Over half a century, MSMEs have emerged as a high powered and dynamic sector in India deserving special recognition. They hand in a significant offering to the economy with a 30% contribution towards India’s GDP. Through industrialization of rural India this sector provides significant employment opportunities assisting the socio-economic development of the country. The non-agriculture MSMEs employ an estimated 11 crore people in the country. In 2021 itself, the Micro enterprises created nearly 5.95 lakh employment opportunities under the Prime Minister’s Employment Generation Programme (PMEGP).
India has approximately 6.3 crore MSMEs. The data provided by MSME Ministry shows53,33,323 MSMEs registered on Udyam Registration portal, as of October 2021. Nearly 94% of the registered MSMEs are micro-enterprises, followed by 5% of small enterprises and 1% mid sized enterprises.
Definition of MSME
MSME stands for Micro, Small, and Medium Enterprises. According to the 2006 Micro, Small, and Medium Enterprises Development (MSMED) Act, the enterprises are classified under two categories.
1. Manufacturing enterprises – engaged in the manufacturing or production of goods in any industry
2. Service enterprises – engaged in providing services
The Atmnirbhar Bharat package revised the MSME definition after 14 years in 2020. This package redefines the MSMEs based on two measures – the investment and its turnover. It has eliminated the distinction between service and the manufacturing sector and increased the limit for investment and turnover that define MSMEs. The revised classification applicable from 2020 has two composite criteria: Investment in Plant & Machinery/equipment and Annual Turnover
- The limit of the Micro units was increased to Rs. 1 Crore investment and Rs. 5 Crore turnover.
- The investment limits of the Small unit is raised to Rs. 10 Crore and turnover up to Rs 50 Crore.
- Similarly, the limits of the Medium enterprises were increased to Rs. 20 Crore of investment and Rs. 100 Crore turnover.
So, how do MSMEs contribute to the economic development in India?
Generate large scale employment
India is blessed with abundance of labour. Although unlike large-scale industries, MSMEs have lower capital-output and capital-labour ratios. As a result, they are better equipped to serve the goals of growth and employment. With a steady growth rate of over 10%, MSMEs in India provide employment to nearly 120 million people. In 2019, 13% of all registered MSMEs in the country created 46.6 million jobs! MSMEs provide a sustainable source of livelihood to the people living in remote areas, thereby maintaining a healthy balance of rural-urban migration. MSMEs play a pivotal role in reasonable distribution of national income and wealth and reduce regional imbalance by boosting industrialization of rural and backward areas.
Potential to Enhance Exports
As per the report by Directorate General of Commercial Intelligence and Statistics, the share of export of specified MSME related products to All India exports during 2019-20 and 2020-21 was 49.8% and 49.5% respectively. The MSME exports largely consist of non-traditional products such as sports goods, readymade garments, plastic products etc. The vast majority of these items are handmade and have an enormous potential to improve MSME led trades. As ancillary industries, many MSMEs provide raw materials, vital components and backward linkages to large scale productions. The interdependency amongst the industries makes MSMEs an integral link to improve economic growth and increase exports.
Growth Inclusive Nature
MSMEs create a positive impact on the lives of the most vulnerable and marginalized people. For many families, these small businesses are the only source of a livelihood. This sector, through employment aims to aid people with the socio-economic tools to overcome the vicious cycle of poverty. It is crucial to empower MSME sectors for steady economic growth.
We don’t need to look too far to measure how SMEs can become a key economic driving force towards a nation’s GDP. In China, the number of SMEs are estimated to be over 38 million. They contribute over 60% of the country’s GDP and account for 80% of nationwide jobs. Compare this to India’s 63 million MSMEs, which account for only 30% of the country’s GDP yet are praised as the economy’s “growth engines”.
We believe MSMEs are an important impetus to socio-economic evolution.
We aim to do our part by empowering MSMEs in their digital journey. We understand the challenges you face and we also realize that going digital is the most effective way forward.
Brand NEEV is one such partner who can help you lay a solid foundation for your brand, define your strategy and create a digital ecosystem. Think of us as all-rounders of brand development where all your needs are taken care of. So you can focus on the business side of things.
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So, are you a young business looking to make your mark on the world? We would love to help. For details Click Here, we’d love to speak with you!