MSME: The Current Scenario

by | Sep 24, 2016

As part of my work with TARA, for the last few weeks, I had been doing a lot of research on various government schemes and provisions available for small loans for MSME entrepreneurs. In the process, I now have a much clearer picture of the MSME sector in India.

MSME or Micro Small and Medium Enterprises play a crucial role in providing large employment opportunities at a comparatively lower capital cost than large industries and also help in industrialization and development of rural areas. MSMEs are often complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country. The sector, comprising of over 36 million units, as of today, provides employment to over 80 million persons. The MSME sector through more than 6,000 products contributes about 8% to GDP besides 45% to the total manufacturing output and 40% to the exports from the country. The MSME sector has the potential to spread industrial growth across the country and can be a major partner in the process of inclusive growth. MSMEs also play a significant role in nation development through high contribution to domestic production, significant export earnings, low investment requirements, operational flexibility, location wise mobility, low intensive imports, capacities to develop appropriate indigenous technology, import substitution, technology -oriented industries, competitiveness in domestic and export markets thereby generating new entrepreneurs by providing knowledge and training.

Definition of MSMEs in India
(As Per Micro, Small & Medium Enterprises Development (MSMED) Act, 2006)

Manufacturing Enterprises – Investment in Plant & Machinery
DescriptionINR
Micro Enterprisesupto Rs. 25 Lakh
Small Enterprisesabove Rs. 25 Lakh & upto Rs. 5 Crore
Medium Enterprisesabove Rs. 5 Crore & upto Rs. 10 Crore
Service Enterprises – Investment in Equipments
DescriptionINR
Micro Enterprisesupto Rs. 10Lakh
Small Enterprisesabove Rs. 10 Lakh & upto Rs. 2 Crore
Medium Enterprisesabove Rs. 2 Crore & upto Rs. 5 Crore

The GoI has various schemes for the MSME sector. The Credit Guarantee Fund Scheme for Micro and Small Enterprises (CGMSE), Prime Minister’s Employment Generation Programme(PMEGP), Technology Upgradation Fund Scheme for the Textile Industries(TUFS), Credit Linked Capital Subsidy Scheme (CLCSS), Integrated Development of Leather Sector Scheme(IDLSS), Technology and Quality upgradation Support to Micro , Small & Medium Enterprises (TEQUP), FPTUFS-Scheme for food Processing Industries, Mudra Bank Scheme, Trade Related Entrepreneurship Assistance and Development (TREAD) Scheme for Women, various schemes under NABARD, SIDBI to name a few.

Additionally, public sector banks have been advised to open at least one specialized MSME branch in each district. The banks have been permitted to categorize their MSME general banking branches having 60% or more of their advances to MSME sector, as specialized MSME branches for providing better service to this sector as a whole. As per the policy package announced by the GoI for stepping up credit to MSME sector, the public sector banks will ensure specialized MSME branches in identified clusters/centres with preponderance of small enterprises to enable the entrepreneurs to have easy access to the bank credit and to equip bank personnel to develop requisite expertise. There are also various skill and capacity building initiatives taken by the GoI through the ITIs, MSME Development Institutes, KVIC and Coir Boards, and various other centres spread all across the country.

In spite of all these, employment opportunities and employability is still an issue for a large portion of our youth. Among the various reasons for this scenario, one that came across time and again during these past few weeks has been the lack of knowledge among the general population regarding these avenues. If corrective measures are not taken in immediate future, this information asymmetry will have far reaching consequences.

All photo source: photopin.com

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2 Comments

  1. Anupama Pain

    Very well explained and thorough post. Really liked reading it. Congratulations Esha!

    Reply

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