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Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard.

Economic growth and the role of the manufacturing sector, especially Micro, Small, and Medium Enterprises (MSMEs), are closely interlinked. MSMEs have been the backbone of the Indian economy, employing a significant portion of the labor force and contributing immensely to exports. Let’s explore the connection between economic growth and MSMEs and delve into the current government policies in this realm.

Connection between Faster Economic Growth, Manufacturing, and MSMEs:

  1. Job Creation: Manufacturing, especially in the MSME sector, has the potential to generate significant employment opportunities. MSMEs employ around 110 million people in India, a testament to their importance in the job market.
  2. Exports: MSMEs contribute to around 45% of India’s total exports. An efficient and thriving MSME sector can help improve the balance of payments.
  3. Local Production: MSMEs play a pivotal role in localizing production, reducing import dependency, and strengthening domestic supply chains.

Government Policies for the Manufacturing Sector and MSMEs:

  1. Make in India: Launched in 2014, this initiative aims to make India a global manufacturing hub by attracting investments from across the globe. It focuses on 25 sectors of the economy, with many of them being MSME-intensive.
  2. MSME Samadhaan: To address the issue of delayed payments, this portal allows MSMEs to file complaints against defaulting entities.
  3. MSME Sambandh: This portal helps monitor the implementation of the Public Procurement Policy for MSMEs, ensuring that they get their due share in government procurement.
  4. Credit Guarantee Scheme: To encourage MSME growth, the government offers credit support without the need for collaterals through the Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE).
  5. Aatmanirbhar Bharat Abhiyan: Amid the 2020 COVID-19 pandemic, the government announced a comprehensive package emphasizing self-reliance, with significant components aimed at aiding MSMEs, including collateral-free loans and equity infusion.

Examples and Facts:

  • Investment Clearance Cell: As part of the Union Budget 2020-21, an Investment Clearance Cell was proposed to offer end-to-end facilitation support, including pre-investment advisory, which will be beneficial for MSMEs.
  • Definition Change: The government revised the MSME definition in 2020. Investment and annual turnover criteria were revised upwards, ensuring a wider range of businesses could benefit from MSME-specific policies.
  • PLI Scheme: The Production Linked Incentive (PLI) Scheme aims to boost domestic manufacturing in specific sectors, potentially benefiting numerous MSMEs in those sectors.


The government recognizes the intertwined relationship between rapid economic growth and the robustness of the manufacturing sector, particularly MSMEs. While the current policies are a step in the right direction, continuous reforms, ease of doing business enhancements, and targeted interventions are necessary to ensure the MSME sector’s optimal contribution to India’s GDP.

September 2023