How to Tackle Common MSME Problems in India’s Competitive Market?

IMSMEs in India account for approximately 30% of the country's GDP and around 45% of total export output. They are the backbone of Indian economic development. Yet, MSME problems persist, and the challenges faced by them have not subsided.

There is still a lot of work to be done for MSMEs in India to promote organic competition and reduce the roadblocks they face. So, what are these problems faced by MSME sector, and how are they impeding their growth? Let us find out.

Here are some key issues that hinder the growth of MSMEs in India:

• Limited Access to Finance

  A significant number of MSMEs face inadequate financing as a result of weak credit history, insufficient collateral, or complex lending procedures. This financial constraint limits their ability to invest in infrastructure, technology, or expansion, which ultimately limits their growth. Even when financing schemes are designed specifically for MSME financing by the government, banks, or even private lenders, they often go unused due to either a lack of awareness among MSMEs or strict procedures.

• Technological Obsolescence

  MSMEs can easily fall victim to being at a disadvantage due to outdated machinery, legacy software, and low digital adoption. Many MSMEs can’t afford to update equipment, which makes them less competitive in terms of productivity, efficiency, and customer experience. The effects of technological obsolescence also limit MSMEs' ability to integrate into modern supply chains and digital marketplaces. This is one of the core problems of MSMEs in India that needs to be addressed to bridge the gap between them and large enterprises for a healthy marketplace.

• Skilled Labour Shortage

  Finding and retaining skilled labour is a constant challenge for MSMEs. Many are located in semi-urban or rural areas where finding trained or skilled staff can be challenging. Additionally, most MSMEs are unable to compete with large companies on salary and benefits, resulting in high employee turnover rates and decreased productivity.

• Regulatory Compliance Burdens

  MSMEs can find themselves juggling multiple competing laws, taxation, and regulatory arrangements. The administrative burden of domestic compliance under different federal and state regimes is time-consuming and expensive. This is more of a burden for small firms that lack an internal legal or compliance function. For instance, multiple elements like compliance under GST, compliant labour practices, and obtaining specific permits or licenses, in certain sectors, can prove to be too much to manage for MSMEs.

• Market Access Limitations

  Many MSME problems are caused by limited marketing budgets and presence through social media or online channels. Similarly, many small businesses do not have access to global market networks or have enough experience using e-commerce platforms to proactively sell exports. If companies lack branding, visibility, and distribution, it is often very difficult for their products to compete in the market for a fair value against bigger brands.

To mitigate their constraints, the Indian government has undertaken several initiatives aimed at enhancing MSMEs' access to finance, technology, and knowledge. Here is a glance at some support mechanisms.

• Credit Guarantee Schemes

  The CGTMSE (Credit Guarantee Fund Trust for Micro and Small Enterprises) allows MSMEs to avail of collateral-free bank loans. CGTMSE provides credit guarantee coverage of up to 75–85%, depending on the loan size and category of the enterprise. With this help from the government, small businesses can access financing even though they may not have significant collateral to offer.

• Digital Lending Platforms

  Initiatives like the PSB Loans in 59 Minutes have created a means for MSMEs to borrow money through an online process that results in much quicker loan approvals for MSMEs. Digital lending platforms reduce paperwork and increase transparency. They expedite the disbursal of loans, making credit easier to access and providing a hassle-free experience. This is further made simpler to avail for first-time borrowers or MSMEs not located close to banking institutions.

• Awareness Programs and Guidebooks

  The government periodically publishes guidebooks, pamphlets, and conducts training sessions. The goal of this is to increase awareness among MSMEs about compliance, funding strategies, and ways to scale. Increasing awareness allows MSMEs to fill significant knowledge gaps while ensuring MSMEs can make informed decisions and take up available schemes and incentives.

Dun & Bradstreet supports MSMEs by going beyond just credit ratings. Here’s how D&B services for MSMEs make a real difference by offering tools and insights that help them overcome core business challenges.

• Embracing Technology and Innovation

  D&B services for MSMEs provide data-driven solutions that encourage digital adoption, helping businesses upgrade operations, streamline processes, and stay competitive in a tech-driven market.

• Skill Development and Training

  D&B services for MSMEs seek to promote knowledge-building and business capability enhancement through workshops and knowledge sessions, leading MSMEs to make better business decisions and operate more efficiently overall.

• Simplifying Compliance Processes

  D&B services for MSMEs include support in navigating regulatory norms, helping businesses manage compliance requirements smoothly and reducing risks associated with non-adherence.

• Exploring New Markets

  Dun & Bradstreet also provides global data and market intelligence to MSMEs, which can help them uncover new opportunities for business expansion and enter markets they may not have previously considered.

• Building Strategic Partnerships

  Dun & Bradstreet helps businesses identify and assess verified partners and suppliers through its global data directory. This fosters a culture of trust and longevity for productive collaborations that support steady growth and operational efficiency for MSMEs.

With the numerous challenges faced by MSMEs in India, the best solution boils down to getting the right support. Choosing the right partner to assist with your MSME problems can turn obstacles into opportunities quite efficiently. For gaining market access to tackling funding gaps, the right support can open informed decisions and proactive steps for better growth.

Partnering with experts like Dun & Bradstreet helps MSMEs have a strategic advantage. Learn more about D&B services for MSMEs, to future-proof your business, improve your decision-making, and sustain business performance in a competitive environment.