MSME formalisation leaps forward as Udyam registrations cross 6.2 crore mark

Over 6.2 crore MSMEs have been registered on the Udyam portal, the online registration system for Micro, Small, and Medium Enterprises (MSMEs) by March 2025 as compared to 2.5 crore as of March 2024. The step up in the number of registrations indicate the continuing formalisation of the Indian MSME sector, says a report published by SIDBI.

The report provides insights into the Indian MSME sector based on a survey of 2,097 MSMEs across 19 sectors in manufacturing, services, and trading. It covers key challenges such as access to finance, technology adoption, competition, compliance, market access, infrastructure, supply chain, and skilled labour availability.

According to the report, formalisation is still a work in progress in the micro enterprise segment with 35% of the survey respondents remaining unregistered, reflecting lack of awareness and fear of scrutiny. While 18% of the MSME respondents said they have availed digital lending platforms, 90% said they accept digital payments, reflecting progress in digitalisation and a large emerging opportunity in the MSME digital lending space. “While an increased credit supply to MSMEs is in evidence, the study broadly estimates that the sector still has an addressable credit gap of about 24% or about Rs 30 lakh crore. The gap is higher in the services sector at 27%; it is estimated to be also higher at 35% for women owned MSMEs. Specific policy initiatives may need to be explored to reduce the credit gap in these segments," the report said.

The report also pointed out that 18% of surveyed MSMEs face intense competition and struggle to expand into new markets particularly in sectors such as hospitals, hotels, and IT & ITeS. Around 70% of the survey respondents continue to use traditional modes of marketing which hinders their scalability and ability to remain competitive, it said.

In terms of export performance, the survey notes that MSMEs have increased their share in merchandise exports from 43.6% in FY2023 to 45.7% in FY2024. The survey reveals that apart from credit access and high competition, supply chain is one of the key challenges for the exporting MSMEs amidst the global uncertainty on tariffs. However, they are better positioned in terms of technological adoption compared to non-exporters, the report suggests.