MSMEs are crucial to India's economy, contributing 30% of GDP, 45% of manufacturing output, and employing over 110 million people.
Table of Content
Why Small and Medium Enterprises (SMEs) are Important for India's Economic Growth: An Overview.
MSME Classification By Government.
How India's SME Industry is Supported by Policy Environment and Statutory Bodies to Drive Economic Growth.
The Importance of Defining MSMEs in India for Promotion and Development: A Key Factor in India's Economic Growth.
Why SMEs are Important for India's Economic Growth: A Comprehensive Overview of the Role of SMEs in Job Creation and Their Significance to the Indian Economy.
Why Indian SMEs Must Overcome These Top Challenges to Drive Economic Growth: A Comprehensive Overview of the Roadblocks and Solutions Hindering Small and Medium Enterprises.
Boosting India's Economic Growth: How Government Initiatives are Supporting the SME Industry.
Importance of SMEs in India: How Small and Medium Enterprises are Driving Economic Growth, Innovation, and Job Creation.
Why Small and Medium Enterprises (SMEs) are Important for India's Economic Growth: An Overview
MSMEs in India increased by a CAGR of 18.5% from 2019 to 2020.
SMEs are defined as businesses with annual revenue between Rs. 5 Crore to Rs. 75 Crore and encompass a diverse range of industries, from manufacturing to services.
India SME/MSME industry as a whole is the most dynamic and lively component of the economy. These industries contributes to India's growth by generating jobs (especially for the demographics of TEIR-2 & TIER-3 cities), encourages and harnesses entrepreneurship, and supports innovation. SMEs (Small and Medium Enterprises) (or) as they are called MSMEs (Micro, Small and Medium Enterprises)in India are often described as firms with a particular amount of investment in plant and machinery or equipment, as well as a certain degree of yearly turnover.
According to the msme.gov.in (Ministry for MSME) , there are over 63 million MSMEs in India, which employs around or more than 110 million people. These industries contributes nearly 30% of India's GDP and around 50% of India's gross exports. The MSME indusrty has been instrumental in driving India's economic growth over decades. (Mint)
The MSME industries in India plays important role in the economy but, it faces lots of obstacles such as limited financing, inadequate infrastructure, low technology adoption, and regulatory challenges. However, the govt in Indian has taken some action lately, to tackle these challenges and propel the growth of this sector, which is vital to the country's economic prosperity.
In recent years, the government has launched several schemes and initiatives such as the 'Make in India' campaign, the 'Startup India' initiative, and the 'Digital India' program to support and promote the growth of the MSME sector. These initiatives aim to provide MSMEs with access to finance, improve infrastructure, encourage innovation, and promote the adoption of technology.
Lately, Indian govt launched several schemes and initiatives such as the #MakeinIndia campaign , the #StartupIndia campaign, and the most important of all #DigitalIndia program to support and promote the growth of the MSME industries. These initiatives aim to provide MSMEs with access to finance, improve infrastructure, encourage innovation, and promote the adoption of technology.
MSME Classification By Government
Why SMEs Are Essential for India's Economic Growth: Sector Classification by the Government of India
(i) Micro Enterprises
The investment made in plant and machinery or equipment should not exceed one crore rupees and the turnover should not exceed five crore rupees.
(ii) Small Enterprises
The investment made in plant and machinery or equipment should not exceed ten crore rupees and the turnover should not exceed fifty crore rupees.
(iii) Medium Enterprises
The investment made in plant and machinery or equipment should not exceed fifty crore rupees and the turnover should not exceed two hundred and fifty crore rupees.
It is important to note that the government's classification system aims to help small and medium enterprises receive benefits such as subsidies, tax exemptions, and priority lending. By being classified as a micro, small, or medium enterprise, businesses can enjoy these benefits, which can help them grow and develop. Furthermore, the government's criteria for classification can act as a guide for businesses to assess their own growth and progress.
How India's SME Industry is Supported by Policy Environment and Statutory Bodies to Drive Economic Growth
For SMEs and MSMEs, knowing the role of governing bodies and regulations is crucial for success. Compliance is key, as non-compliance can lead to legal consequences and reputational damage.
Let's discuss in detail the governing bodies defined by the Ministry of Micro, Small and Medium Enterprises in India (msme.gov.in), as well as their roles in the SME industry, segment by segment.
Khadi and Village Industries Commission (KVIC)
The Khadi and Village Industries Commission (KVIC) is a government body established in 1956 to promote khadi and village industries in rural India. KVIC aims to create employment opportunities and encourage self-sufficiency by promoting locally sourced raw materials. Khadi is a hand-spun and handwoven fabric that played a significant role in India's independence movement. KVIC promotes and sells khadi products such as clothing, home décor, and accessories. The commission trains rural artisans and entrepreneurs and helps them market their products. KVIC also promotes other industries like beekeeping, pottery, and carpentry, which provide employment and preserve traditional crafts. KVIC has successfully created employment opportunities and preserved India's cultural heritage.
Technology Centers (Earlier known as Tool Rooms & Technical Development Centers)
Technology Centers are specialized facilities established by the Indian Government to promote manufacturing industry development (dcmsme.gov.in). They offer technical assistance, training, and state-of-the-art infrastructure to entrepreneurs and small and medium-sized enterprises (SMEs) in product design and manufacturing. These centers are crucial in developing new products, especially in the automotive, aerospace, and electronics industries. They support the Make in India initiative to promote local manufacturing, create job opportunities, and contribute to economic growth.
Coir Board
The Coir Board, established by the Government of India in 1953, develops the coir industry in the country, including the production and marketing of coir products such as mats, rugs, carpets, and handicraft items. It aims to improve quality and productivity, promote coir product use, provide financial assistance, research and development, and training to entrepreneurs and coir cooperatives. The Coir Board creates employment in rural areas and enhances the quality and competitiveness of coir products in the global market.
The National Small Industries Corporation (NSIC) Limited
The National Small Industries Corporation (NSIC) Limited is a Government of India enterprise established in 1955 to promote and support small and medium-sized enterprises (SMEs) in the country. The corporation provides services such as marketing, raw material procurement, technology support, and financial assistance to SMEs. NSIC has offices across the country and collaborates with industry associations and international organizations to promote SME growth. NSIC has contributed to employment opportunities in rural and urban areas, supported entrepreneurship, and promoted the development of SMEs in various sectors, contributing to the overall economic growth of the country.
Mahatma Gandhi Institute for Rural Industrialization (MGIRI)
MGIRI is a national institute under the Indian Ministry of Micro, Small, and Medium Enterprises. It was established in 1993 to promote rural industrialization and sustainable development.
The institute provides training, research, and consultancy services to rural entrepreneurs, artisans, and stakeholders. It focuses on sustainable technologies and management practices. MGIRI also promotes traditional crafts and knowledge systems in rural areas.
MGIRI has successfully created jobs and supported traditional crafts, helping to preserve India's cultural heritage.
National Institute for Micro, Small and Medium Enterprises, (NI-MSME)
NI-MSME is a top institute that helps micro, small and medium-sized enterprises (MSMEs) grow. Established in 1960 under the Ministry of MSME, the institute offers training, consultancy, research and development, and policy advocacy. NI-MSME also promotes entrepreneurship education and provides incubation facilities for startups. The institute has played a significant role in promoting MSME development and creating employment opportunities, contributing to the overall economic growth of India.
The Importance of Defining MSMEs in India for Promotion and Development: A Key Factor in India's Economic Growth
The MSME (Micro, Small and Medium Enterprises) sector plays a significant role in the economic growth and development of any country. In India, the MSMED Act 2006 was enacted to provide a legal framework for the promotion, development, and enhancement of the MSME sector.
Under the MSMED Act, 2006, MSMEs are referred to as SMEs (Small and Medium Enterprises) and are defined based on their investment in plant and machinery or equipment. Micro enterprises have an investment of up to Rs. 1 crore, small enterprises have an investment of up to Rs. 10 crores, and medium enterprises have an investment of up to Rs. 50 crores.
The MSMED Act, 2006 provides several benefits to SMEs in India. It facilitates the promotion and development of these enterprises by providing them with easy access to credit and other financial facilities. The Act also provides for the establishment of an online platform for registration and filing of Entrepreneurs Memorandum (EM) Part-I and Part-II, which serves as a basis for obtaining various licenses and approvals.
The Act also mandates timely payment to SMEs by large companies and encourages their participation in public procurement. Additionally, it provides for the setting up of a Credit Guarantee Fund Scheme for SMEs to ensure timely and adequate credit flow.
Overall, the MSMED Act, 2006 has played a crucial role in promoting and developing the MSME sector in India. The Act has facilitated the growth of SMEs by providing them with a legal framework and several benefits. The continued implementation and strengthening of the Act are essential to ensuring the sustained growth of the MSME sector and contributing to the overall economic development of the country.
"Why SMEs are Important for India's Economic Growth: A Comprehensive Overview of the Role of SMEs in Job Creation and Their Significance to the Indian Economy"
SMEs account for around 45% of India's manufacturing output and employ more than 11 crore people.
According to the Ministry of Micro, Small and Medium Enterprises, there are over 63 million MSMEs in India, employing more than 110 million people. The sector accounts for nearly 30% of India's GDP and around 50% of India's exports. The MSME sector has been instrumental in driving India's economic growth over the past few years. (IBEF).
Let's discuss some key points about the SME/MSME industry and its significance to India.
SMEs contribute significantly to India's GDP, accounting for approximately 30% of the country's total GDP.
SMEs provide employment opportunities to a large number of people, with over 110 million people employed in the sector.
SMEs play a crucial role in promoting inclusive growth and reducing regional disparities in the country.
The growth of SMEs has a multiplier effect on the economy, leading to increased demand for goods and services.
SMEs promote entrepreneurship and innovation, leading to the development of new products and services.
SMEs are an important source of tax revenue for the government, contributing significantly to the country's tax base.
SMEs contribute to foreign exchange earnings through exports, with approximately 40% of India's exports being sourced from SMEs.
SMEs promote rural development by creating employment opportunities and supporting the development of local economies.
The growth of SMEs supports the development of a robust supply chain ecosystem, benefiting large industries as well.
SMEs often have lower capital requirements than larger firms, making them more accessible to entrepreneurs and promoting the democratization of the economy.
The growth of SMEs can lead to increased competition, driving innovation and improving the quality of goods and services.
SMEs are more flexible and responsive to changing market conditions than larger firms, allowing them to adapt more quickly to economic changes.
SMEs play a crucial role in promoting social mobility and reducing income inequality in the country.
SMEs often use locally sourced materials and promote sustainable production practices, contributing to environmental sustainability.
The growth of SMEs can lead to the development of new markets, benefiting both the businesses and the consumers.
SMEs often operate in niche markets, leading to the development of specialized products and services.
SMEs often have a greater social and cultural impact on local communities, supporting the preservation of local traditions and practices.
The growth of SMEs can lead to increased investment in research and development, benefiting the entire economy.
SMEs provide opportunities for women entrepreneurs, promoting gender equality and women's empowerment.
SMEs promote economic resilience by diversifying the economy and reducing reliance on a few large industries.
Why SMEs Are Crucial for India's Economic Growth: A Comprehensive Overview of the Role of SMEs in Job Creation and Their Significance to the Indian Economy
Employment Categorized by Sub-Industry:
According to the National Sample Survey, SME/MSME has generated 11.10 crore jobs (360.41 lakh in Manufacturing, 0.07 lakh in Non-captive Electricity Generation and Transmission, 387.18 lakh in Trade and 362.82 lakh in Other Services).
Employment Categorized by Industry
The micro sector, employed 1076.19 lakh persons, accounting for around 97% of total employment in the industry. The small sector and the Medium sector employed 31.95 lakh (2.88%) and 1.75 lakh (0.16%) respectively (Source: MoMSME Annual Report 2021-22).
Employment Categorized by Geography
SME/MSMEs employees 612.10 Lakhs (55%) in Urban Areas & 497.87 Lakhs (45%) in Rural Areas.
Employment Categorized by Gender
According to the National Sample Survey, SME/MSME workforce comprises of 78% Male & 24% Female employees.
In India, of the estimated unincorporated non-agricultural 633.88 Lakhs MSMEs, more than 99% are in the micro sector (630.52 lakh enterprises), while the small sector (3.31 lakh estimated MSMEs) and the Medium sector (0.05 lakh estimated MSMEs) account for only 0.52% and 0.01% of the total estimated MSMEs, respectively.
The micro sector accounts for over 99% of the employing around 97% of total employment in the industry. The small and medium sectors account for only 0.52% and 0.01% of the total estimated MSMEs, respectively. Over half of the MSMEs are located in rural areas.
"Why Indian SMEs Must Overcome These Top Challenges to Drive Economic Growth: A Comprehensive Overview of the Roadblocks and Solutions Hindering Small and Medium Enterprises”
Mckinsey report says, that the digitalization in SMEs is only 30% right now.
Small and Medium Enterprises (SMEs) are the backbone of the Indian economy, contributing to over 40% of the country's GDP and generating employment opportunities for millions of people. However, despite their critical role in the Indian economy, SMEs face several challenges that hamper their growth and sustainability.
The key challenges faced by Small and Medium Enterprises (SMEs) in India can be broadly categorized into three categories: financial, operational, and regulatory.
One of the primary challenges faced by SMEs is the lack of adequate and timely banking finance. Access to affordable credit is critical for SMEs to invest in new technology, expand operations, and improve competitiveness. However, many SMEs struggle to secure loans due to limited collateral, lack of credit history, and the high cost of borrowing.
Another key challenge for SMEs is the availability of skilled manpower. Many SMEs face difficulties in finding and retaining skilled workers, which can limit their ability to grow and innovate. Limited capital and knowledge can also be a barrier to innovation and can make it difficult for SMEs to keep up with changing market trends.
Non-availability of suitable technology can also pose a challenge for SMEs. Many SMEs lack the resources to invest in the latest technology, which can limit their productivity and competitiveness. Low production capacity and ineffective marketing strategy can also make it difficult for SMEs to reach new customers and grow their business. Mckinsey report talked about the digitalization in SMEs is only 30% right now.
Regulatory constraints can also pose a challenge for SMEs. Follow-up with various government agencies can be time-consuming and can divert resources away from core business operations. Identification of new markets can also be a challenge, as SMEs may lack the resources to conduct market research and explore new opportunities.
In conclusion, Indian SMEs face a range of challenges that can limit their ability to grow and compete. Addressing these challenges will require a multi-faceted approach that involves improving access to finance, investing in human capital, fostering innovation, promoting the adoption of new technology, and streamlining regulatory processes.
"Boosting India's Economic Growth: How Government Initiatives are Supporting the SME Industry”
The Indian government has launched several schemes and initiatives to support and promote the growth of the MSME sector, including the Special Credit Linked Capital Subsidy Scheme and the inclusion of retail and wholesale trades as MSMEs. The budget allocation for MSMEs in FY22 has more than doubled compared to FY21. (Source: MSME)
MSMED Act, 2006, was enacted: MSMEs are called SMEs in India under the MSMED Act, 2006. We might say that SME is a fundamental notion, while MSME is its Indian definition.
November 2021, the Indian government launched the Special Credit Linked Capital Subsidy Scheme (SCLCSS) for the services sector.
July 2021, the Indian government announced inclusion of retail and wholesale trades as MSMEs to strengthen the sector and boost economic growth.
The government has launched several schemes and initiatives such as the 'Make in India' campaign, the 'Startup India' initiative, and the 'Digital India' program to support and promote the growth of the MSME sector.
Budget allocation for MSMEs in FY22 more than doubled to Rs. 15,700 crore (US$ 2.14 billion) vis-à-vis Rs. 7,572 crore (US$ 1.03 billion) in FY21.
Other Government Initiatives: Boosting the Indian economy by supporting the SME industry of India.
Following are the measures taken by the Indian government to support the growth of small and medium-sized enterprises (SMEs). The following bullet points highlight some of the key initiatives implemented to promote the development of the SME sector in India. (Source: MSME)
The Emergency Credit Line Guarantee Scheme (ECLGS) has provided additional credit to over 13 million MSMEs. The ECLGS will now continue until March 2023, with an expansion of the guarantee cover by INR 50,000 crore to a total of INR 5 Lakh Crore.
Micro and Small Enterprises can now access an additional INR 2 lakh crore in credit, facilitated under the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE).
The Raising and Accelerating MSME performance (RAMP) program will be rolled out, with an outlay of Rs 6,000 crore.
The Udyam, e-Shram, National Career Service (NCS), and Aatamanirbhar Skilled Employee Employer Mapping (ASEEM) portals will be interlinked. These portals will now serve as live, organic databases, providing G2C, B2C, and B2B services related to credit facilitation, skill development, and recruitment.
6 Major Schemes by the Government to Boost Economic Growth for Indian SMEs: An Overview of the Initiatives Supporting SMEs
Scheme for Credit and Financial assistance to MSMEs
Schemes for Skill Development and Training
Schemes for Infrastructure Development - Support through Cluster Approach.
Scheme for Marketing Assistance
Scheme for providing financial assistance to Khadi institutions under MPDA.
Scheme for Technology Upgradation and Competitiveness
Financial Support to MSMEs in ZED certification.
Other Schemes for the MSMEs across the country
The National Scheduled Caste and Scheduled Tribe Hub.
Scheme for Promotion of MSMEs in N.E. Region and Sikkim.
Building Awareness on Intellectual Property Rights (IPR) for MSMEs.
"Importance of SMEs in India: How Small and Medium Enterprises are Driving Economic Growth, Innovation, and Job Creation"
The Small and Medium Enterprise (SME) industry plays a significant role in India's growth and contributes to the country's economic development. SMEs are the backbone of the Indian economy, contributing significantly to GDP, employment, exports, innovation, and cash flow.
In addition to their national impact, SMEs are vital to the growth of Tier 2 & 3 cities, as they create job opportunities and stimulate economic growth in these areas. They also help to reduce regional disparities and promote equitable development across the country. SMEs account for around 30% of India's GDP.
Employment is a crucial aspect of SMEs as they provide jobs to millions of people, especially in Tier 2 & 3 cities. SMEs account for around 45% of India's manufacturing output and employ more than 11 crore people.
The SME sector also contributes significantly to India's exports, with exports from this sector accounting for around 40% of the country's total exports. SMEs are also driving innovation in India, with many innovative products and services being developed by these businesses.
Cash flow is another critical aspect of SMEs as they provide a significant source of revenue to the economy. The growth of SMEs has a ripple effect on the economy, leading to increased spending and consumption, which further boosts economic growth.
In conclusion, the SME industry is crucial to India's economic growth and development, especially in Tier 2 & 3 cities. These businesses play a significant role in creating jobs, promoting innovation, boosting exports, and contributing to the overall GDP and cash flow of the country. Therefore, the government must continue to support and promote the growth of SMEs in India to ensure sustained economic growth and development.
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It's hard for small business to survive in such harsh economic conditions but still they are doing their best and providing employment..
Awesome