MSMEs

The Union Budget 2023-24 has introduced several enabling provisions for the growth of the MSMEs. However, MSMEs continue to face several challenges.

MSMEs 8 Feb 2023

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? 

  1. There is a need to push for digitisation of MSMEs. 
  2. The National Logistics Policy can also be used to boost the competitiveness of MSMEs.
  3. MSMEs have access to a channel to expand their markets.

                                                                                                               News Source: The Indian Express

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