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India’s MSME Landscape: The Expansion of a Formal Economy

Overview: The MSMEs of India have made notable progress to even have more than 4. This resulted in the establishment of 5 crore units that were registered with the Ministry of MSMEs, which shows a significant shift towards the incorporation of these enterprises in the formal economy. This piece looks at the data that has surfaced from the Udyam registration portal and concentrates on the formation of MSMEs, the journey toward formalization and the advantages of registration.

Micro Enterprises Dominate: As it is evident from the above data, out of the total registered MSMEs, as many as 98. 1% are of Microenterprises, thereby proving their importance in shaping the economy of India. This segment also includes other non-GST entities such as Street Vendors which is a clear indication that the formal economy cuts across a vast area.

MSME Formalization Journey: The process of MSMEs bringing them under the legal entity has been a slow transition and this has been done through the help of the Udyog Aadhaar Memorandum (UAM) and Udyam registration. The shifting of epoch from EM-II to UAM, and now to the Udyam is indicative of the government’s proactive measures to simplify the registration process and expand the plethora of advantages to a broader spectrum of MSMEs.

Benefits of Udyam Registration: MSMEs can be registered under the Udyam which gives them entry to multiple benefits which include selling on the government e-commerce portals such as GeM, priority sector lending, and public procurement. However, there are some constraints that are applicable to wholesale and retail traders who are barred from availing of the benefits of priority-sector lending in their businesses.

Impact on Employment: The registered MSMEs have been able to make a combined report of over 19. The funds will create over 5 crore jobs to market more than four crore rupees. an estimated 3 crore women employees due to which the sector has been playing a vital role in employment generation for women in the country.


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