MSME Industries
The MSME sector includes micro, small, and medium-sized firms that create, manufacture, and process goods and commodities. The Indian government initially adopted this criterion through legislation, the Micro, Small & Medium Enterprises Development (MSMED) Act of 2006. This essay investigates the Indian economy’s MSME sector from the perspective of UPSC exam preparation.
What Is the MSME Sector?
- The MSME sector, which is the backbone of the Indian economy, has historically protected the national economy by providing it with the resilience and fortitude required to endure shocks to the global economy.
- This industry contributes to 24.63 percent of the GDP in the service sector, 6.11 percent of the manufacturing GDP, and 33.4% of the manufacturing production in India.
- Around 63.4 million of them are in use nationwide. The MSME sector, which accounts for around 45 percent of all Indian exports, employs about 120 million people.
How the Indian economy depends on the MSME sector:
- Rural development is encouraged by this sector, which also encourages the use of local resources, resource mobilisation, increases exportability of goods, etc.
- It makes nearly 6,000 different products, ranging from everyday items to cutting-edge technology, and provides a broad range of services.
- GDP contribution: The Ministry of MSME has set a target of raising its GDP contribution to 50% by 2025 in order for India to reach a $5 trillion economy.
- Employment: Outside of agriculture, this industry provides opportunities for both self-employment and waged employment.
- It contributes to the establishment of an equitable society by offering low-cost non-farm livelihoods and balanced regional development with gender and social balance.
- Rural areas and other poor regions of the country are particularly affected. For instance, the rural khadi and village industries employ a large number of women while requiring little in the way of per capita spending.
- The employment potential can be roughly estimated given that they employ over 11 crore people but that urban MSMEs account for 55% of employment.
Barriers to the MSME Sector:
- They struggle to obtain credit, which puts them in a cycle of debt and makes them more vulnerable to unscrupulous lenders.
- Due to challenges getting bank loans and operational capital as well as delays in receiving government payments, MSMEs have a higher level of debt.
- Commercial banks and NBFCs, two types of financial institutions, can only cover 16 percent of the credit demand.
- 86 percent of the manufacturing MSMEs operating in the country are not registered because of the lack of formalisation.
- The use of outdated technologies and conventional procedures has an impact on the industrial output.
- limited access to skilled labour, technical progress, and management that supports their growth
For the MSME Sector, the Government Has Undertaken a Number of Initiatives:
- The Udyami Mitra Portal was established by SIDBI to assist MSMEs in obtaining finance and providing support services.
- The MSME Sambandh will be used by the Central Public Sector Enterprises to track the execution of the public procurement from MSMEs.
- Micro and small business owners will be able to directly file grievances through MSME Samadhaan over delayed payments from Central Ministries, Departments, CPSEs, and State Governments.
- The digital MSME initiative makes use of cloud computing to give MSMEs online access to both standard and customised IT infrastructure.
- Boosting the competitiveness of traditional firms and craftsmen is the Strategic Fund for Regeneration of Traditional Industries (SFURTI) Scheme’s primary objective.
- To increase the culture of entrepreneurship, to provide new employment opportunities, etc. A Program for Fostering Innovation, Rural Industry, and Entrepreneurship (ASPIRE)
- The Micro & Small Enterprises Cluster Development Programme (MSE-CDP) will employ a cluster development technique in order to increase the productivity and competitiveness of MSMEs.
- MSMEs can increase their technological capabilities with the aid of the Credit Linked Capital Subsidy Scheme (CLCSS).
Conclusion:
- The MSME sector underpins the Indian economy’s core. Due to the fact that it contributes a third of India’s GDP, 46% of manufacturing output, and 35% of exports, it may have an impact on manufacturing and export competitiveness. It is crucial to make sure that this industry has enough institutional support because of its greater contribution to job potential; otherwise, it could have a significant negative influence on people’s livelihoods.
