MSME

Micro, Small & Medium enterprises (MSME)

MSME termed as “engine of growth“ for India, has played a prominent role in the development of the country in terms of creating employment opportunities.

• It currently employs 60 million people, creates 1.3 million jobs every year and produces more than 8000 quality products for the Indian and international markets.

• Startups and young firms create more jobs regardless of their size, and educated entrepreneurs have a far higher probability of success.

The challenges and concerns associated with the growth of MSME sector:

• Size of Sector:
• employment in India is concentrated in these micro businesses, whereas in developed countries, it is concentrated in formal small and medium-sized firms.
• new and young firms create more jobs than older, established firms.
• with age, Indian firms typically stagnate or decline in employment.
• productive jobs are created by firms that start out as formal.
• Access to Credit:
• According to Economic Survey (2017-18), MSME sector faces a major problem in terms of getting adequate credit for expansion of business activities.
• The Survey had pointed out that the MSME received only 17.4 per cent of the total credit outstanding.
• Most banks are reluctant to lend to MSMEs because from the perspective of bankers, inexperience of these enterprises, poor financials, lack of collaterals and infrastructure.
• Poor Infrastructure:
• With poor infrastructure, MSMEs’ production capacity is very low while production cost is very high.

• Access to modern Technology
• Poor access to markets
• Legal hurdles:
• Getting statutory clearances related to power, environment, labour are major hurdles.

• Constant crunch of skilled manpower

Other issues:

• Low ICT usage.
• Low market penetration.
• Quality assurance/certification.
• IPR related issues.
• Quality assurance/certification.
• Standardization of products and proper marketing channels to penetrate new markets.

Measures needed:

• The Government policies on micro, small and medium enterprises (MSMEs) must become more nuanced.

• Educating the next generation
• To enhance the productivity of businesses and promote growth, the government should subsidise the provision of management support services—as industrial public goods—to young businesses.
• The government should also periodically update the definitions of MSMEs to bring them closer to international standards.