Focus: GS 3: Investment, MSME Sector
Why in news?
The World Bank and the Government of India today signed the $750 million agreement for the MSME Emergency Response Programme to support increased flow of finance into the hands of micro, small, and medium enterprises (MSMEs)
More about agreement.
The World Bank’s MSME Emergency Response Programme will address the immediate liquidity and credit needs of some 1.5 million viable MSMEs
Importance of MSMEs for Indian Economy
- Employment: It is the second largest employment generating sector after agriculture. It provides employment to around 120 million persons in India.
- Contribution to GDP: With around 36.1 million units throughout the geographical expanse of the country, MSMEs contribute around 6.11% of the manufacturing GDP and 24.63% of the GDP from service activities.
- MSME ministry has set a target to up its contribution to GDP to 50% by 2025 as India becomes a $5 trillion economy.
- Exports: It contributes around 45% of the overall exports from India.
- Inclusive growth: MSMEs promote inclusive growth by providing employment opportunities in rural areas especially to people belonging to weaker sections of the society.
- Financial inclusion: Small industries and retail businesses in tier-II and tier-III cities create opportunities for people to use banking services and products.
- Promote innovation: It provides opportunity for budding entrepreneurs to build creative products boosting business competition and fuels growth.
Thus, Indian MSME sector is the backbone of the national economic structure and acts as a bulwark for Indian economy, providing resilience to ward off global economic shocks and adversities.