuring consumer protection.
Facilitating Data Sharing: Encourage the sharing of credit information and other relevant data between digital lending platforms and traditional financial institutions to improve credit risk assessment.
Providing Training and Support: Offer training and support to MSMEs on how to use digital lending platforms effectively and manage their finances online.
Fostering Fintech Innovations
Fintech companies are developing innovative financial products and services that can address the specific needs of MSMEs. Supporting fintech innovations can significantly improve financial inclusion and access to credit. This can be done by:
Establishing Fintech Accelerators: Create fintech accelerators and incubators to support the development and scaling of innovative financial solutions for MSMEs.
Providing Seed Funding: Offer seed funding and venture capital to promising fintech startups focused on serving the MSME sector.
Encouraging Collaboration: Promote collaboration between fintech companies and traditional financial institutions to leverage their respective strengths and reach a wider range of MSMEs.
Improving Financial Literacy and Education
Lack of financial literacy can be a major barrier for MSMEs seeking access to finance. Improving financial literacy and education can empower MSME owners to make informed financial decisions and manage their businesses more effectively. Key initiatives include:
Developing Financial Literacy Programs: Create tailored financial literacy programs for MSMEs that cover topics such as financial planning, budgeting, credit management, and investment strategies.
Providing Mentorship and Advisory Services: Offer mentorship and advisory services to MSME owners to provide guidance on financial management and business growth.
Utilising Digital Platforms: Leverage digital platforms to deliver financial literacy content and resources to MSMEs in a convenient and accessible format.
May 14, 2025
Indian smes funding surge

Indian smes funding surge

Several key sources are fueling the current surge in funding for Indian SMEs. Venture capital firms, both domestic and international, are increasingly recognizing the potential of this sector and are actively deploying capital. Private equity investments are also on the rise, with funds targeting established SMEs looking to expand their operations and market reach. Banks, traditionally a major source of finance, are becoming more willing to lend to SMEs, driven by government initiatives and a greater understanding of the sector’s growth prospects.

Government schemes and policies play a crucial role in facilitating SME funding. Initiatives such as the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) provide guarantees to banks, encouraging them to lend to SMEs without collateral. The Startup India initiative has also fostered a more vibrant ecosystem for startups, attracting investment and providing access to funding opportunities. These government interventions are instrumental in lowering the barriers to external funding for Indian SMEs.

Fintech companies are emerging as significant players in the SME funding landscape. They leverage technology to streamline the lending process, offering faster and more convenient access to finance. Online lending platforms and peer-to-peer lending platforms are gaining traction, particularly among smaller SMEs that may find it challenging to secure funding from traditional banks. CPA Australia’s recent survey in 2024 highlights the growing importance of fintech in providing SME funding across India.
Sme Investment Trends
Investment patterns in Indian SMEs reveal a dynamic landscape. Early-stage ventures are attracting seed funding and angel investments, supporting innovation and disruptive business models. Growth-stage companies are securing larger rounds of funding to scale their operations, expand into new markets, and enhance their technological capabilities. Established SMEs are tapping into private equity and debt financing to fuel expansion plans, acquire competitors, or restructure their balance sheets. This diversified investment activity demonstrates the increasing sophistication of the SME sector in India.

Sector-specific trends are also evident in SME funding. Technology-driven SMEs, particularly those in e-commerce, fintech, and software development, are attracting significant investment. Manufacturing SMEs, especially those focused on exports and import substitution, are also witnessing increased funding activity. The healthcare and pharmaceuticals sectors are emerging as attractive investment destinations, driven by the growing demand for quality healthcare services. These sector-specific trends reflect the evolving priorities of investors and the changing dynamics of the Indian economy.

The increasing availability of external funding is having a positive impact on the growth and development of Indian SMEs. With greater access to finance, SMEs are investing in new technologies, expanding their production capacity, and hiring more employees. This, in turn, is driving economic growth, creating jobs, and contributing to the overall prosperity of India. The CPA Australia survey in 2024 also highlights a growing confidence among SMEs in their ability to secure funding and invest in their future. This positive outlook is further fueling the SME funding surge.
Impact On Indian Economy
The increased availability of external funding is poised to have a transformative effect on the Indian economy. As Indian SMEs gain access to the capital they need to grow and innovate, their contribution to the nation’s GDP is expected to rise significantly. This injection of finance will enable SMEs to expand their operations, modernise their infrastructure, and enhance their competitiveness in both domestic and international markets.

Job creation is another key area where the impact of increased SME funding will be felt. As SMEs grow, they will require more employees to manage their expanding operations. This will lead to a significant increase in employment opportunities, particularly in smaller towns and rural areas, thereby addressing the pressing issue of unemployment in India. The CPA Australia survey in 2024 indicates that a substantial portion of SMEs plan to increase their workforce as they secure additional funding.

Furthermore, the surge in SME funding is expected to stimulate innovation and entrepreneurship across India. With access to finance, entrepreneurs will be more willing to take risks and pursue new ideas, leading to the development of innovative products and services. This, in turn, will boost the competitiveness of the Indian economy and drive economic growth. The rise in SME funding will also encourage the formalisation of the informal sector, as more businesses seek external funding and comply with regulatory requirements. This will improve tax collection and contribute to the overall fiscal health of India.

May 13, 2025
Is india-uk fta a boon for msmes

Is india-uk fta a boon for msmes

The India-UK FTA holds significant potential benefits for Indian MSMEs. A key aspect is the anticipated boost to exports. By reducing or eliminating tariffs on a wide range of goods, the Free Trade Agreement can make Indian products more competitive in the UK market. This enhanced competitiveness can translate into increased export volumes and revenue for small businesses across various sectors. Access to the UK market, with its established consumer base and sophisticated supply chains, represents a considerable opportunity for growth.

Beyond trade, the India-UK FTA could also facilitate greater technology transfer and collaboration. MSMEs often face challenges in accessing cutting-edge technologies and innovative practices. The agreement could create avenues for partnerships between Indian and UK firms, enabling the transfer of knowledge, skills, and technologies. This could lead to improvements in productivity, efficiency, and product quality for Indian MSMEs, making them more competitive both domestically and internationally.

It’s important to note that the India-UK FTA isn’t a panacea for all the challenges faced by MSMEs. However, the potential benefits, particularly in terms of increased export opportunities and access to technology, are substantial. The impact of the Free Trade Agreement will depend on how effectively Indian MSMEs can leverage these opportunities and adapt to the changing trade landscape. Careful planning and strategic investments will be crucial for maximising the benefits of the India-UK FTA.
Challenges For Indian Msmes
Despite the potential benefits, the India-UK FTA presents several challenges for Indian MSMEs. Increased competition from UK firms is a primary concern. With reduced tariffs, UK companies may find it easier to penetrate the Indian market, potentially displacing domestic players. This is particularly relevant for sectors where UK firms possess a technological or cost advantage. Indian MSMEs will need to adapt and innovate to remain competitive in the face of this increased rivalry.

Compliance with UK standards and regulations also poses a significant hurdle. The UK has stringent requirements for product quality, safety, and environmental sustainability. Indian MSMEs seeking to export to the UK must ensure that their products meet these standards, which may require investments in upgrading production processes and obtaining certifications. This can be a costly and time-consuming process, especially for smaller businesses with limited resources.

Furthermore, access to finance remains a persistent challenge for many Indian MSMEs. To capitalise on the opportunities presented by the India-UK FTA, small businesses may need to invest in expanding their production capacity, upgrading technology, and marketing their products in the UK. However, securing the necessary funding can be difficult, particularly for businesses with limited collateral or a poor credit history. Without adequate financial support, many MSMEs may struggle to fully realise the potential benefits of the Free Trade Agreement.

Agitated farmers have staged protests expressing concerns about the potential impact of the India-UK FTA on the agricultural sector. They fear that increased import of agricultural products from the UK could depress domestic prices and harm their livelihoods. These concerns highlight the need for the government to carefully consider the impact of the agreement on vulnerable sectors and implement measures to protect the interests of farmers and other stakeholders. The India-UK FTA is not a panacea, and mitigating its potential negative impacts is crucial for ensuring its overall success.
Opportunities For Uk Msmes
The India-UK FTA also presents significant opportunities for UK MSMEs looking to expand their presence in the Indian market. India’s large and growing consumer base, coupled with its increasing disposable incomes, makes it an attractive destination for UK businesses. The Free Trade Agreement can lower barriers to entry, making it easier and more affordable for UK small businesses to export their goods and services to India. This could lead to increased sales and revenue for UK MSMEs, as well as the creation of new jobs.

Furthermore, the India-UK FTA could facilitate greater investment flows between the two countries. UK MSMEs may be more inclined to invest in India, either through setting up new operations or partnering with existing Indian firms. This could bring much-needed capital and expertise to the Indian market, helping to boost economic growth and create new opportunities for both Indian and UK businesses. The agreement could also encourage Indian firms to invest in the UK, further strengthening the economic ties between the two countries.

The potential for collaboration in technology and innovation is another key opportunity for UK MSMEs. India has a thriving tech sector, with a large pool of skilled engineers and IT professionals. UK MSMEs with expertise in areas such as artificial intelligence, fintech, and renewable energy could find valuable partners in India. The India-UK FTA could create a framework for collaboration on joint research and development projects, as well as the commercialisation of new technologies. This could lead to breakthroughs that benefit both countries and address global challenges.

Specifically, the manufacturing sector in India presents significant opportunities for UK MSMEs. The Indian government is actively promoting manufacturing through its “Make in India” initiative, and the India-UK FTA could further boost this effort. UK firms with expertise in advanced manufacturing technologies, such as robotics and automation, could help Indian manufacturers improve their productivity and competitiveness. This could lead to increased demand for UK equipment and services, as well as the creation of new jobs in both countries. The impact of this Free Trade Agreement could be transformational.
Navigating The Fta: Key Considerations
Navigating the India-UK FTA effectively requires a strategic approach from both Indian and UK MSMEs. For Indian small businesses, a thorough understanding of the UK market is paramount. This includes identifying target customers, understanding their needs and preferences, and adapting products and services accordingly. Market research, participation in trade fairs, and partnerships with UK distributors can all be valuable tools for gaining insights into the UK market. The impact of this should not be underestimated.

For UK MSMEs, a similar level of due diligence is required when entering the Indian market. India is a diverse country with varying consumer preferences and regulatory requirements across different states. Understanding these nuances is crucial for success. Partnering with local distributors or consultants can provide valuable assistance in navigating the complexities of the Indian market. The Free Trade Agreement is not a panacea, and careful planning is essential.

Access to information and resources is also critical for MSMEs to fully leverage the India-UK FTA. Governments and trade organisations in both countries should provide clear and concise information about the agreement, including tariff schedules, rules of origin, and regulatory requirements. Training programs and workshops can also help MSMEs develop the skills and knowledge needed to succeed in international trade. This is especially important for smaller businesses with limited experience in export or import.

Furthermore, it’s essential to address potential challenges proactively. For instance, Indian MSMEs should invest in upgrading their technology and processes to meet UK standards. They should also explore options for accessing finance to support their export activities. Similarly, UK MSMEs should be prepared to adapt their products and services to the Indian market and to comply with local regulations. Addressing these challenges head-on will increase the likelihood of success under the India-UK FTA. The benefits are there to be taken, but it takes work.

Ongoing monitoring and evaluation are essential to assess the impact of the India-UK FTA on MSMEs. Governments and trade organisations should track key indicators such as export volumes, investment flows, and job creation to understand the effects of the agreement. This information can be used to refine policies and programs to better support MSMEs in both countries. The India-UK FTA presents a significant opportunity for growth, but its success will depend on careful planning, proactive problem-solving, and continuous improvement. The India-UK FTA can lead to a trade boom, but only if it is used correctly.

May 12, 2025
Promoters raise holdings

Promoters raise holdings

Several promoters of Indian companies have strategically increased their stakes in their respective firms recently. This move signifies a growing confidence amongst key stakeholders in the long-term prospects of their businesses. Data reveals a noticeable uptick in promoter shareholding across various sectors, indicating a broader trend rather than isolated incidents.

The increase in holdings has been achieved through various means, including open market acquisitions, preferential allotments, and creeping acquisitions. These investments demonstrate a proactive approach by promoters to capitalise on perceived undervaluation and reinforce their commitment to the company’s future growth. The specific percentages of increase vary, but the overall impact is a strengthening of promoter control and alignment of interests with other shareholders.

Furthermore, this increased activity in the stock market suggests that promoters view the current market conditions as favourable for long-term investment. Some promoters may view the current weakness as an opportunity to increase their ownership at relatively lower prices. This strategic move not only bolsters their position but also sends a positive signal to the market regarding the company’s intrinsic value.
Companies Involved
The companies witnessing increased promoter activity span a diverse range of sectors, including finance, manufacturing, and technology. Notable examples include a prominent non-banking financial company where promoters increased their stakes through open market acquisitions, signaling their belief in the company’s future growth trajectory. Similarly, in the manufacturing sector, the promoter group of a leading engineering firm augmented their shareholding via preferential allotment, reinforcing their commitment to expansion plans. These are just a few instances of a wider trend.

Several mid-sized Indian companies have also experienced significant increases in promoter holdings. In many of these instances, promoters took advantage of a perceived weakness in the stock market to consolidate their positions. This suggests that promoters are not only focused on short-term gains but are also looking to strengthen their long-term control and influence over their companies. This strategic investment demonstrates confidence in the underlying strength and potential of these businesses, even amidst market volatility.

Furthermore, there are examples of smaller, family-owned businesses where promoters have increased their stakes through creeping acquisitions. This gradual increase in shareholding allows promoters to solidify their control without triggering mandatory open offer requirements. Regardless of the specific method employed, the common thread is a renewed commitment by promoters to their respective businesses, underlining a positive outlook for the future. This increase is a demonstration of faith in the companies’ future.
Reasons Behind Increase
Several factors underpin this recent surge in promoter shareholding across Indian companies. One primary driver is the perception of undervaluation. Promoters often believe their company’s stock price does not accurately reflect its intrinsic value, particularly during periods of market volatility or sector-specific challenges. By increasing their stakes, they aim to capitalise on this perceived discrepancy and benefit from future price appreciation.

Another significant reason is the desire to consolidate control and strengthen their influence over strategic decision-making. In an increasingly competitive business environment, promoters seek to ensure their vision for the company’s future is effectively implemented. A higher shareholding provides greater voting power and allows them to navigate challenges more effectively. This proactive approach to governance aims to enhance long-term stability and performance.

Furthermore, regulatory changes and a more stable economic outlook may also contribute to this trend. The Indian government’s efforts to improve the ease of doing business and promote investment have created a more favourable environment for companies. Coupled with expectations of sustained economic growth, promoters are increasingly confident in the long-term prospects of their businesses and are willing to make significant investments to reinforce their positions.
Market Impact
The increased promoter shareholding is likely to have a multifaceted impact on the stock market. Firstly, it can be interpreted as a positive signal, boosting investor confidence and potentially leading to an increase in share prices. When promoters demonstrate their faith in the company by increasing their stakes, it sends a strong message to the market that the company is undervalued and has strong growth prospects. This, in turn, can attract further investment from both retail and institutional investors, driving up demand for the company’s shares.

However, the impact isn’t uniformly positive. In some instances, a significant increase in promoter holdings could reduce the free float of shares available in the market. This reduced liquidity might lead to increased volatility and potentially make it more difficult for smaller investors to trade the stock. The perception of reduced liquidity can also deter some institutional investors who require a certain level of trading volume for their investment strategies. Thus, the net effect on share prices can be complex and depend on a variety of factors, including the overall market sentiment and the specific circumstances of the Indian companies involved.

Furthermore, increased promoter stakes can influence corporate governance dynamics. While a stronger promoter presence can streamline decision-making and ensure alignment with long-term strategic goals, it could also raise concerns about minority shareholder rights. It is crucial that promoters act in the best interests of all shareholders, not just their own, to maintain market confidence and ensure fair value discovery. Increased scrutiny from regulatory bodies and investor activism may arise to ensure that corporate governance standards are upheld and that minority shareholders’ interests are adequately protected. The long-term sustainability of the increase depends on how promoters exercise their strengthened control.

May 12, 2025
Govt partners hafele india to empower local startups

Govt partners hafele india to empower local startups

The primary objective of the partnership between the government and Hafele India is to empower local startups and MSMEs operating within the furniture and interior design sectors. This collaborative effort aims to provide these burgeoning businesses with the resources and support necessary to scale their operations and enhance their competitiveness in both domestic and international markets. The govt recognises the critical role that startups play in driving innovation and economic growth, and this partnership seeks to create a conducive ecosystem for them to thrive.

A key focus of the partnership is to boost the manufacturing capabilities of these startups. By facilitating access to advanced technologies, industry best practices, and expert mentorship, the initiative aims to help them improve product quality, streamline production processes, and reduce costs. This will enable them to better compete with established players and expand their market reach. The collaboration also intends to foster a culture of innovation and entrepreneurship, encouraging startups to develop unique and cutting-edge solutions that address the evolving needs of the furniture and interior design industry.

Furthermore, the partnership between the govt and Hafele India seeks to create employment opportunities within the local communities where these startups operate. By supporting their growth and expansion, the initiative aims to generate new jobs and contribute to the overall economic development of these regions. The long-term vision is to establish India as a global hub for furniture and interior design innovation, driven by the ingenuity and dynamism of its startup ecosystem. The success of this partnership hinges on the active participation and collaboration of all stakeholders, including the government, Hafele India, and the startups themselves.
Hafele’s Role
Hafele India, as a key partner in this initiative, will leverage its extensive industry expertise, global network, and technological resources to support the growth and development of the selected startups. The company will provide access to its state-of-the-art manufacturing facilities, design tools, and supply chain infrastructure, enabling startups to enhance their operational efficiency and product quality. Furthermore, Hafele India will conduct workshops and training programs to impart valuable knowledge and skills to the startups, covering areas such as product design, manufacturing processes, marketing strategies, and financial management.

In addition to providing access to resources and expertise, Hafele India will also play a crucial role in connecting the startups with potential investors, customers, and partners. Through its established network, the company will facilitate opportunities for the startups to showcase their products and services, forge strategic alliances, and secure funding for their expansion plans. Hafele India’s commitment to innovation and sustainability will also be reflected in its support for startups that are developing eco-friendly and technologically advanced solutions for the furniture and interior design industry. The goal is to empower these local businesses to not only succeed in the domestic market but also to establish a strong presence in the global arena. This partnership between the govt and Hafele India aims to boost the entire ecosystem.

Hafele India will also offer mentorship programs, pairing experienced industry professionals with the startups to provide guidance and support on various aspects of their business. These mentors will share their insights, best practices, and lessons learned, helping the startups to navigate the challenges of entrepreneurship and accelerate their growth trajectory. This mentorship aspect of Hafele India’s role is considered vital for fostering a new generation of innovative leaders within the furniture and interior design sectors. By actively engaging with these MSMEs and providing tailored support, Hafele India aims to contribute significantly to the success of this partnership.
Startup Benefits
Participating startups stand to gain significantly from this collaborative effort. They will receive invaluable access to resources, mentorship, and market opportunities that would otherwise be difficult to obtain. The boost in manufacturing capabilities, facilitated by access to Hafele India’s facilities and expertise, will enable them to produce higher-quality products at competitive prices. This will strengthen their position in the market and enhance their ability to attract customers. Furthermore, the knowledge and skills gained through workshops and training programs will empower them to improve their business operations and make informed decisions.

The partnership will also provide startups with a platform to showcase their innovations and connect with potential investors and partners. This increased visibility can lead to new collaborations, funding opportunities, and market expansion. The support from Hafele India will enable startups to overcome common challenges such as limited access to capital, lack of industry expertise, and difficulties in reaching a wider customer base. By addressing these obstacles, the initiative aims to create a level playing field and foster a more inclusive and dynamic entrepreneurial ecosystem. The ultimate goal is to help these startups grow into successful and sustainable businesses that contribute to the economic prosperity of their local communities.

Moreover, the emphasis on innovation and sustainability within the partnership will encourage startups to develop cutting-edge solutions that address the evolving needs of the furniture and interior design industry. This will not only enhance their competitiveness but also contribute to a more environmentally friendly and socially responsible sector. The mentorship programs, in particular, will provide invaluable guidance and support to the startups, helping them to navigate the complexities of entrepreneurship and build strong, resilient businesses. The combined effect of these benefits is expected to significantly accelerate the growth and development of the participating startups, positioning them for long-term success.

May 9, 2025