The Indian growth story, for the most part, has been led by Micro, small, and medium enterprises (MSMEs). According to the Ministry of MSME, the sector currently contributes more than 31 per cent to India’s Gross Domestic Product (GDP), accounts for 48.58 per cent of the country’s exports, and supports livelihoods for nearly 32.8 crore people. These enterprises have been the backbone of economic growth for India, as they have generated employment, supported local economies, and are seen as a key factor in building durable supply chains across industries.
Over the past few years, policy initiatives by the government and digital adoption have accelerated the formalisation of the MSME sector and improved access to finance. Measures such as Udyam Registration have brought more enterprises into the formal economy, while digital platforms have expanded access to capital, customers, and suppliers. As a result, many MSMEs are moving beyond survival and focusing on growth and expansion.
As businesses enter the formal economy and integrate with various stakeholders such as customers, suppliers, lenders, and digital platforms, they are exposed to multiple operational risks. A localised disruption can suddenly snowball into one that has consequences across multiple business functions. It makes resilience a critical requirement alongside growth.
Facing the challenges
An SME manufacturing unit now depends on multiple sets of suppliers, logistics networks, digital networks and customers spread across the country and the globe. Those enterprises that are operating in the services sector depend on tech platforms to support business growth and make sure operations are not interrupted. Any small issue in the wider supply chain can impact revenues and customer trust.
We have observed in recent years that a sudden disruption is impacting business continuity of an SME unit. Supply chain bottlenecks, extreme weather events, fluctuations in input costs, cyber incidents, and logistics delays tend to impact production deadlines and can leave customers unhappy. The MSMEs that will win this battle are those that can operate with limited buffers but anticipate, absorb, and recover from such shocks.
Risk preparedness is now becoming a critical part of any MSME’s decision-making. We must concentrate on identifying vulnerabilities in the system, how they can impact the business, and then put safeguards in place. It helps businesses to keep running, even when disruptions occur, and reduces recovery time.
Insurance to the rescue
As risks become more complex and interconnected, financial preparedness becomes equally important. Insurance therefore needs to be viewed not merely as a post-loss support mechanism, but as an integral component of business resilience. Insurance in practice offers protection and cover to help enterprises recover from sudden, unforeseen events, without straining working capital (for day-to-day operations) or expansion.
For MSMEs, which often operate with limited financial buffers, even a temporary disruption can have significant consequences. Insurance provides a financial safety net, enabling businesses to restore damaged assets and resume operations more quickly following events such as fire, natural catastrophes, theft, machinery breakdown or other unforeseen incidents.
Importantly, insurance delivers maximum value when complemented by proactive risk management. Measures such as identifying vulnerabilities, strengthening digital security, diversifying suppliers and building contingency plans can significantly reduce the impact of disruptions. Together, risk preparedness and insurance can help MSMEs navigate uncertainty with greater confidence and focus on sustainable growth.
What happens next?
MSME growth will not be led only by higher revenues, greater market share, or higher digital adoption. It will hinge on how MSMEs prepare and manage complex risks.
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Policymakers, lenders, insurers and industry bodies all have a role to play in strengthening this ecosystem. Building resilient MSMEs is not just about protecting individual businesses; it is about safeguarding jobs, strengthening supply chains and ensuring more sustainable economic growth. As India’s enterprises scale and become more interconnected, resilience must become a cornerstone of their growth journey.
Views expressed by: S. Vishwanathan, Head – Underwriting & Reinsurance, SBI General Insurance.
