MSMEs Contribute 62% To Employment In India: McKinsey Global Institute

A recent report by the McKinsey Global Institute (MGI) sheds light on the significant yet nuanced role of micro, small, and medium enterprises (MSMEs) in India's economy. While these enterprises contribute substantially to employment, comprising 62% of the workforce, their contribution to the overall business value added is comparatively lower at 30%, with micro-MSMEs dominating employment figures. Despite their pervasive presence, MSMEs in India face productivity challenges, operating at only 26% of the productivity level of larger corporations. However, the report highlights the potential for growth by fostering collaborations between MSMEs and larger entities, citing that such interactions can lead to mutual benefits and narrowing the productivity gap, potentially adding up to 10.5% to India's GDP.

Furthermore, the report underscores the importance of inter-enterprise interactions, noting that MSMEs' productivity is notably higher when engaged in business-to-business interactions with larger corporations. It emphasizes the need for strategic linkages between MSMEs and larger firms, particularly in sectors where India's large companies demonstrate high productivity. By leveraging these synergies, MSMEs stand to enhance their productivity levels and contribute more significantly to India's economic output, particularly in sectors such as computer programming, telecommunications, manufacturing, and others identified as high-potential subsectors.