Micro Small and Medium Enterprises (MSMEs)

It was introduced by the Government of India in agreement with the MSMED (Micro, Small, and Medium Enterprises Development) Act of 2006.
Ministry – Ministry of Micro, Small, and Medium Enterprises (M/o MSME)
As per the new definition-
- Micro – An enterprise is classified as a “micro” enterprise when its investments do not exceed Rs. 1 crore while its annual turnovers remain below Rs. 5 crore.
- Small – An enterprise is considered “small” when its investments range between Rs.1 crore to Rs.10 crore while its annual turnover ranges between Rs. 5 crore to Rs 50 crore.
- Medium – An enterprise is considered a “medium” when its investments range between Rs.10 crore to Rs.50 crore, while its annual turnover ranges between Rs. 50 crores to Rs 250 crores.
Significance:
- The MSME sector is the backbone of the country’s economy, contributing 30 percent of India’s GDP and 40 percent of exports.
- They are also accountable for one-third of India’s manufacturing output.
- It contributes about 11% of GDP from manufacturing and 24.63% of GDP from service activities.
- According to the 2018-19 Annual Report of the Department of MSMEs, there are 6.34 crore MSMEs in the country. Around 51 percent of these are situated in rural India. 99.5 percent of all MSMEs fall in the micro category.
- These MSMEs employ more than 11 crore people.
- MSMEs promote inclusive growth by creating job opportunities, especially for people from lower socioeconomic backgrounds in rural areas.
Challenges:
- Credit Availability: MSMEs struggle to obtain sufficient and timely credit due to stringent lending norms.
- Delayed Payments: Long payment cycles from large corporations and government entities exacerbate liquidity issues.
- Complex Compliance: Multiple regulatory compliances are complex and costly for MSMEs.
- Bureaucratic Hurdles: Lengthy procedures for obtaining licences and approvals delay business operations.
- Limited Access to Technology: Many MSMEs lack access to modern technology and digital tools.
- Digital Literacy: Significant gaps in digital literacy hinder adoption of new technologies.
- Limited Market Reach: MSMEs struggle to expand market reach beyond local boundaries.
- Competition: Intense competition from larger enterprises and cheap imports erode market share.
- Inadequate Infrastructure: Poor infrastructure and inadequate transportation facilities hamper growth.
- Limited Access to Industrial Facilities: MSMEs often lack access to well-developed industrial parks and SEZs.
- Skilled Workforce: A shortage of skilled labour affects production quality and efficiency.
- Training and Development: Limited access to vocational training hinders skill upgradation.
- Low Investment in R&D: Insufficient investment in research and development limits innovation.
- Innovation Support: Lack of support mechanisms for innovation restricts growth potential.
- Export Challenges: Difficulties in navigating international trade regulations and customs procedures.
- Trade Policies: Unfavourable trade policies in other countries restrict market access.
- Sustainability Practices: Lack of awareness and resources to implement sustainable practices.