MSMEs play a pivotal role in India’s economic landscape, contributing nearly 30% to the country’s GDP, accounting for approximately 48% of exports, and providing employment for over 110 million people. They are crucial for job creation, innovation, and boosting exports, making them indispensable for sustainable economic growth.
Government’s Endeavors for Manufacturing and MSMEs:
Make in India:
- Objective: To increase the manufacturing sector’s contribution to 25% of GDP by 2022.
- Impact: FDI inflow rose to $64.37 billion in 2019-20 from $45.15 billion in 2014-15, showcasing the initiative’s success.
- Addresses payment delays, a significant issue for MSME liquidity.
- Over 40,000 cases were registered on the portal by 2020, demonstrating active use by MSMEs.
Credit Guarantee Scheme for MSMEs:
- Facilitates collateral-free credit.
- Cumulative loan sanctions under the scheme exceeded ₹2.2 lakh crore by 2020.
National Manufacturing Policy (NMP):
- Aims to create 100 million jobs by 2022.
- Establishment of NIMZs, such as the one in Prakasam district, Andhra Pradesh, to boost industrial growth.
Revised MSME Definition:
- Expanded in 2020 to include more enterprises.
- New criteria classify companies with an investment up to ₹50 crore and a turnover of up to ₹250 crore as medium enterprises, benefiting a larger number of enterprises.
Atmanirbhar Bharat Abhiyan:
- Emphasizes local production and self-reliance.
- Announced ₹3 lakh crore of collateral-free loans for MSMEs in 2020.
Way Forward (Steps needed to strengthen MSMEs):
- Facilitate Easier Access to Credit: Simplify lending processes and digitally-driven credit evaluations to expedite financing for MSMEs, as suggested by Dr. K.V. Kamath.
- Enhance Skill Development: Establish specialized institutions and training centers to upgrade the skills of MSME workers, ensuring global competitiveness, as recommended by the Abid Hussain Committee.
- Promote Technological Upgradation: Integrate technology into MSME operations, offering government subsidies or incentives for adopting digital tools and platforms, in line with Raghuram Rajan’s suggestion.
- Streamline Regulatory Processes: Reduce the regulatory burden by implementing single-window clearances and integrating permissions for easier business operations, as advised by the Prime Minister’s Task Force on MSMEs.
- Expand Market Access: Encourage MSMEs to access larger markets by enhancing participation in global value chains through trade agreements and partnerships, as advocated by Arvind Panagariya.
- Infrastructure Development: Improve logistics and infrastructure by creating MSME clusters and dedicated hubs, reducing operational costs and enhancing efficiency, as proposed by the U.K. Sinha Committee on MSMEs.
While the government has made commendable strides in supporting the MSME sector, implementing expert recommendations can further strengthen the foundation for these enterprises.
Focusing on credit accessibility, technological integration, skill development, and infrastructure development can fully unlock the potential of the MSME sector, contributing to robust economic growth.