ASSIGNMENT ON MSME

MSME

In India, MSMEs contribute nearly 8% of the country’s GDP, around 45% of the
manufacturing output, and approximately 40% of the country’s exports. It won’t
be wrong to refer them as the ‘Backbone of the country.’

The Government of India has introduced MSME or Micro, Small, and Medium

Enterprises in agreement with Micro, Small and Medium Enterprises
Development (MSMED) Act of 2006. These enterprises primarily engaged in the
production, manufacturing, processing, or preservation of goods and
commodities.

MSMEs are an important sector for the Indian economy and have contributed
immensely to the country’s socio-economic development. It not only generates
employment opportunities but also works hand-in-hand towards the development
of the nation’s backward and rural areas. According to the annual report by the
Government (2018-19), there are around 6,08,41,245 MSMEs in India.
MSMEs Redefined

A proposal was made to redefine MSMEs by the Micro, Small and Medium
Enterprises Development (Amendment) Bill, 2018, to classify them as
manufacturing or service-providing enterprises, based on their annual turnover.

Classification of enterprises into micro, small and medium enterprises (in Rs)

Kind of Act of 2006 Bill of 2018

enterprise

  Manufacturing Services All enterprises

  Investment Investment Annual

towards plant & towards Turnover
machinery equipment

Micro 25 lacs 10 lacs 5 Cr

Small 25 lacs to 5 Cr 10 lacs to 2 Cr 5 Cr to 75 Cr

Medium 5 Cr to 10 Cr 2 Cr to 5 Cr 75 Cr to 250 Cr

Benefits of the above-proposed reclassification

According to the proposed reclassification or the new classification, there would

be no need for frequent inspections to check the investment in plant and
machinery. Also, the operations of MSMEs would be transparent, non-
discriminatory, and objective in nature.
Highlights of new MSMEs

‘Atma Nirbhar Bharat Abhiyan’ or the Self-Reliant India Scheme of 2020 by the
Government of India has given a new definition for MSMEs.

Following are a few highlighting features of new MSMEs –

1. A provision of Collateral Free Loans to MSMEs

2. An arrangement of loans to MSMEs MSME worth of Rs. 3 lac crores

3. An offer for MSMEs to get a Moratorium period of 12 months

4. Consideration of Manufacturing and Service MSMEs as the same entities

5. MSM is a granted a repayment Tenure of 48 months

6. MSMEs are assured a 100% Credit Guarantee

7. Reclassification of MSMEs will benefit approximately 45 Lac units.

Features of MSMEs

Following are some of the essential elements of MSMEs –

1. MSMEs work for the welfare of the workers and artisans. They help them
by giving employment and by providing loans and other services.

2. MSMEs provide credit limit or funding support to banks.

3. They promote the development of entrepreneurship as well as up-gradation

of skills by launching specialized training centers for the same.
 4. They support the up-grading of developmental technology, infrastructure
development, and the modernization of the sector as a whole

5. MSMEs are known to provide reasonable assistance for improved access to

the domestic as well as export markets.

6. They also offer modern testing facilities and quality certification services.

7. Following the recent trends, MSMEs now support product development,

design innovation, intervention, and packaging.

Role of MSMEs in Indian Economy

Since its formation, the MSME segment has proven to be a highly dynamic
Indian economy sector. MSMEs produce and manufacture a variety of products
for both domestic as well as international markets. They have helped promote the
growth and development of khadi, village, and coir industries. They have
collaborated and worked with the concerned ministries, state governments, and
stakeholders towards the upbringing of rural areas.

MSMEs have played an essential role in providing employment opportunities in

rural areas. They have helped in the industrialization of these areas with a low
capital cost compared to the large industries. Acting as a complementary unit to
large sectors, the MSME sector has enormously contributed to its socio-economic
development.

MSMEs also contribute and play an essential role in the country’s development in
different areas like the requirement of low investment, flexibility in operations,
mobility through the locations, low rate of imports, and a high contribution to
domestic production.
With the capability and capacity to develop appropriate local technology, provide
fierce competition in domestic and international markets, technology-savvy
industries, a contribution towards creating defense materials, and generating new
entrepreneurs by providing knowledge, training, and skill up-gradation through
specialized training centers.

The below-mentioned data, represented in a tabular format, is by the Central

Statistics Office (CSO) and Ministry of Statistics & Program Implementation.

Contribution of MSMEs in Country’s Economy at Current Price

Share of
MSME- Total
Share of
Addition Growth Addition Total MSME in
Year MSME in
of Gross (%) of Gross GDP
GVA (%) GDP (in
Value Value
%)

2011-
2622574 – 8106946 32.35 8736329 30
12

2012-
3020528 15.17 9202692 32.82 9944013 30.40
13

2013-
3389922 12.23 10363153 32.71 11233522 30.20
14

2014- 3704956 9.29 11504279 32.21 12467959 29.70

15

2015-
4025595 8.65 12566646 32.03 13764037 29.20
16

2016-
4405753 9.44 13841591 31.83 15253714 28.90
17

Source: Central Statistics Office (CSO), Ministry of Statistics & Program

Implementation

Importance of MSMEs for the Indian Economy

Across the globe, MSMEs are accepted as a means of economic growth and for
promoting equitable development. They are known to generate the highest rate of
growth in the economy. MSMEs have driven India to new heights through
requirements of low investment, flexible operations, and the capacity to develop
appropriate native technology.

1. MSMEs employ around 120 million persons, becoming the second-largest

employment generating sector after agriculture.

2. With approximately 45 lac units throughout the country, it contributes

about 6.11% of GDP from manufacturing and 24.63% of the GDP from
service activities.

3. MSME ministry targets to increase its contribution towards GDP by up to

50% by 2025 as India moves ahead to become a $5 trillion economy
 4. Contributing around 45% of overall Indian exports

5. MSMEs promote all-inclusive growth by providing employment

opportunities, especially to people belonging to weaker sections of the
society in rural areas.

6. MSMEs in tier-2 and tier-3 cities help in creating opportunities for people
to use banking services and products, which can amount to the final
inclusion of the contribution of MSMEs for the economy.

7. MSMEs promote innovation by providing an opportunity to budding

entrepreneurs to help them build creative products hey and thereby boost
competition in business and fuel the growth.

The Indian MSME sector provides silent support to the national economy and
acts as a defense against global economic shock and adversities. Hence, we can
say that India is propelling towards a robust global economy through a silent
revolution powered by MSMEs.
Features of Ministry of MSME

 Works for the welfare of artisans and workers

 Provides credit limit or funding support from banks
 Promotes entrepreneurship development and skill upgradation via
specialized training centers
 Supports technology upgradation, infrastructural development and
modernization
 Offers assistance for improved access to domestic and export markets
 Provides modern testing facilities and quality certification
 Supports packaging, product development and design intervention
Some of the entities that work under Ministry of MSME are as follows:

 A Scheme for Promotion of Innovation, Rural Industries and

Entrepreneurship (ASPIRE)
 Khadi and Village Industries Commission (KVIC)
 Mahatma Gandhi Institute for Rural Industrialization (MGIRI)
 National Institute for Micro, Small and Medium Enterprises (NIMSME)
 National Small Industries Corporation (NSIC)
 Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

List of projects that have been identified by Ministry of MSME for promoting
MSMEs in aspirational districts with number of projects:

 Prime Minister Employment Generation Program (PMEGP) – 178

 Micro & Small Enterprises Cluster Development (MSE-CDP) – 81
 EDP/MDP schemes – 46
 Entrepreneurial and Managerial Development of SMEs through Incubators –
13
 MSME Market Development Assistance (MDA) – 12
 Marketing Assistance & Technology Upgradation (MATU) – 10
 Revamped Scheme of Fund for Regeneration of Traditional Industries
(SFURTI) – 10
 Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE) – 7
 Credit Linked Capital Subsidy for Technology Upgradation – 6
 Financial Support to MSMEs in ZED Certification Scheme – 4
 Technology and Quality Upgradation Support to MSMEs – 4
 Lean Manufacturing Competitiveness for MSMEs – 3
 Design Clinic for Design Expertise to MSMEs – 1
  Assistance to Training Institutions (ATI) – 1
 A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship
(ASPIRE) -1
 Skill Upgradation & Mahila Coir Yojana (MCY) – 2
 Market Promotion & Development Scheme (MPDA) 1
 Performance and Credit Rating Scheme 1
 Marketing Support/Assistance to MSMEs (Bar Code)
 Others – 52

The Micro, Small and Medium Enterprises (MSME) sector is a very important
piece of India’s legacy economic model and a part of the critical supply chain for
products and services. This sector is considered as the job creator and plays a
crucial role in providing large-scale employment and industrialization of rural and
backward areas. As per the National Sample Survey (NSS) 73rd round, in 2015-
2016, there were around 633.8 lakh unincorporated non-agriculture enterprises in
the country which are dealing in different economic activities providing
employment to 11.10 crore workers. In this article, we will focus on the
Importance of MSME. You can also Register MSME online with Legal Raasta.
For getting additional information such as MSME Registration in
India, Importance of small businesses for India you must follow our Blog.

Importance of MSME

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.
Therefore leveraging the scope of the sector even now government simplified
the MSME Registration online with the paperless work.
The further Importance of MSME in India has been described below:

1. It creates large-scale employment: Enterprises that are inclusive in this

sector require low capital to start up new business. Moreover, it creates a
vast opportunity for the unemployed people to avail. India produces about
1.2 million graduates per year out of which the total number of engineers
are around 0.8 million. There is no economy so far that could provide that
large number of freshers in one year only. MSME is the boon for the fresh
talent in India.

2. Economic stability in terms of Growth and leverage Exports: It is the

most significant driver in India contributing to the tune of 8% to GDP.
Considering the contribution of MSME to manufacturing, exports, and
employment, other sectors are also benefitting from it. Nowadays, MNCs
are buying semi-finished, and auxiliary products from small enterprises, for
example, buying of clutches and brakes by automobile companies. It is
helpful in creating a linkage between MSME and big companies even after
the implementation of the GST 40% MSME sector also applied GST
Registration that plays an important role to increase the government
revenue by 11%.

3. Encourages Inclusive Growth: The inclusive growth is at the top of the

agenda of Ministry for Medium, and small and Medium-sized enterprises
for several years. On the other hand, poverty and deprivation are a deterrent
to the development of India. Besides, it includes marginalized sections of a
society which is a key challenge lying before the Ministry of MSME.
 4. Cheap Labor and minimum overhead: While in the large-scale
organizations, one of the main challenge is to retain the human resource
through an effective human resource management professional manager.
But, when it comes to MSME, the requirement of labor is less and it does
not need a highly skilled laborer. Therefore, the indirect expenses incurred
by the owner is also low.

5. Simple Management Structure for Enterprises: MSME can start with

limited resources within the control of the owner. From this decision
making gets easy and efficient. On the contrary, a large corporation
requires a specialist for every departmental functioning as it has a complex
organizational structure. Whereas a small enterprise does not need to hire
an external specialist for its management. The owner can manage himself.
Hence, it could run single-handedly.
6. The main role in the mission of “Make in India”: The signature
initiative by the Prime Minister of India “Make in India” has been made
easy with MSME. It is taken as a backbone in making this dream a
possibility. In addition, the government has directed the financial institution
to lend more credit to enterprises in the MSME sector.

Conclusion
MSME is the backbone of the Indian economy. 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.