MSMEs Saw Positive Growth In First Six Months Of 2022

The first six months of 2022 have been growth positive for micro, small and medium enterprises (MSMEs) across all the categories and regions, the 2022 Mid-Year MSME Business Sentiment Survey by fintech firm Khatabook said.

The firm surveyed 7,295 MSME businesses through which it was found that a total of 71 per cent of businesses are optimistic about growth in the remaining six months of this year and only 5 per cent expect a dip in this time period.

Ravish Naresh, CEO, and co-founder, Khatabook, said, “We are seeing a steady improvement in the actual business performance. For the next two quarters in 2022, 71 per cent is a high business performance optimism score by the MSME community. I hope the actual business performance feedback in the next survey aligns with this optimism score.”

According to the survey, MSME ecosystems in all the states are growth positive, with Telangana, Rajasthan, Maharashtra and Gujarat being at the top. All the categories have displayed growth, including those in negative growth in 2021, like industrial services, stationery and home furnishing. Pharma, salons, and restaurants and eatery are the top growth categories in the first two quarters of 2022.

About 66 per cent of businesses mentioned they had no significant business-related issues. In contrast, others said weak demand, credit availability and liquidity, and payment collection were some of the major concerns, found the survey.

Of 7,295 MSMEs surveyed, 58 per cent witnessed improvement in business from January to June 2022, while 14 per cent of businesses saw a dip in business during the period as compared to 23 per cent in the last six months of 2021.

Sentiment improved across retailers, wholesalers, distributors and manufacturers. Major improvement was seen among wholesalers and distributors, while manufacturers saw the least improvement in sentiment index scores, the survey found.

The micro, small, and medium enterprise (MSME) sector is important for creating jobs and is sometimes referred to as the “backbone” of the Indian economy because it employs a large number of people. The sector also generates low-cost employment opportunities in rural areas, which helps reduce the economy’s regional imbalance. MSMEs account for 33.4 per cent of India’s manufacturing output and contribute 45 per cent of the country’s total exports. They also employ over 114 million people.

External influences have a major impact on the sector. COVID-19 has impacted every sector of the economy, but MSMEs have been particularly hard hit due to supply-side disruption and demand reduction. The rising costs have been the headline for the last few months as the inflation is at a 17-year high according to some estimates. Due to the Ukraine crisis and a weak rupee, the annual whole selling price (WPI) inflation rate jumped to 15.08 per cent in April 2022, causing alarm among businesses.

There are over 6.3 crore micro, small and medium enterprises (MSMEs) in India and most of them are facing one major problem — access to capital. Whether it is investment opportunities or credit facilities, Indian MSMEs have been largely financially excluded.

Even though the Reserve Bank of India (RBI) has made MSME into a priority lending sector, the lack of data on these small businesses hasn’t been helping. Yet, fintechs and digital businesses have been gearing up to lend to small businesses, who have been left out of the financial system for too long.