Context:
The Union Budget 2023-24 has introduced several enabling provisions for the growth of the MSMEs. However, MSMEs continue to face several challenges.
Issues
- The year 2023 has started on an optimistic note.
- The Industrial sector has received much attention especially the role of large businesses in economic recovery.
- However, the Micro, Small and Medium Enterprises (MSME) sector is more crucial as MSMEs are the largest employers in India outside of agriculture.
- Addressing MSMEs challenges can ensure not only faster overall economic growth, but also make the growth process more sustainable and inclusive.
About MSMEs:
- MSME (Micro, Small, and Medium Enterprise) are regulated under the Micro, Small & Medium Enterprises Development (MSMED) Act, 2006.
- Earlier, MSMEs were categorized based on the amount invested in plant and machinery/equipment.
- With revised regulations effective from July 2020, annual turnover has also been added as a criteria.
Classification criteria of MSMEs:
- Micro Enterprise: Investment in Plant and Machinery or Equipment is less than INR 1 crore and Annual Turnover is less than INR 5 crore.
- Small Enterprise: Investment in Plant and Machinery or Equipment is less than INR 10 crore and Annual Turnover is less than INR 5O crore.
- Medium Enterprise: Investment in Plant and Machinery or Equipment is less than INR 50 crore and Annual Turnover is less than INR 250 crore.
Statutory Bodies:
The Ministry of MSME have 5 statutory bodies:
- Khadi and Village Industries Commission (KVIC)
- The Coir Board
- National Small Industries Corporation Limited (NSIC)
- National Institute for Micro, Small and Medium Enterprises, (NI-MSME)
- Mahatma Gandhi Institute for Rural Industrialisation (MGIRI)
Significance of MSMEs:
- Boon for Rural Development: 51% of MSMEs are located in rural areas.
- Contribution to GDP and Exports: In 2020-21, MSMEs accounted for 26.8% of Gross Value Added (GVA).
- Creation of Employment: MSMEs are India’s largest employer outside of agriculture.
- MSMEs are key to the Make in India mission.
Recent Government Initiatives Related to MSMEs:
- Raising and Accelerating MSME Performance (RAMP) Scheme
- Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE)
- A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE)
- Interest Subsidy Eligibility Certificate (ISEC)
- Credit Linked Capital Subsidy for Technology Upgradation (CLCSS)
Challenges:
- Financial Constraint
- Lack of Innovation, Lack of Formalisation, Skill Development, Creativity lacking
- Competition from other sectors and Red-Tapism
What more should be done to support MSMEs?
- There is a need to push for digitisation of MSMEs.
- The National Logistics Policy can also be used to boost the competitiveness of MSMEs.
- MSMEs have access to a channel to expand their markets.
News Source: The Indian Express
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