Delayed payments continue to hit MSMEs, ₹8.1 trillion stuck: Eco Survey

Delayed payments worth ₹8.1 trillion continue to choke MSME cash flows, with fear of losing business ties discouraging firms from pursuing legal remedies, says Economic Survey

The persistence of delayed payments remains a critical challenge for the Micro, Small and Medium Enterprises (MSME) sector, with an estimated ₹8.1 trillion locked in delayed payments, impacting working capital and restricting growth, the Economic Survey tabled on Thursday by Union Minister for Finance and Corporate Affairs Nirmala Sitharaman said.

 

“When an MSME files a delayed payment case against a buyer, it may strain or even damage the business relationship. Buyers may perceive the filing as an adversarial step and may stop placing new orders or discontinue the partnership altogether. Since MSMEs rely heavily on long-term commercial ties, the fear of losing future business prevents them from pursuing legal options, even when large dues remain pending,” the survey said.

 

 

The survey further added that MSMEs form the backbone of India’s industrial economy. It mentioned that the sector accounts for approximately 35.4 per cent of manufacturing, around 48.58 per cent of exports, and 31.1 per cent of GDP in the country. With over 7.47 crore enterprises employing more than 32.82 crore people, the sector holds its position as the second-largest employer after agriculture.

 

“Globally, MSMEs make up about 90 per cent of businesses and are responsible for over 50 per cent of total global employment. With India’s manufacturing sector positioned for greater global integration, the MSME sector’s role is critical in enabling effective supply-chain participation, fostering local value addition, and supporting inclusive regional growth,” the survey stated.

 

The survey also added that MSME credit has maintained a positive trajectory in recent times, bolstered by several government interventions aimed at enhancing credit flow to the sector.

 

The survey mentioned that MSME credit remained the primary driver of industrial credit growth during H1FY26. The overall MSME credit growth year-on-year has significantly outpaced the year-on-year growth observed in large industry credit.

 

The SME public markets have also witnessed a dramatic expansion over the past two years, driven by buoyant market conditions and digital retail participation.

 

The Self-Reliant India (SRI) Fund, launched to infuse ₹50,000 crore as equity funding in MSMEs, has assisted 682 MSMEs by way of investment worth ₹15,442 crore, as of November 30, 2025. Innovation is also being institutionalised through the MSME-Innovative component, which facilitates incubation, design interventions, and the protection of IPR.

 

India accounted for an estimated 2.9 per cent of global manufacturing gross value added and 1.8 per cent of global merchandise exports in 2024, indicating considerable potential for expanding its global manufacturing footprint.

 

“From the perspective of advanced manufacturing strategy, which includes India’s R&D-intensive innovative technology, this would help improve and enhance competitiveness,” the survey noted.