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    Government Policies and Support For MSMEs

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    Samiksha Sharma

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    Government Policies and Support For MSMEs

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    Samiksha Sharma
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    4. Government Policies and Support for MSMEs

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    8 views7 pages

    Government Policies and Support For MSMEs

    Uploaded by

    Samiksha Sharma

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
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    Government Policies and Support for MSMEs: Incentives, Subsidies, and

    Skill Development Programs

    Introduction to MSMEs in India

    Micro, Small, and Medium Enterprises (MSMEs) are a crucial part of the
    Indian economy, significantly contributing to:

    • Industrial Development

    • Exports

    • Job Creation

    • Entrepreneurship

    MSMEs make up over 90% of total enterprises in most economies and play
    a vital role in reducing regional imbalances by providing employment and
    promoting development across various areas.

    Classification of MSMEs

    The MSMED Act, 2006 classifies MSMEs into three categories based on
    investment:

    Type of Enterprises Manufacturing Sector (Investment in Plant &


    Machinery) Service Sector (Investment in Equipment)

    Micro Up to ₹25 lakhs Up to ₹10 lakhs

    Small ₹25 lakhs to ₹5 crores ₹10 lakhs to ₹2 crores

    Medium ₹5 crores to ₹10 crores ₹2 crores to ₹5 crores

    Importance of MSMEs

    MSMEs are:

    • Resource-efficient and job creators.

    • Promoters of technological innovation and inter-sectoral linkages.

    • Key contributors to exports and entrepreneurial growth.

    • Essential in reducing regional imbalances, serving as engines for


    economic growth.

    Challenges Faced by MSMEs

    Despite their importance, MSMEs encounter various challenges, including:


    • Lack of capital

    • Slow decision-making processes

    • Limited infrastructure

    Government Schemes to Support MSMEs

    1. Credit and Financial Assistance

    • Prime Minister’s Employment Generation Programme (PMEGP): Aims


    to create job opportunities in rural and urban areas by setting up micro-
    enterprises.

    • Credit Linked Capital Subsidy Scheme (CLCSS): Provides a 15%


    subsidy (up to ₹15 lakhs) on loans for technology upgrades.

    • Credit Guarantee Trust Fund for MSEs (CGTMSE): Offers collateral-


    free loans (up to ₹200 lakhs) to micro and small enterprises.

    2. Skill Development Training

    • ASPIRE (Scheme for Promotion of Innovation, Rural Industry, and


    Entrepreneurship): Encourages entrepreneurship in rural areas by
    promoting innovative business ideas.

    • Entrepreneurship and Skill Development Programmes (ESDP):


    Provides training to enhance entrepreneurial skills.

    3. Infrastructure Development

    • Scheme of Fund for Regeneration of Traditional Industries (SFURTI):


    Aims to cluster traditional industries and artisans to adopt modern
    technologies and improve marketability.

    • Micro & Small Enterprises Cluster Development Programme (MSE-


    CDP): Helps micro and small enterprises increase productivity through
    cluster collaboration.

    4. Marketing Assistance

    • Scheme for Providing Financial Assistance to Khadi Institutions


    under MPDA: Offers financial support to Khadi institutions through the
    Market Development Assistance (MDA) scheme.

    5. Technological and Quality Upgradation

    • ZED Certification Scheme (Zero Defect, Zero Effect): Provides


    financial support for MSMEs to achieve ZED certification, promoting high-
    quality production with minimal environmental impact.
    • Support for Entrepreneurial and Managerial Development of SMEs
    through Incubators: Encourages innovation and entrepreneurship by
    supporting incubators.

    6. Other Services

    • National Scheduled Caste and Scheduled Tribe Hub: Supports SC/ST


    entrepreneurs to help them meet procurement policy standards.

    • Scheme for Promotion of MSMEs in North-East and Sikkim: Provides


    technology, infrastructure, and financial support to MSMEs in these
    regions.

    • Intellectual Property Rights (IPR) Awareness for MSMEs: Raises


    awareness about protecting innovations.

    Schemes by the Government of West Bengal

    The Government of West Bengal offers various assistance forms to


    MSMEs:

    Pre-Investment Stage

    • Motivational programs to encourage new businesses.

    • Technical help for project report preparation.

    • Facilitating access to infrastructure.

    During-Investment Stage

    • Financial support through initiatives like Karmatirtha and Urban


    Haat.

    • Training through Entrepreneurship Development Programs.

    Post-Investment Stage

    • Marketing assistance through participation in industrial fairs.

    • Support for technology upgradation and R&D.

    • Buyer-seller meets for MSME connectivity.

    Key Observations

    • MSMEs are vital for economic growth, yet entrepreneurs often lack
    awareness of available government schemes.

    • Effective communication and execution of these schemes are crucial


    for MSMEs to thrive and contribute to economic growth.

    • Better coordination between central and state governments is


    essential to ensure that MSMEs fully benefit from support schemes.
    Overview of MSME Closures in India

    • Statistics on Closures: Approximately 34% of MSME units are closed,


    with unclear reasons.

    • Impact on Economy: Closures can harm the economy but also create
    opportunities for new entrepreneurs, fostering competitiveness.

    • Fear of Failure: A prevalent fear of failure hinders entrepreneurship,


    necessitating simpler insolvency processes.

    Global Practices in Comparison to India

    Pre-Start-up Stage

    • Many countries, like the USA and Malaysia, have initiatives to


    encourage entrepreneurship. India also has organizations that provide
    support.

    Support for Start-ups

    • Countries like China and Australia provide diverse funding options.


    India has schemes like CGTMSE to facilitate loans.

    Growth Stage

    • Support includes technical assistance and market access. Programs


    like the Cluster Development Programme enhance collaboration.

    Maturity Stage

    • Innovative funding programs in countries like Colombia aid small


    businesses in expansion. Indian businesses can raise capital on
    exchanges.

    Decline Stage

    • Programs exist to help financially troubled businesses restructure


    finances.

    Exit Stage

    • Strong insolvency laws aid business exits, while India's bankruptcy


    code needs reforms.

    Suggestions for Developing the MSME Sector in India

    India's strengths include a large, educated population and a growing


    market. Suggestions for improvement include:

    • Improving Information Availability: An online portal for


    comprehensive information about government schemes and market
    opportunities.
    • Promoting a Culture of Entrepreneurship: Government initiatives
    should focus on changing the mindset around entrepreneurship.

    • Skill Development: Training in technical, business, and life skills is


    vital for fostering new entrepreneurs.

    • Formalizing MSMEs: Simplifying registration processes for informal


    businesses can help them access support.

    • Improving Access to Finance: Strengthening credit guarantee


    schemes and promoting venture capital.

    • Promoting High-Growth Enterprises: Focus on high-growth sectors to


    create jobs.

    • Supporting Women Entrepreneurs: Addressing social barriers and


    promoting resources for women.

    • Encouraging Rural Enterprises: Assessing existing programs to


    promote rural entrepreneurship.

    Conclusion

    This paper discusses various initiatives and schemes to support the MSME
    sector in India. While many efforts focus on creation and growth, more
    attention is needed at stages like revival and exit. Comparing India's
    approach with global practices indicates significant room for improvement
    in developing a supportive ecosystem for MSMEs. This understanding can
    guide policymakers to create effective schemes that ensure the
    sustainability of the MSME sector.

    Acknowledgments and Conflicts of Interest

    The authors express gratitude to the Development Commissioner (MSME),


    Government of India, for support during the study and declare no potential
    conflicts of interest related to their research.

    Additional MSME Initiatives

    1. MSME Sustainable (ZED) Certification

    • Goal: Promote "Zero Defect, Zero Effect" production.

    • Benefits: Reduces wastage, increases productivity, expands market


    opportunities, and encourages best practices.

    2. MSME Innovative Scheme (Incubation, IPR, and Design)

    • Objective: Foster innovation in the MSME sector.

    • Key Aspects: Provides resources for marketable products, connects


    with research institutions, and offers financial aid for R&D.
    3. Subordinate Debt Scheme

    • Purpose: Assist financially troubled MSMEs nearing non-performing


    assets (NPA).

    • How It Works: Equity infusion and loan repayment support.

    4. Self-Reliant India (SRI) Fund

    • Goal: Boost the MSME sector for self-reliance and economic growth.

    • Key Features: Establishes a fund of ₹10,000 crores for growth


    capital.

    5. Raising and Accelerating MSME Performance (RAMP)

    • Objective: Improve MSMEs' access to markets, finance, and


    technology.

    • Key Benefits: Supports technology upgrades and involves state


    governments in MSME assistance.

    Human Resource Administration in MSMEs

    1. HR Administration in MSMEs

    • Limited HR Departments: Only 8% have a formal HR department.

    • Empowerment Issues: 91% lack proper HR support, with owners


    making all HR decisions.

    2. Workforce Diversity

    • Globalization Necessitates Diversity: Training in cultural awareness


    is essential.

    • Team-building Workshops: Promote unity among diverse employees.

    3. Training and Development in MSMEs

    • Limited Training Scope: Focus mainly on product sales and service.

    • Lack of Development Programs: 74% of MSMEs lack comprehensive


    training.

    4. Performance Management in MSMEs

    • Inconsistent Appraisals: Varying methods across departments.

    • Lack of Unified Strategy: Less than half have a formal performance


    management system.

    5. Compensation and Benefits in MSMEs

    • Timely Payments: Good practices in payroll management.


    • Inadequate Employee Benefits: Limited healthcare and retirement
    options compared to larger firms.

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