How MSMEs Help to Boost the Economy of Developing Country?

The MSMEs have developed over the years as a highly dynamic sector which will benefit the Indian Economy. These enterprises are the driving engine behind the economic growth and for promotion of equitable development. They comprise over 90% of the complete enterprises in most economies. They are responsible for generating impressive employment growth and high amount of industrial production as well as exports. Owing to its flexibility and vibrancy, they have shown appreciative innovativeness and easy adaptability in surviving the ups and downs of Indian Economy. They are immense opportunities for future growth and expansion.

Provided below are a few highlights of MSME:

Over the past few decades, the MSME has registered a high growth rate in comparison to other industrial sectors. This sector employs an estimate of about 45% of the manufacturing output and around 40% of the total export of India. The main advantage is that they offer more employment potential at low capital cost. The Government also offers various schemes, policies, practices, etc. for the micro and small enterprises for efficient mechanism and removing the problem of delayed payments, etc.

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 ensures the development of the enterprises. It provides a legal framework for the recognition of the enterprise as an enterprise, for both manufacturing and services.

The MSME sector of the country creates a vast number of employment opportunities for the people. The minimum investment of one lakh rupees in fixed assets in small scale creates the employment of four people. They play a significant role in the industrialization of the rural and backward areas, hence reducing the regional imbalance and creating equitable distribution national income. Henceforth, they contribute to the socio-economic development of the country. It is the only sector which offers maximum opportunities for both self-employment and wage-employment, apart from the agriculture sector.

The MSEs are defined solely based on investment limit and turnover size. Thus, the present FDI policy on MSE permits FDI subject only to the sector-wise equity caps entry routes and other relevant sector-based regulations.

The present business scenario is technology-based; hence for the growth of MSME sector, the Government has set up ten state-of-the-art Tool Rooms and Training Centres. They offer valuable service to the Indian industry with precision tooling and providing training to craftsmen for tool and die making. The tool rooms are equipped with most advanced technology and are updated with advancements like CAD/CAM, CNC machining for tooling, Vacuum Heat Treatment, etc.

The MSME sector plays a significant role in export promotion. The government assists in the promotion by providing the following:

1. Products of MSE exporters are displayed in international exhibitions, and the Government reimburses the expenditure incurred by the company.
2. Training program on the packaging for exporters is organized in various parts of the country in association with the Indian Institute of Packaging, to acquaint MSE exporters with the latest packaging standards, techniques, etc.
3. Under the MSE (MDA) Scheme, special assistance is provided to people for participation in overseas fairs/ exhibitions, overseas study tours, or tours as a member of a trade delegation going abroad.

For the development of MSMEs, a special Integrated Infrastructural Development (IID) Scheme was launched in 1994. The scheme provided service to rural and urban areas. It includes the provision of 50% reservation for rural areas and 50% of industrial plots are to be reserved for the micro-enterprises. The scheme also provides strengthening of the infrastructural facilities for the existing industrial estates.

*The Union cabinet has approved the revised definition for classification of enterprises as Micro, Small and Medium Enterprises on 1st June, 2020, as defined below:

• Micro Units: Enterprises with Investments up to Rs 1 crore & Turnover of below Rs 5 crore.
• Small Units: Enterprises with Investment of up to Rs 10 crore & Turnover of below 50 crore.
• Medium Units: Enterprises with Investment of up to Rs 50 crore & Turnover of below Rs 250 crore.

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