The Micro, Small, and Medium Enterprises (MSMEs) sector is characterized by units with cumulative investments ranging from 25 lakhs to 10 crores for manufacturing and 10 lakhs to 5 crores for services. This sector plays a crucial role in India’s economy, contributing significantly to exports, employment, and GDP. It is often referred to as the growth engine of the nation.
The importance of the MSME sector can be understood through the following points:
- MSMEs provide ample opportunities for both self-employment and wage-employment, reducing disguised unemployment in the agricultural sector.
- MSMEs contribute to building an inclusive and sustainable society by creating livelihood opportunities at a low cost, promoting balanced regional development, and ensuring environmentally sustainable practices.
- The MSME sector exhibits diversity in terms of size, technology levels, products, services, and target markets.
- The MSME sector has the potential to establish India as a global manufacturing hub, positioning the country within global supply chains.
- MSMEs can play a vital role in fostering an export-led growth trajectory for the Indian economy, with their current contribution to Indian exports standing at 48%.
Despite its significance, the MSME sector faces several challenges, including:
- Limited and delayed access to finance, which hampers competitiveness, particularly in the context of free trade agreements.
- Inadequate access to modern technology, resulting in low productivity, lack of competitiveness, and increased input costs.
- Weak marketing and branding strategies, impeding scaling up of operations in a globalized world with limited time windows for opportunity.
- High regulatory and compliance costs, leading many enterprises to remain small to avail regulatory concessions.
- Issues related to labor laws, research and development, infrastructure, etc., restraining the growth and development of the MSME sector.
- Delayed payment of dues to MSMEs, limiting their ability to reinvest and create assets, as seen during the COVID-19 lockdowns.
To revive the MSME sector, concerted efforts should be undertaken, including:
- Incentivizing the growth of ‘Dwarf’ micro, small, and medium-sized enterprises with less than 100 workers, addressing the missing middle problem.
- Providing MSMEs with the latest technology to enhance competitiveness and efficiency, such as interventions involving AI, as seen in schemes like ASPIRE.
- Establishing Common Facility Centers in each MSME cluster to ensure access to raw materials, marketing support, and smooth movement of goods and services, as demonstrated in the SFURTI scheme.
- Enhancing credit availability for the MSME sector to facilitate sustainable operations, through initiatives like the Credit Guarantee Trust Fund, Mudra Yojna, and the 59-minute loan scheme.
- Implementing measures to ensure timely payment of dues to MSMEs, as there are significant amounts stuck in delayed payments.
Reviving the MSME sector requires a stakeholder approach, incorporating initiatives such as MSME Sambandh and Samadhan, the zero defect zero effect model, and the 25% public procurement policy. These measures aim to address the challenges faced by the MSME sector and reinvigorate its growth and contribution to the Indian economy.