India’s MSME sector remains a vital part of the economy, but in 2025, it faces several ongoing challenges.

Access to finance is still a major hurdle. Many small businesses struggle with loan approvals due to limited credit history and complicated banking processes. Digital adoption is another concern, as many MSMEs lack the tools and training to stay competitive in a fast-changing market.

Compliance with tax and labor regulations adds further pressure, especially for businesses without dedicated legal or finance teams. At the same time, rising global competition and customer expectations are pushing MSMEs to improve quality and service without always having the resources to do so.

Finding skilled workers is also difficult, particularly in smaller towns, where younger workers often migrate to cities or turn to freelance work.

Despite these challenges, the sector holds great promise. With better access to credit, digital tools and policy support, India’s MSMEs can continue to play a powerful role in economic growth.

Challenges Facing India’s MSME Sector in 2025