SIDBI has released a report titled ‘Understanding the Indian MSME Sector: Progress, and Challenges’. The report provides comprehensive insights into the rapidly growing MSME sector in India, based on both primary and secondary research. It includes industry, gender, and regional-level analyses, drawn from a primary survey of more than 2,000 MSMEs across 19 industries. The survey offers a deeper understanding of ground-level trends in the MSME sector and highlights the sector's growth, challenges, and opportunities. In particular, the report provides insights into women entrepreneurship and sustainability initiatives, aligning with the Government’s focus on these areas. The study also offers an estimate of the credit gap in the MSME sector.

The key findings of the study are mentioned below:

• Formalization Drive: The MSME sector, especially micro and small enterprises, has seen significant formalization through Udyam Registration and Udyam Assist Portal, with over 6.2 crore registrations by March 2025 (up from 2.5 crore in March 2024). 
• Access to Credit: The survey respondents consider timely and adequate credit access as one of their key challenges despite the comprehensive policy initiatives in that regard. While borrowings from informal sources are minimal for small and medium enterprises at 3% and 2% respectively, it is still relatively significant at 12% for micro enterprises.
• Digital Lending Opportunity: With 18% of MSMEs using digital lending platforms and 90% accepting digital payments, the sector shows promising digital adoption. This trend, supported by platforms like UPI, can enhance credit access going forward.
• Credit Gap: Increased credit supply to MSMEs is in evidence. The study broadly estimates that the sector still has an addressable credit gap of about 24% or ₹30 lakh crore. The gap is higher in the services sector at 27%; it is estimated to be also higher at 35% for women owned MSMEs, indicating a need for targeted policy actions.
• Women Entrepreneurship: Women entrepreneurship has become a significant aspect in the MSME sector with 26.2% in proprietary enterprises being owned by women as per ASUSE 2023-24, signalling growing inclusivity. 76% of the women led MSME respondents have access to credit, but they continue to face higher challenges vis-à-vis their male counterparts with 41% highlighting credit access and high competition as the largest obstacle to their growth.  
• Market Access Challenges: According to the survey, a majority of the MSMEs have been slow to adopt modern channels to reach customers. Around 70% of the survey respondents continue to use traditional modes of marketing which hinders their scalability and ability to remain competitive. Effective utilization of e-commerce and digital marketing can provide MSMEs with improved access to new markets and customers.
• Export Potential: MSMEs increased their merchandise export share from 43.6% (FY23) to 45.7% (FY24). Exporting MSMEs show better tech adoption than non-exporters, but cite supply chain issues, credit access, and competition as major hurdles, though they.
• Skilled Labour Shortage: Around a fourth of the surveyed MSMEs cite the lack of skilled manpower as one of their major challenges. Skilled labour shortages are particularly high in defence equipment, readymade garments, hotel sectors, tiles and sanitaryware as reflected in the survey.
• Infrastructure & Technology Gaps: Inadequate infrastructure and technology adoption affect productivity and competitiveness; more prominent in sectors like auto components, iron and steel and transport and logistics. A significant proportion of the respondents cited technology adoption as a major obstacle to their growth.
• Sustainability Efforts: Over one-third of MSMEs have adopted sustainable practices; 31% use energy-efficient systems, and 21% utilize renewable energy. However, 33% cite limited awareness as a key barrier to further adoption.