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19.5% of majorly micro-sized firms transitioned into larger firms: SBI Ecowrap report

Reflecting the changing contours of industry and services as formalization drive brings more MSMEs into the net, there is a palpable change in the income pattern of MSMEs, said the Economic Research Department of SBI in its latest Ecowrap report.

Around 19.5 per cent of majorly micro-sized firms have been able to shift their income upwards, to classify into a small, medium or a large organisation, the report said. This included 4.8 per cent firms which transitioned into small firms, around 6.1 per cent evolved into medium-sized firms, and around 9.3 per cent companies growing into large-sized firms.

A K-shaped economic recovery refers to a scenario in which different sectors or segments of the economy recover at different rates or follow divergent paths. In a K-shaped recovery, some parts of the economy experience growth and improvement, while others decline or stagnate.

Earlier economists, including former RBI governor Raghuram Rajan, had called for steps to thwart K-shaped recovery.

“The recent data from RBI’s Trend and Progress indicate that all the SME units are becoming larger with the rise in economic activity. This we can infer from average ticket size (based on outstanding) of MSMEs which has increased from Rs 4.2 lakh in FY21 to whopping Rs 10.6 lakh in FY23. This reveals integration of MSME units with larger value chain as PLI activity is getting momentum. This will increase the ability of MSME units to raise capital through (non-bank) debt markets,” the report authored by Soumya Kanti Ghosh, Group Chief Economic Adviser, SBI said.

‘Debunking’ the K-shaped recovery, Ghosh added that income inequality has declined significantly from 0.472 to 0.402 during FY14-FY22 with 36.3 per cent of taxpayers moving from lower income to higher income tax bucket resulting in 21.3 per cent additional income.

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