Today, the 27th of June is celebrated as World MSME Day. MSME stands for Micro, Small, and Medium Enterprises.
Micro, Small and Medium enterprises include artisans, bakers, delicatessens, carpenters, electricians, machine makers, potters and the likes. The MSME sector is a large contributor to the GDP- Gross Domestic Product in India. In December 2021, the MSME sector contributed about 6.11% of the GDP to the manufacturing sector and 24.63% to the services sector. (Source: IBEF)
The importance of MSMEs is often underrated, because of their size. However, it is essential that we give an impetus to MSMEs in India, for they can transform into larger companies in the future.
As on 1st June 2020, the government announced through the Gazette of India, a clear criteria of the organizations that will benefit from the MSME Act and its advantages. Souce: MSME.gov.in
(i) a micro enterprise, where the investment in Plant and Machinery or Equipment does not
exceed one crore rupees and turnover does not exceed five crore rupees;
(ii) a small enterprise, where the investment in Plant and Machinery or Equipment does not exceed
ten crore rupees and turnover does not exceed fifty crore rupees;
(iii) a medium enterprise, where the investment in Plant and Machinery or Equipment does not
exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.
THE IMPETUS FACTOR:
With the ease of regulation and policies easing away, doors of opportunities have opened up for the MSME sector providing them with ease of doing business. Lesser paperwork is an encouragement to invite more investment from entrepreneurs. The advent of technology has increased connectivity even in the most remote corners of the country, ease of doing business, easy payments etc as well as FDI- Foreign Direct Investment has been encouraged in the country. The role of Government incentives also, cannot be ignored.
POST PANDEMIC UPHEAVAL:
The pandemic was a catastrophe for the MSME sector. Many businesses were shut down, unable to survive. But, the tide turned rather sharply as the Prime Minister announced the Atmanirbhar Bharat initiative. MSMEs have become strategically and economically important for the country. The government has projected to add around 50 million additional job opportunities in the sector. Technological Integration is responsible for the development of tech-based business models including Artificial intelligence, mechanisation, and data analytics.
The MSME sector in India faces a number of challenges. Although it is a prominent contributor to the country’s exports, there is no dearth of hurdles for this thriving industry. The biggest roadblock for MSMEs is securing finances. Due to their small size, MSMEs find it difficult to secure financing from private banks, while a wide majority is financed by government banks or grants.
A constantly changing legal landscape makes for a difficult adaptation. Labour laws, tax regulations, and central bank norms are ever-changing. This is especially difficult for small enterprises to deal with as hiring legal advisors is expensive and compliance becomes difficult due to a lack of awareness or legal help.
Other issues include lack of infrastructure, slower adaptation rate to technology, and low capital that pose hindrances to the growth of the MSME sector. However post-pandemic the situation has improved with increased participation of private players in financing MSMEs, improved technology, increased internet penetration and government support initiatives. (Source: ET)