Bridging the Financing Gap in Indian Entrepreneurship: Institutional and Policy Perspectives

Abstract

Entrepreneurship is widely recognized as a critical driver of economic growth, employment generation, innovation, and inclusive development. In India, the entrepreneurial ecosystem has expanded significantly over the past two decades, supported by demographic advantages, digital transformation, and policy initiatives such as Startup India and Make in India. However, despite this progress, access to finance continues to remain one of the most persistent and structural challenges faced by Indian entrepreneurs, particularly micro, small, and medium enterprises (MSMEs), startups, rural entrepreneurs, and women-led ventures. The financing gap—defined as the mismatch between the demand for and supply of appropriate financial resources—constrains enterprise creation, survival, and scaling. This paper provides a comprehensive theoretical and review-based analysis of the financing gap in Indian entrepreneurship from institutional and policy perspectives. It examines the nature and dimensions of entrepreneurial finance constraints, reviews the role of formal and informal financial institutions, evaluates key government policies and schemes, and identifies systemic limitations within the current framework. Drawing upon existing literature, policy documents, and institutional analyses, the study highlights the need for a more inclusive, responsive, and innovation-driven financial ecosystem. The paper concludes by offering policy recommendations to strengthen institutional coordination, improve credit accessibility, and foster sustainable entrepreneurial growth in India.