Top Challenges faced by MSMEs in India: Solutions to Overcome them

Navin was once reading an interview of the young entrepreneur, Mr. Kaushal Dugar. Mr. Dugar used innovation in technology and supply chain to start ‘Teabox,’ with a vision to build India’s first global tea brand. This kicked Navin, a young adult with entrepreneurial dreams, towards driving faster on this path of starting a new business. He got to know about various government schemes through the Udyami helpline, low business loan interest rates, and collateral-free loans for new businesses offered by banks and financial institutions. He then ended his search by taking a business loan at an affordable rate.

Today, the ‘Make in India’  initiative by the Indian government is integral to the growth of entrepreneurship across the country. Therefore, small and medium-sized entities, popularly known as the Micro, Small, and Medium Enterprises (MSMEs), are very significant for strengthening the Indian economy. Their success encourages young people, like Navin, from small towns to pursue self-employment through business innovations.

Main Challenges faced by MSMEs in India

Despite the crucial role played by the MSMEs in Indian economic growth, the sector is facing several challenges that prevent it from reaching its true potential.

Financial Challenge

A critical challenge in this sector is the lack of financial literacy. As MSME owners are from remote regions, they are typically unaware of the special financial privileges given to them by the government. Unlike big companies, they do not enjoy creditworthiness as their owners do not have sufficient assets to offer as collateral to the lenders. Lenders often lack the faith of regular receipt of loan EMIs and repayment of loans. Consequently, they are compelled to borrow from the unorganized sector.


MSME owners should be updated about the latest schemes and benefits offered by the government and lenders offering low business loan interest rates, easy processing, and flexible loan repayment structure. Such information can be procured by reading news updates, regularly approaching government officials, and being part of local groups. The government also educates and informs people through advertisements in newspapers, TV, and social media.

Ineffective Marketing

MSMEs are struggling to cope up with the current competitive market due to a lack of managerial and marketing skills, inadequate knowledge of market trends, absence of market analysis to boost sales and acquire new consumers, etc. MSMEs face challenges to stand firm against big business houses due to the lack of professional exposure towards levels such as branding, marketing, distribution.


There are various groups formed by the government or the MSMEs themselves to help other MSMEs learn the nuances of the business and thus, procure more customers and orders. They may charge nominal fees for their services. MSMEs may consider being part of such groups. It helps them connect with peers and professionals for better marketing and pricing strategies to withstand competition.

Technology and Infrastructural challenges

Indian MSMEs face these challenges due to a lack of up-to-date knowledge of the latest technological developments in the market. In certain cases, the inability to use computers and basic invoicing and accounting software results in limited expansion of business.

Besides, the main infrastructural issues in semi-urban and rural regions are frequent power cuts, restricted water supply, poor internet connectivity, poor roads, etc. This adversely affects the productivity and profitability of the MSMEs.


MSME owners should enroll themselves in government IT development programs to get better access to modern technology. For instance, knowledge of basic technologies like the business loan EMI calculator can help them ascertain the EMIs payable over a period of time.

Installing power generators or solar panels can help to overcome the power cut issue.

Unskilled Labor

India has a large pool of human resources, yet industries are facing challenges in procuring skilled manpower. Also, poor employee management and lack of training facilities lead to wastage of time and money.


MSME owners should organize in this area and combine their efforts to provide on-the-job training to new employees, higher wages or recognition to deserving persons, better training infrastructure, etc.


In short, MSMEs need to utilize the limited resources in an optimum and collective manner. They should be educated and informed about business loan, schemes, and skills to help the sector grow.

The government also rolls out different schemes to empower the MSMEs to overcome the obstacles. Being aware of such schemes and taking their benefits, and helping the MSMEs in business expansion.