MSMEs - A brief discussion - Manthan Experts

Micro, Small and Medium Enterprises (MSMEs)

MSME is an important Sector for the Indian economy and have hugely contributed towards the country’s Socio-Economic Development. It not only generates employment opportunities but also develops the nation’s backward and rural areas.

Introduction

The Government of India have introduced Micro, Small and Medium Enterprises (MSME) in agreement with Micro, Small and Medium Enterprises Development (MSMED) Act of 2006. These enterprises generally engaged in production, manufacturing, processing or conservation of goods and commodities.

In India, MSMEs contributes 30% to the country’s GDP and export from it is 48%. Union Minister of MSME, Nitin Gadkari mentioned MSME as ‘Backbone of Indian Economy‘.

India’s MSME Sector Comprises of 633.88 Lakh units as per National Sample Survey 73^rd Round (2015 – 16).

Moreover, MSME Sector has created about 11.10 Crore Jobs in the country as per National Sample Survey 73^rd Round (2015 – 16).

Topics Covered –

What is MSMEs?

MSMEs are defined under the Micro, Small and Medium Enterprises Development Act, 2006. The Act classifies MSMEs as Micro, Small and Medium Enterprises based on:

Investment in Plant and Machinery engaged in manufacturing or production of goods.
Investment in Equipment for Providing Services.

Manufacturing and Service Rendering Enterprises under MSME:

Classification

Micro

Small

Medium

Investment in Plant and machinery or Equipment

Less than Rs. 1 Crore

More than Rs. 1 Crore

Less than Rs. 10 Crore

More than Rs. 10 Crore

Less than Rs. 50 Crore

Annual turnover

Less than Rs. 5 Crore

More than Rs. 5 Crore

Less than Rs. 50 Crore

More than Rs. 50 Crore

Less than Rs. 250 Crore

What are the features of MSMEs?

Let’s discuss few of the important features of MSMEs:

Works for the welfare of Skilled and Unskilled Workers, by giving Employment and providing loans and other services.

Provides funding Support / Credit limit to Banks.

Promote the Development of Industries as well as Up gradation of Skills.

Promote and Support the Up gradation of following:

- Technology
- Infrastructure
- Modernization of Sector as a Whole.
- Product Development
- Design Innovations and Packaging.

What is the role of MSMEs in Indian Economy?

MSMEs have played an essential role in uplifting our Indian Economy. Let’s discuss some of such essential roles played by MSMEs as under:

MSMEs Manufacture and Produce a variety of products for both Domestic as well as International Markets.

MSMEs have developed appropriate local Technology and provided tough Competition in Domestic and International Markets.

It has also generated New Entrepreneurs by Providing Knowledge, Training and Skill Up gradation through Specialized Training Centers.

MSMEs have played an essential role in-

- Providing Employment Opportunities in Rural Areas.

- Contributing towards Socio-Economic Development.

- Country’s development in different areas, such as-

- - Low Investment
  - Flexibility in Operations
  - Mobility through the locations
  - High contribution towards Domestic production and a low Rate of Imports.

What is the importance of MSMEs in Indian Economy?

MSMEs are known to generate the Highest Rate of Growth in the Economy. It is accepted as a means of Economic Growth and for promoting Equitable Development.

Let’s discuss importance of MSMEs in Indian Economy as under:

MSMEs Employed around 12 Crore persons and is the Second largest Employment Generating Sector after Agriculture.

It contributes about 63% of the GDP from Service Activities and 6.11% of GDP from manufacturing.

Union minister of MSMEs Nitin Gadkari, targets to increase its contribution towards GDP up to 50% by 2025.

It contributes around 45% of overall Indian Exports.

It provides Employment opportunities, mainly to weaker sections of the Society in Rural Areas.

What are the challenges faced by MSMEs?

We have already discussed about the importance of MSMEs in Indian Economy. Though MSMEs have played essential role in uplifting our Indian Economy, but there are various challenges that MSMEs are facing.

Let’s discuss some of challenges faced by MSMEs:

Absence of Adequate and Timely Banking Funds.

Limited Knowledge and Capital.

Technologies used are not either Suitable or Available.

Capacity of production according to the resources is quite low.

Marketing strategies are poor.

Non-Availability of Skilled labour at Affordable Cost.

Amid of pandemic COVID – 19, Modi government has introduced ‘Aatma Nirbhar Bharat Abhiyan’. For the growth of MSME Sector Government has taken few decisions under the AATMA – NIRBHAR BHARAT ABHIYAN.