MSME has introduced in the year 2006 in India. There are still some service sector that was not yet included in this sector was included in the definition of the Micro, Small and Medium-sized Enterprises making a historic change to this Act.
The MSME sector in India gave a major boost to the economy. Over 63 million MSMEs spread across the country contributed 30.5% to India’s GDP in FY19 and 30% in FY20. It also created many employment opportunities. Based on a study conducted by the Ministry of Statistics & PI between July 2015 and June 2016, the MSME sector employed 111 million workers. Compared with large-scale companies, MSMEs aided in the industrialisation of rural areas at minimal capital cost. The sector has made significant contributions to the country’s socio-economic growth and complemented major industries as well. MSMEs account for approximately 40% of India’s total exports, 6.11% of GDP from the manufacturing sector and 24.63% of GDP from the services sector.
The significance of the MSMEs sector can be noted from the fact that it is the second-largest employment provider, after agriculture in India. This sector has proven the instrumental in the growth of the nation, leverage exports, creating huge employment opportunities for the unskilled, fresh graduates, and the underemployed. It also extended the opportunities to banks for giving more credit to enterprises to MSME Sector. The government should take the special care by addressing the importance of MSME in terms of providing more and more MSME Registration advantages by implementing better regulations and enable financial institutions to lend more credit at less interest rate for sustainability of this sector.
To ensure that MSMEs continue to lead the country towards economic growth, the Government of India has from time to time announced various schemes to support the development of this sector. Recently, in view of the economic hardship caused by covid 19, the government has announced few schemes under ‘Aatmanirbhar Bharat’ i.e. Self-reliant India initiative. Accordingly, the criterion for classifying MSME has also been revised. Under the revised criterion, the combined factors of ‘Investment in plant and machinery’ and ‘Turnover’ are required to be considered to determine whether a business should be classified as a micro, small or a medium enterprise. In contrast, earlier the classification of an MSME unit was based only its investment in plant and machinery; and also depending on whether the enterprise was in the manufacturing sector or in the services sector.