New Delhi :  India must focus on bringing 80 per cent of its Micro, Small, and Medium Enterprises (MSMEs) into the formal financial system, up from the current 40 per cent, according to M Nagaraju, Secretary, Department of Financial Services (DFS).

Speaking at a recent event, Nagaraju emphasised the untapped potential of MSMEs and their role in driving economic growth if integrated into the formal economy.

“Currently, a little over 40 million MSMEs are registered, but only 40 per cent of them are within the formal financial framework. Imagine the transformative impact if we can increase that figure to 70 per cent or 80 per cent,” Nagaraju stated, reported Business Standard.

He highlighted that access to formal financial services would unlock critical opportunities for these businesses, including access to credit, insurance, and risk mitigation tools.

India’s MSMEs, which account for approximately 30 per cent of the country’s GDP and employ millions, are often limited by a lack of access to formal banking and financial services.

By bringing a greater proportion of these enterprises into the formal system, the government aims to enhance financial inclusion, improve transparency, and stimulate economic expansion.

However, achieving this goal will require concerted efforts from both public and private sectors, Nagaraju noted. “To bridge the gap, we need more robust financial products tailored to MSMEs, greater digital infrastructure, and streamlined regulations,” he added.

The secretary also stressed the importance of leveraging digital platforms, such as the Goods and Services Tax (GST) framework and the Unified Payments Interface (UPI), to formalise these businesses and foster a more inclusive financial ecosystem.

India’s continued focus on MSMEs comes at a time when the government is looking to strengthen its economic foundations post-pandemic, with targeted support for key sectors.