Impact of MSME on Indian Economy

INTRODUCTION TO MSME

The Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector the Indian Economy over the last 5 decades. MSME Sector has been one of the most focused sectors in prospects of Investments and has contributed significantly for our country’s Social Development as well as Economic development. MSME has also promoted women empower and has helped in generating largest employment opportunities at lower capital cost, next only to agriculture. It has helped abundantly by promoting the term ‘Entrepreneurship’. MSME have merged as complementary to large industries as ancillary units and they are widening their domain across all sectors of the Indian Economy as well as producing a range of Products and Services which will help to meet the needs of not only domestic market but International markets also. Government of India has never failed to support MSME in all ways possible and have promoted MSME sectors by starting a number of Schemes and other Incentives for them. The Ministry of MSME runs Various Schemes aimed at financial assistance, Infrastructure development, technology assistance and Upgradation, skill development and training, enhancing competitiveness and market assistance of MSMEs.

GOVERNMENT SUPPORT TO MSME

The ministry of MSME is doing its best to help MSMEs reaching new high and contributing more and more to The Indian Economy. The ministry recently came up with some Policy Initiatives like:

  • Ease of Registration Process of MSMEs- Udyog Aadhaar Memorandum
  • Framework for Revival and Rehabilitation of MSMEs
  • MSME Data Bank
  • MyMSME
  • Direct Benefit Transfer in the M/o MSME
  • GST rollout & Ministry of MSME
  • Digital Payments
  • Grievance Monitoring
  • MSME Samadhaan: To Address Delayed Payments to MSEs
  • MSME- Sambhandh
  • Technology Centre Systems Programme(TCSP)
  • Partnership with Industry
  • International MoUs
  • MoU with NSIC for provision of services for MSMEs
  • Swachhta Pakhwada by Ministry of MSME
  • National Scheduled Caste / Scheduled Tribe Hub

These Policies are being formulated to help MSME reach new heights and contribute more in Economic and Social Development of the Country. The Schemes by Government help MSMEs Financially/in-kind for their betterment. Government of India has Supported and Promoted MSME Sector not only on Domestic Levels but in International Markets also. The contribution made by MSME in development of Economy and Social Life in backward areas has been spectacular.

ROLE OF MSME IN INDIA

The MSMEs have been a great contributor to the expansion of entrepreneurial endeavours through business innovation. Since past 9 Years MSME have contributed around 29% in GDP of India(Source: CSO, Ministry of Statistics & Programme Implementation). The Gross Value added by MSMEs in contribution to Indian Economy as on 2015-16 was INR 1,24,58,642 Crs.

In India 324.88 Lakhs MSMEs are located in Rural Areas whereas 309 Lakhs MSMEs are located in Urban Areas. Shockingly 630.52 Lakhs of these MSMEs falls under Micro Sector whereas 3.31 Lakh MSME falls under Small sector and only 0.05 Lakh falls under Medium Sector(Data as per MSME Annual Report 2017-18). MSMEs have a big impact on Micro Sector helping small entrepreneur’s achieving their dreams.

Not only was these, it also seen that 22.24% of the ownership of these Enterprises in rural areas were of female. In urban areas Female ownership of these enterprises came around 18.42%. MSME have led a movement in supporting Female entrepreneurs and have helped them in achieving their dreams. One more interesting fact is that 50% of MSMEs in India have ownership of OBCs followed by 12.45% of SCs and ST having ownership of 4.10%. In total ~66% of MSMEs in India are owned by Socially Backward Groups.

Estimated number of MSMEs (Activity Wise) is as follows:

Activity Category

Estimated Number of Enterprises (in Lakh)

Share(%)

RURAL

URBAN

TOTAL

Manufacturing

114.14

82.50

196.65

31

Trade

108.71

121.64

230.35

36

Other Services

102.00

104.85

206.85

33

Electricity*

0.03

0.01

0.03

0

ALL

324.88

309.00

638.88

100

*Non-captive electricity generation and transmission and distribution by units not registered with the Central Electricity Authority (CEA)

MSMEs have helped women entrepreneurs, socially backward groups in excelling and have been a major player in generating employment. Truly Micro Sector has been a major contributor in Social and Economic development of our nation.

Following Table shows how MSME helped in Employment Generation:

Activity Category

Employment (in Lakh)

Share(%)

RURAL

URBAN

TOTAL

Manufacturing

186.56

173.86

360.41

32

Trade

160.64

226.54

387.18

35

Other Services

150.53

211.69

362.22

33

Electricity*

0.06

0.02

0.07

0

ALL

497.78

612.10

1109.89

100

*Non-captive electricity generation and transmission

Interestingly, out of the total Estimated Employment Generated around 97% are generated by Micro sector which shows how it has been aiding in development of our nation and shaping a bright future.

MSME Sector has always been supported by Government and Big industries in every ways possible and MSME have returned the favour.

“No dream is too big and no dreamer is too small” these saying have been proved right as the smallest of enterprises have supported millions of peoples dream by providing them with employment.

*The figures were taken from the government MSME Annual Report of 2017-2018

Author
Aditya Majmudar
Volunteer- Equity Research & Valuation
(MSc Finance, NMIMS Mumbai. Batch 2018-20)

Connect with Aditya on LinkedIn

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