MSMEs, as a major contributor towards growth of domestic economy and employment generation, should get adequate support in terms of policy framework, incentives and other relevant aids. There are 35 million enterprises in various industries, employing 69 million people. Together, these account for 45% of the industrial output and 40% of the exports. Although 95% of Micro, small and medium enterprise units is informal in nature, the contribution of the sector to India’s GDP has been growing consistently at 11% per annum, higher than overall GDP growth of 7-8%. Nationwide, Micro, Small and Medium enterprises (MSMEs) have been acknowledged as the engine of economic acceleration and for promoting unbiased progress. The finest benefit of this sector is employment generation for the development of Indian Economy by increasing of standard of living of the people. In this background researcher made an attempt to study the role of Small, Micro and Medium Enterprises in inclusive growth of Indian Economy. Steps like providing infrastructure facilities, developing various industrial parks and technology incubators under MSME cluster development programmes, creating networks of organizations that help provide training to skilled workforce to improve productivity, encourage entrepreneurship and competency in management, funding R&D investments, technology advancement may work for the betterment of the sector. This paper focuses on the prospects of MSME and the major challenges for sustained growth.