As part of the Aatmanirbhar Bharat package, the government announced an equity infusion of ₹50,000 crore for MSMEs through a Fund of Funds. In line with this initiative, SRI was established in 2021. The ₹50,000 crore fund includes ₹10,000 crore from the government of India, with the remaining ₹40,000 crore expected to come from private equity and venture capital funds.

While the fund infusion peaked in 2023-24, there is a sharp dip in 2024-25 so far. Improvement in health of MSMEs could be a reason. Government’s cost control measures could be another reason for reduction in fund infusions in to smaller companies.

Funding trends: A surge followed by a slowdown

The data available with the Ministry of Micro, Small and Medium Enterprise show that in FY22, ₹1,335 crore was infused into 75 MSMEs, marking a moderate investment phase. This was followed by a significant surge in FY23, with funding jumping to ₹3,007 crore distributed among 250 MSMEs, reflecting increased financial support and policy initiatives.

In the FY24, total funding rose marginally to ₹3,306 crore, benefiting 107 MSMEs, indicating a strategic shift towards fewer, larger investments.

As of November 2024, the current financial year (FY25) has witnessed ₹1,964 crore funding across 91 MSMEs, with projections suggesting a total infusion of ₹2,142 crore by year-end. If these trends persist, this would mark a decline compared to the previous two years.

A crucial aspect of this funding pattern is the average investment per MSME, which has fluctuated significantly. In FY22, the average funding per MSME was ₹17.8 crore, which dropped to ₹12.03 crore in FY23, despite the increase in overall funding. Interestingly, FY24 recorded the highest average investment per MSME at ₹30.9 crore, suggesting a strategic focus on fewer businesses with larger financial backing. Currently, in FY25, the average investment stands at ₹21.58 crore, a figure that may evolve as the year progresses.

Policy impacts and economic recovery

The sharp rise in FY23 can be attributed to more MSMEs needing help to tide over the pandemic-led slowdown. The subsequent slowdown could be because of improving business conditions for smaller companies after the pandemic. But the reining in of revenue expenditure by the Centre could also be a reason why infusions through SRI fund is slowing. But the government has managed to exceed the targeted number of MSMEs receiving support from the scheme. The MSME sector, continues to play a pivotal role in India’s economy by fostering entrepreneurship and generating employment opportunities at relatively low capital costs, second only to agriculture. As per the December 2024 data, 5.70 crore MSMEs employing 24.14 crore individuals are registered on the Udyam Registration Portal and Udyam Assist Platform (UAP).

Closures after receiving funds The Ministry data presented to the Lok Sabha show that seven companies have closed their operations after receiving SRI funds while eight companies had more than ₹50 crore foreign exchange earnings through export during FY24

Published on January 28, 2025