Union Budget 2025-26: Here are the key challenges in the MSME sector

A PwC report

 

MSME

 

Key challenges

 

*  A major share of MSMEs are unincorporated and non-agricultural, resulting in exclusion from government support programmes due to lack of formalisation, hindering their growth

 

*  Lack of credit history, inability to provide collateral, high borrowing costs, and limited capacity to service debt obstruct their working capital management and scaling opportunities

 

*  MSMEs face informational asymmetries, limited consumer visibility, and weak branding and marketing capabilities, making it difficult to establish their brands

 

*  High costs of R&D, product design, technology acquisition, and production upgrades prevent MSMEs from diversifying and updating their product portfolios 

 

Industry ask

 

*  There is a need to expand access to affordable financing. Business loans in India, with rates exceeding 10% p.a., remain challenging for MSMEs 

 

*  Small-scale ops and low profit margins make MSMEs less attractive to lenders and investors. Upscaling initiatives like the socially responsible investing fund can help mobilise PE and foreign expertise

 

*  MSMEs face hurdles in accessing information, and business connections. Market-driven interventions like training, capacity building, global B2B platforms, and export acceleration centers at the sectoral/district level are critical to boost MSME exports

 

*  Supporting MSMEs requires robust industrial, social, and logistical infrastructure. Programs like RAMP should converge with initiatives like the National Industrial Corridor Development Program to establish MSME growth hubs