India’s growth journey over the coming decade will be shaped by the millions of retailers, small businesses and entrepreneurs that power economic activity across the country. These enterprises create jobs, support local supply chains, foster innovation, and contribute meaningfully to the nation’s economic resilience. Their ability to invest, grow, and adapt will play a defining role in determining how fast and how inclusively India grows.
Today, India is home to nearly 7.3 crore registered MSMEs, making it one of the largest entrepreneurial ecosystems in the world. Yet, access to formal finance remains uneven across this vast and diverse landscape. Approximately 0.2 crore businesses with annual revenues exceeding ₹25 crore are largely well served by traditional banking channels. At the other end are around 4.8 crore businesses with annual revenues below ₹30 lakh, many of which continue to rely on informal funding sources despite increasing digital adoption and business visibility.
Between these two groups lies perhaps the most significant opportunity for India’s economic growth – the underfinanced segment. Comprising nearly 2.3 crore businesses, including businesses with annual revenues ranging from ₹30 lakh to ₹25 crore, this segment is increasingly integrated into the formal economy through GST registration, banking relationships and digital payment adoption. Yet, many of these businesses continue to face barriers in accessing timely and affordable credit.
This is not merely a financing challenge. It is an economic opportunity. The underfinanced and unfinanced MSME ecosystem together represents an estimated ₹43 trillion credit opportunity, with the underfinanced segment accounting for nearly 60% of the overall credit gap. Bridging this gap has the potential to unlock productivity, stimulate entrepreneurship, and accelerate India’s GDP growth in a meaningful and inclusive manner.
The impact of accessible credit extends well beyond the balance sheet of an individual enterprise. For a retailer, it may enable inventory purchases ahead of festive demand. For a small manufacturer, it can support investments in machinery or capacity expansion. For service businesses, it provides the working capital needed to scale operations and create jobs. When millions of enterprises are empowered to make these investments, the cumulative impact on economic output becomes substantial.
Affordable and timely credit also strengthens business resilience. Small businesses often operate with limited financial buffers and face challenges such as seasonal cash-flow fluctuations and delayed receivables. Access to formal finance enables them to navigate these cycles with greater confidence, invest for the long term, and build more sustainable businesses. Increased productivity at the enterprise level ultimately translates into stronger economic performance at the national level.
Equally important is the role of credit in expanding economic participation. GST adoption, digital payments, e-invoicing and banking penetration have enabled businesses to create verifiable transaction histories and financial records. This has allowed lenders to increasingly assess enterprises on the basis of cash flows and operating performance, rather than relying solely on conventional collateral.
As digitisation deepens, more businesses are expected to become part of the formal credit ecosystem, expanding growth opportunities across sectors and geographies. India has already made significant progress through digital onboarding, technology-enabled underwriting and stronger financial infrastructure. However, a substantial opportunity still lies in serving commercially viable businesses that remain underserved by traditional financing models.
The next phase of growth will require continued innovation, with financial products aligned to business cash-flow cycles, wider adoption of digital underwriting and sustained efforts to strengthen financial literacy. The objective should not simply be to increase the volume of credit, but to ensure that businesses receive the right credit at the right time and in a manner that supports sustainable growth.
Also Read: Beyond Credit Scores: The Future of Risk Assessment in Digital Lending
India’s aspiration to become a developed economy will depend significantly on the strength of its small businesses and the ecosystems that support them. Ensuring that retailers and small enterprises have access to responsible, timely, and accessible credit is therefore not just a financial priority. It is an economic imperative and one of the most powerful levers available to accelerate inclusive GDP growth in the years ahead.
Views expressed by: Arun Nayyar, MD & CEO, NeoGrowth
