Economic Survey Flags Credit Risk as Biggest Challenge for MSMEs, Growth Role Intact

• The Economic Survey 2025–26 identifies access to formal credit as the primary risk for India's MSMEs, despite their crucial role in manufacturing, exports, and employment.
• Lack of finance is cited by 27% of MSMEs as their biggest obstacle, mainly due to limited collateral and weak documentation, affecting micro and first-time borrowers.
• MSMEs contribute significantly to India's economy, accounting for 35.4% of manufacturing output, 31.1% of GDP, and nearly 48.6% of total exports.
• Despite financing constraints, MSME exports surged to ₹12.39 lakh crore in 2024–25, contributing 45-46% of India's total exports, with the number of exporting MSMEs tripling.
• The survey recommends expanding cash-flow-based lending and accelerating digital lending partnerships to address credit gaps, emphasizing its macroeconomic importance.

Why It Matters: Economic Survey highlights credit risk as the top challenge for MSMEs, crucial for India's economic growth.