MSME
MSMEs: Backbone of Indian economy
Iqbal Marazi
MSME sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. It contributes significantly to the economic and social development of the country. But, the sector was among the most affected sections during the COVID19 pandemic.
It has been reported that lockdown induced the closing of thousands of MSMEs in the country, despite the government of India’s Rs 20 lakh crore covid response package. According to a recent report by Small Industries Development Bank Of India(SIDBI), two-thirds of MSME’s in India were shut for a period of three months or more in FY2021 and over half of all MSMEs saw a decline of 25 percent in revenue.
WHAT ARE MSMEs
MSMEs are micro, small and medium enterprises categorised on the basis of investment in plant and machinery and the annual turnover in accordance with the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006. MSMEs in India have evolved considerably since independence. From being referred to merely as the small-scale industries (SSI) sector in 1960s and 70s, the MSME sector has progressed in scale and in the scope of business activities over the years. MSME consists of both traditional and modern small industries in India. Small industries are divided into eight subgroups: Handlooms, Handicrafts, Sericulture, Khadi And Village Industries, Small Scale Industries and Power looms.
WHY ARE MSMEs SIGNIFICANT FOR INDIA’s DEVELOPMENT
1) Acting as engines of entrepreneurship: The indigenous skills and grassroots innovations can be channelled into MSME business ideas as they require very limited capital investment, are low risk and are not bureaucratically tedious.
2) Completing the economic supply chain: MSMEs are complimentary to large Industries as ancillary units and form an integral part of the value chain by filling the localised gaps.
3) Equitably distributing the opportunities of development: MSME units provide source of income, in wide range of non- agricultural activities and provide employment opportunities in rural areas, especially for the non-traditional artisans and weaker sections of the society.
4) Encouraging inclusive growth via employment generation: MSME are the second largest employers of human resources, after agriculture. They are, therefore considered to be more labour-intensive and less capital-intensive. They provide gainful employment to marginalised sections.
5) Growing role in technology-intensive and rapidly emerging sectors: Indian MSME’s are not limited to small business only but are rapidly increasing their presence, like Financial Technology, Defence, Manufacturing and Space among others.
6) Aiding achievement of sustainable development goals: MSMEs produce products using locally available resources, both material and labour. These products and processes help in achievement of SDGs both directly and indirectly. Some of SDGs are as:
SDG1 (End Poverty) Alleviating poverty through micro franchising
SDG3 (Good health and wellbeing)
SDG6 (Sanitation for all)
SDG7 (Energy for all)
SDG10 (Reduced Inequalities)
SDG14 (Life below water)
India’s MSME sector contributes almost 30% of the GDP. Almost half of the exports come from micro, small and medium enterprises. In India around 20% of micro, small and medium enterprises are micro enterprises. More than half of micro, small and medium enterprises are owned by general category entrepreneurs.
RECENT INITIATIVES TAKEN BY GOVERNMENT OF INDIA FOR MSMEs:
1) Improvement in overall performance and quality. Raising and Accelerating MSME Performance (RAMP) is a world bank assisted central sector scheme. The revamped Zero Defect Zero Effect (ZED) Certification scheme.
2)Access to Finance, Collateral free loan 59-minute loan portal.
3) Access to markets, mandating PSEs to compulsorily procure 25% of their total purchases from MSME’s, International Cooperation Scheme, Marketing Assistance Scheme.
4) Technology Upgradation, Setting up 15 new and upgrading 18 existing tool rooms.
5) Ease of doing business, randomised inspection through a computerized random allotment, reduced environment clearance and certification burden.
The author is a PG student of economics at HNB Garhwal Central University Uttrakhand. He can be reached at iqbalmarazi999@gmail.com