Contribution of MSME- Micro, Small and Medium Enterprises is 37.5 % of India’s GDP, 45% of the manufacturing output and 40% of the exports. In other words, this sector has shown an average growth of 12% in the last Five-Year Plan, which is higher than the annual increase of GDP. National Policy for manufacturing envisages a contribution of manufacturing sector from 16% to 25% in India’s GDP by 2022. After Agriculture, this sector generates largest employment. A growth in MSME sector can ensure industrialization in the backward areas also. They have already become the nursery of innovation and entrepreneurship. They are dispersed widely throughout the country and produce a diverse range of products and services to meet the demands of the national & international value chains, local and the global market. They help in generating foreign exchange for the country and contribute to the GDP of India. Active participation has been observed by this sector for the last fifty years. This sector does not require huge investment by any entrepreneur. Units under this sector can also act as ancillary unit of large scale industries.
Micro, Small and Medium Enterprises Development Act, 2006 – was enacted by Indian Parliament, published in Government Gazette on 16th June, 2006 which came into force with effect from 2nd October, 2006.
MSMED Act 2006 Definition of MSME (In Lacs)
| Initial Investment in Plant & Machinery | |||||||||||||||||||||||||
| Category/Enterprise Size | MicroEnterprise | Small Enterprise | Medium Enterprise | ||||||||||||||||||||||
| Manufacturing | 25.00 | 25.00 to 500.00 | 500.00 to 1000.00 | ||||||||||||||||||||||
| Service | 10.00 | 10.00 to 200.00 | 200.00 to 500.00 There are 32 million MSME units in India, according to the latest survey, of which, 95% of the MSME units are unregistered. Unorganized sector consists of almost 30 million units. Of the total MSME units 50% are in rural area.
Inspite of this fact that there is immense potential in this sector, yet it suffers from various constraints to its growth. There is always inadequate capital infusion with insufficient data for credit requirement. Poor infrastructure and inadequate market linkage are the constraints in the growth of MSME. It suffers because of high cost of credit which even does not reach on time, non-availability of collaterals in the hands of entrepreneurs, legal hassles in getting licenses, taxation (Both direct and indirect) constrains. Non financing is the result of Illiteracy/Ignorance/inability/un-willingness to share information. Mindset of the individuals working in unorganized sector may also be one of the reason for backwardness and poor growth.
The Central Government has realized the potential of MSME Sector in country’s growth and has taken various steps in promoting MSME and has also advised state governments to take initiatives.
Some of the steps include constitution of Nodal Institutions/bodies to promote, nurture and look after MSME:
Moreover various states in India have also taken steps during the course of time by constituting various nodal agencies/funds/policies like State Finance Corporations, Handicraft Development Boards, Industrial Development Corporations, Small Industrial Development Corporations, District Industry Centers, Khadi and Village Industries Board, Biotechnology Development Funds, Automotive Development Policy, Agro and Food Processing Policy, ITE/IT Infrastructure Policy, Clusters Development Policy, Tech Zones, Tech Parks and the latest being Solar Policy.
Reserve Bank of India has also stipulated a sustained growth of 20% on year to year basis from Schedules Banks in India.
For improvement of MSME health, Banking/Financial Sector together has to play vital role with the steps like:
For Top priority in growth trajectory of India, building global competitiveness, inclusivity and sustainability, financial health of MSME has to play vital role. We can dream of prosperous India with sustained growth in GDP on year to year basis if our MSME grows.
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