Need for bolstering MSMEs

Context:

Recently, Union Minister for MSMEs said six pillars were identified as focus areas for the growth of the MSME sector namely

1. Formalisation and access to credit,
2. Increased access to market and e-commerce adoption,
3. Higher productivity through modern technology,
4. Enhanced skill levels and digitalisation in the service sector
5. Support to Khadi, Village and Coir industry to globalise them
6. Empowerment of women and artisans through enterprise creation

Relevance:

GS-III: Indian Economy (Growth and Development of Indian Economy, Mobilization of Resources)

Dimensions of the Article:

1. Understanding MSMEs in India
2. Measures that can give some hope to the MSME sector

Understanding MSMEs in India

• MSME stands for Micro, Small, and Medium Enterprises which are small sized entities, defined in terms of their size of investment in plant and machinery/equipment along with THE NEW CRITERION OF ANNUAL TURNOVER.
  1. As per the revised definition, any firm with investment up to Rs 1 crore and turnover under Rs 5 crore will be classified as “micro”.
  2. A company with investment up to Rs 10 crore and turnover up to Rs 50 crore will be classified as “small”.
  3. A firm with investment up to Rs 50 crore and turnover under Rs 250 crore will be classified as “medium”.

Pointers about MSMEs in India

• According to the Annual Report of the Department of MSMEs (2018-19), there are more than 6 crore MSMEs in the country.
• MSMEs are the growth accelerators of the Indian economy, contributing about 30% of the country’s gross domestic product (GDP).
• 99.5% of all MSMEs fall in the micro category. Small and medium MSMEs are predominantly present in urban India whereas, micro enterprises are equally distributed over rural and urban India.
• Around 51% of MSMEs are situated in rural India and 49% of them are situated in urban India.
• Both rural and urban MSMEs together employ over 11 crore people but 55% of the employment happens in the urban MSMEs.
• The gender ratio among employees is largely consistent across the board at roughly 80% male and 20% female.
• In terms of exports, MSMEs are an integral part of the supply chain and contribute about 48% of the overall exports.
• MSMEs also play an important role in employment generation, as they employ about 110 million people across the country.

Measures that can give some hope to the MSME sector

• Why assemble in India, when we can Make-in-India?: Now could be the right time for the Government to roll out sops to MSMEs that manufacture locally. The Government eMarketplace (GeM) could be of great use to suppliers looking for purchasers and vice versa. Investing in online infrastructure while also encouraging small businesses to source locally could help improve manufacturing while also cutting on our import costs.
• Delay MSME loan repayments or extend tenures: As the RBI pumps in more cash into the banking sector, deferring or relieving the MSMEs of loan repayments could come as a welcome move. Most businesses are looking for financial support from the government and doing this can help them cope with cash flow problems. Relaxing bad loan norms could also be a saving move for this sector.
• Inventory management for exporters: Businesses that are into exports could use some help with inventory management. In the Union Budget 2020, Sitharaman proposed building warehouses at block/taluk level. If the government could allot subsidised warehousing to exporters while figuring out the supply chain side of things, it could potentially help support the economy.

-Source: The Hindu