Micro, Small, Medium Enterprises (MSME’s) are privately owned entities involved in production, manufacturing and processing of goods and commodities. It forms the core of Indian economy and has always acted as the bulwark for the Indian economy, providing it strength and resilience to tolerate global economic shocks and adversities. It requires less than ₹50 crore in investment in plant and machinery and has turnover below ₹250 crore. Thus, serving as a backbone of the Indian economy. The government of India has identified MSME’s as a top priority for achieving Atma Nirbhar Bharat.
Importance of MSMEs for Indian Economy :
• Employment: It is the second largest employment generating sector after agriculture. It provides employment to around 11.1 crore people or 45% of all the workers in India. It accounts for 99% of all the businesses.
• Contribution to GDP: With around 36.1 million units throughout the geographical expanse of the country, MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities. MSME ministry has set a target to up its contribution to GDP to 50% by 2025 as India becomes a $5 trillion economy.
• Exports: It contributes around 45% of the overall exports from India.
• Inclusive growth: MSMEs promote inclusive growth by providing employment opportunities in rural areas especially to people belonging to weaker sections of the society. For example: Khadi and Village industries require low per capita investment and employs a large number of women in rural areas.
• Financial inclusion: Small industries and retail businesses in tier-II and tier-III cities create opportunities for people to use banking services and products.
• Promote innovation: It provides opportunity for budding entrepreneurs to build creative products boosting business competition and fuels growth.
Issues and Challenges :
1. Access to credit :
• 90% of the MSMEs are dependent on informal sources for funding
• Lack of sufficient collateral and high working capital needs
2. Access to Markets :
• Low outreach and non availability of new markets.
• Lack of skilled manpower and ineffective marketing strategy.
• Difficult for MSMEs to sell products to government agencies.
• Competition from MNCs and other big industries
3. Technology Access :
• Limited human resources and weak financial standing.
• MSMEs, particularly in the unorganised sector, show lower adaptability of new technology and innovation.
4. Quality and Export Issues :
• Low quality products impact export competitiveness.
• Inadequate access to quality raw materials.
• Use of traditional machines causes low productivity
5. Ease of Doing Business :
• Cumbersome government procedures and rules for establishing new units.
• Bureaucratic delays in getting clearances.
• Poor litigation system in the country.
Steps to be taken to improve the condition of MSMEs :
• Launch of the 59 minute loan portal to enable easy access to credit for MSMEs.
• 2 percent interest subvention for all GST registered MSMEs, on fresh or incremental loans.
• Trade Receivables e-Discounting System (TReDS) to enable access to credit from banks, based on their upcoming trade receivables from corporate and other buyers.
• Union government announced to launch an e-commerce platform on the lines of “Amazon and Alibaba” to sell products from MSMEs and the Khadi and Village Industries Commission.
• Public sector companies now compulsorily procure 25%, instead of 20% of their total purchases, from MSMEs.
• More than 40,000 MSMEs registered on Government e-Marketplace (GeM) portal. It provides transparency in procurement and facilitates MSMEs to directly reach out to the buyers.
• 20 hubs and 100 spokes in the form of tool rooms will be established across the country. This will facilitate product design and easy access to latest technology to MSMEs.
• Financial assistance is provided for implementation of lean manufacturing techniques to enhance the manufacturing competitiveness of MSMEs.
• Financial support to MSMEs in ZED(Zero Defect Zero Effect) certification to improve quality of products.
• Government provides subsidy towards the expenditure incurred by enterprises to obtain the product certification licenses from national and international bodies.The return under 8 labour laws and 10 Union regulations must now be filed only once a year.
• Computerised random allotment for inspector visits to the establishment.
• Environmental Clearance under air pollution and water pollution laws, have been merged into one. Also, the return will be accepted through self-certification.
• For minor violations under the Companies Act, the entrepreneur will no longer have to approach the courts, but can correct them through simple procedures. This signifies simplification of government procedures and instilling confidence among entrepreneurs.
Government schemes to promote MSMEs :
• Udyami Mitra Portal : launched by SIDBI to improve accessibility of credit and handholding services to MSMEs.
• MSME Sambandh : To monitor the implementation of the public procurement from MSMEs by Central Public Sector Enterprises.
• MSME Samadhaan -MSME Delayed Payment Portal –– will empower Micro and Small entrepreneurs across the country to directly register their cases relating to delayed payments by Central Ministries/Departments/CPSEs/State Governments.
• Digital MSME Scheme : It involves usage of Cloud Computing where MSMEs use the internet to access common as well as tailor-made IT infrastructure
• Prime Minister Employment Generation Programme : It is a credit linked subsidy program under Ministry of MSME.
• Revamped Scheme of Fund for Regeneration Of Traditional Industries (SFURTI) : organizes traditional industries and artisans into clusters and make them competitive by enhancing their marketability & equipping them with improved skills.
• A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE) : creates new jobs & reduce unemployment, promotes entrepreneurship culture, facilitates innovative business solution etc.
• National Manufacturing Competitiveness Programme (NMCP) : to develop global competitiveness among Indian MSMEs by improving their processes, designs, technology and market access.
• Micro & Small Enterprises Cluster Development Programme (MSE-CDP) – adopts cluster development approach for enhancing the productivity and competitiveness as well as capacity building of MSEs.
• Credit Linked Capital Subsidy Scheme (CLCSS) is operational for upgradation of technology for MSMEs.
Way Forward :
Today enterprises need to adopt best practises and follow international standards to go forward for offering innovative solutions. Focus should be on transfer of information and skill development to effectively use the transferred technology. There is an urgent need to upgrade infrastructure utilities (like water, power supply, road/rail) for any enterprise to run its operations successfully. Entrepreneurs need to develop quality conscious mindsets embedded in the organisational culture. Sensitisation and handholding of MSMEs at different and upgraded level of certification is the need of the hour. Policy makers and society at large need to recognize and support the central socio-economic role that MSMEs play in India.
Sources : The Hindu and Dristi IAS.










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