Ease of Doing Business for MSMEs: The share of 6.3-crore strong micro, small and medium enterprise (MSME) sector in the country’s gross domestic product (GDP) dropped from 30.50 per cent during the financial year 2018-19 and FY20 to 26.83 per cent during the first year of the Covid pandemic 2020-21, official data showed. MSMEs’ share in the GDP had earlier increased from 29.25 per cent in FY17 to 29.69 per cent in FY18.
While the data for the previous financial year 2021-22 wasn’t shared by Minister of State for MSMEs Bhanu Pratap Singh Verma in his written reply to the question on the contribution of the MSME sector to GDP in the Lok Sabha on Thursday, the drop in FY21 assumed significance as the government has been looking to boost MSME sector’s overall performance in the coming years.
Former MSME Minister Nitin Gadkari in 2020 had set a target of increasing MSMEs’ share in exports to 60 per cent from 48 per cent and 5 crore additional jobs apart from the jump in GDP share to 40 per cent by 2025.
Meanwhile, a Crisil report as well in June this year had noted that over a quarter of Indian MSMEs had lost their market share of more than 3 per cent due to the Covid pandemic while half of them suffered a contraction in their earnings before interest, tax, depreciation and amortisation (Ebitda) margins because of a sharp rise in commodity prices last fiscal, compared with the pre-pandemic (FY20) level.
The SME Report 2022 analysed 69 sectors and 147 clusters having revenue of Rs 47 lakh crore, representing nearly a fourth per cent of India’s GDP. “SMEs in several sectors saw market share loss of over 3% and Ebitda margin erosion compared with fiscal 2020 last fiscal. For instance, the pandemic-induced supply chain disruptions impacted small pesticides manufacturers more. On the other hand, large ones leveraged their global presence to procure raw materials, so could eat up a huge chunk of the SME pie,” said Pushan Sharma, Director, CRISIL Research.
According to SBI Research, India’s economy grew by 8.7 per cent in FY22 to Rs 147 lakh crore, only 1.5 per cent higher than the pre-Covid year of FY20. For FY23, the real GDP growth is projected to be at 7.5 per cent.
The government, last week, also reported a dip in MSMEs’ share in the country’s annual merchandise exports to 45.04 per cent in FY22 in comparison to 49.75 per cent during FY20 and 49.35 per cent during FY21. However, the MSME exports’ value had surged 21.8 per cent from $155.9 billion during FY20 and 31.9 per cent from $143.9 billion during FY21 to $190 billion during FY22.