The micro, small, and medium enterprises (MSME) sector in Kerala seems to be on two different tracks. On one side, bank lending to the sector is booming, indicating improved access to credit.
On the other, financial support from the state government has been worryingly low, despite the government's ambitious claims of promoting entrepreneurship.
Officials maintain that Kerala is taking highly encouraging steps to support entrepreneurs. The recently held Invest Kerala Global Summit reportedly attracted investment proposals worth ₹1.53 lakh crore, according to Industries Minister P. Rajeeve.
Additionally, according to the data from the State Level Bankers’ Committee, MSMEs in Kerala received ₹92,175.63 crore in loans by December 31, 2024. If this trend continues, bank lending to the sector is expected to cross ₹1 lakh crore by the end of the financial year. Authorities suggest that measures like Ease of Doing Business reforms have simplified procedures, helping MSMEs thrive.
The government also claims that since 2022, Kerala has facilitated 3,43,491 new MSMEs. A breakdown of registrations shows that 1,39,839 MSMEs were registered in 2022-23, followed by 1,03,596 in 2023-24, and 1,00,056 in 2024-25. These numbers, according to officials, highlight the success of Kerala’s push for small and medium enterprises.
However, there have been criticisms that many of these registrations stem from businesses signing up on Udyam Portal, a central government initiative offering various loan schemes for MSMEs. Some argue that this surge in registrations is not a direct result of state-level initiatives. The Kerala Industries Department, however, has clarified that their data does not rely on Udyam Portal registrations.
While bank loans to MSMEs have seen significant growth, financial support from the state government tells a different story.
The latest Assembly Subject Committee report on Industries and Minerals highlights that the MSME Special Package, meant to provide direct financial assistance, has seen drastically reduced spending. The scheme was allocated ₹45.6 crore in 2022-23, but not a single rupee was spent. The following year, the allocation was slashed to ₹21.5 crore, of which only ₹2.56 crore—or just 11.9%—was utilised.
For 2024-25, the budget allocation was reduced to just ₹1,000, effectively shutting down the scheme. Over the past four years, the total allocation for MSME financial support has plummeted: ₹9 crore in 2021-22, ₹5 crore in 2022-23, and ₹1.5 crore in 2024-25. Actual spending has been dismally low, with only ₹3.9 crore utilised in total, and zero expenditure recorded in 2023-24.
This funding gap raises questions, particularly when compared to the government’s claims of successfully supporting thousands of new MSMEs.
The state’s focus on improving Ease of Doing Business and attracting investment has made it easier for businesses to access bank loans. Industry experts expect MSME loans to cross ₹1 lakh crore by the end of this financial year.
But while banks are stepping up their lending, the government appears to be stepping back from direct financial support.
