Analysing the Role of the Micro, Small and Medium Enterprises in India’s Economic Growth

Abstract

The Micro Small and Medium Enterprises (MSME) sectors are one of the largest contributors to India’s GDP leading to socio-economic development in the country. MSMEs generate employment as per the 73rd round of the National Sample Survey (NSS) 11.10 crore jobs The Gross value added by MSMEs was around 30% in 2019-20. The share of MSME exports in India’s total exports stands at 49.5 % in 2020-21. Unfortunately, the MSMEs faced major challenges during COVID-19, more than 67 % of MSMEs were shut down and witnessed an above 25 % fall in their revenue (SIDBI report). Reduced employment, revenue loss, and cash flow hindrance were the major challenges in sustaining their business during COVID-19. The study is based on an extensive literature review and secondary data analysis from published reports. The objective of this study is to analyze the role of MSMEs in India’s economic growth and their performance during and post-COVID-19. Trend analysis is used to depict the growth of MSMEs and a correlation test is performed to analyze the relationship between the economic growth, the manufacturing sector’s growth rate, and the unemployment rate. The result shows a strong positive correlation between economic growth and manufacturing growth and a strong negative correlation between economic growth and unemployment. Further to measure the causal relationship between both variables a regression test is performed.