Introduction: by whatever name called, engaged in production

Introduction:

Micro
Small and Medium Enterprises (MSME) sector has emerged as a highly exciting and
forceful sector of the Indian economy over the last five decades. MSMEs not
only play crucial role in providing more employment opportunities at
comparatively lower capital cost than large industries but also help in industrialization
of rural & backward areas, thereby, reducing regional imbalances, assuring
more equitable distribution of national income and wealth. MSMEs are
complementary to large industries as ancillary units and this sector
contributes enormously to the socio-economic development of the country. MSMEs
are facing many risks and challenges to compete in domestic and global markets.
The Government of India has been giving due importance to MSME sector and
implementing number of programs and schemes for their development.

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Definition
of Micro, Small and Medium Enterprises:

MSME are defined under Sub-Section (1) of Section 7 of MSME
Development Act 2006. Micro, Small & Medium Enterprises (MSMEs): MSME
Sector consists of any enterprises, whether proprietorship, Hindu undivided
family, association of persons, co-operative society, partnership or
undertaking or any other legal entity, by whatever name called, engaged in
production of goods pertaining to any industry specified in the first schedule
of Industry Development and Regulation Act, 1951 & other enterprises
engaged in production and rendering services, subject to limiting factor of
investment in plant and machinery and equipments respectively as noted below:

 

 

Classification

Manufacturing Enterprises ( Investment limit in Plant and Machinery)

Service Enterprises ( Investment limit in Equipment)

Micro

Not exceeding Rs.25.00
Lakhs

Not exceeding Rs.10.00
Lakhs

Small

More than Rs.25.00 lakhs
but does not exceed Rs.500.00 lakhs

More than Rs.10.00 lakhs
but does not exceed Rs.200.00 lakhs

Medium

More than Rs.500.00 lakhs
but does not exceed Rs.1000.00 lakhs

More than Rs.200.00 lakhs
but does not exceed Rs.500.00 lakhs

 

Among
business enterprises, the Micro, small and Medium Enterprises (MSME) are special
attention. Although MSMEs square measure small investment enterprises, however
their contribution to the Indian economy is terribly vital.

Significance of MSMED
Act 2006

With the ratification
of MSMED Act 2006, the standard shift that has taken place is that the enclosure
of services sector within the definition of small, small and Medium
Enterprises, except extending the scope to Medium Enterprises.

Share of MSMEs in India

The Micro, small and
Medium Enterprises occupies a strategic importance in terms of output (about
forty fifth of producing output), exports (about four-hundredth of the overall
exports) and employment (about sixty nine million persons in over twenty nine
million units throughout the country) based on the Planning Commission, 2012.
it’s determined worldwide that as financial gain will increase the share of the
informal sector decreases which of the formal SME sector will increase.

Worldwide Trends in SME
Sector

Japan
– SMEs use seventieth of the wage earners and contribute fifty fifth of the
worth extra.

Thailand
– SMEs use sixty.7% of the population whereas contributory thirty eighth to the
GDP.

China
– SMEs contribute to over sixty eight of the exports – within the last twenty
years created additional SMEs than the overall variety of SMEs in Europe and
therefore the United States combined.

The Importance and role
of MSMEs in Indian Economy:

To generate enormous
scale employment

In India, capital is
scarce and labor luxuriant. MSMEs square measure thought to possess lower
capital-output and capital-labour ratios than large-scale industries, and thus,
higher serve growth and employment objectives. The MSME sector in India has
fully grown considerably since 1960 – with a mean annual rate of growth of
four.4% within the variety of units and four.62% employed (currently using
thirty million). Not solely do MSMEs generate the very best employment per
capita investment, they conjointly go a protracted approach in checking rural-urban
migration by providing individuals living in isolated areas with a property
supply of employment.

To sustain economic
process and increase exports

Non-traditional
merchandise account for over ninety fifth of the MSME exports (dominating
within the export of sports product, readymade clothes, plastic merchandise
etc.). Since these merchandise square measure principally handcrafted and
thence eco-friendly, there exists an amazing potential to expand the quantum of
MSME crystal rectifier exports. Also, MSMEs act as accessory industries for
giant Scale Industries providing them with raw materials, very important
elements and backward linkages.

Making Growth inclusive

MSMEs
square measure instruments of inclusive growth that alter the lives of the
foremost vulnerable and marginalized. for several families, it’s the sole
supply of bread and butter. Thus, rather than taking a welfare approach, this
sector seeks to empower individuals to interrupt the cycle of economic condition
and deprivation. It focuses on people’s skills and agency. However, totally
{different | completely different} segments of the MSME sector square measure
dominated by different social teams.

The Twelfth arrange has
listed the subsequent because the objectives for the MSME sector

Ø  Promoting
aggressiveness and productivity within the MSME area. Making the MSME sector
innovative, up technology and depth.

Ø  Enabling
atmosphere for promotion and development of MSMEs.

Ø  Strong
presence in exports.

Ø  Improved
social control processes in MSMEs.

Policy towards
Small-Scale Industries:

Though
MSMEs were recognized as vital for employment generation and just distribution
of financial gain from the earliest days of Indian Independence, it seems that
the objectives of policies stressing the role of MSMEs aren’t being realized.

Since
independence in 1947, particularly since the late Fifties, development has been
wide-ranging, each in terms of programs and regions. Policy measures enclosed
inter-alia financial  concessions,
sponsored and directed bank credit, and technical and promoting support, along
side reservations of merchandise for exclusive production by the MSME sector. These
policy measures were in tune with the opposite policies like the domestic
investment and foreign trade policies that became additional restrictive over
the years.

Since
the mid-1980s there has been a gradual turnaround in policy, as well as reforms
within the legal system and relief burning policy. The shift in MSME policy
stress from protection to the promotion of aggressiveness began with the
introduction of Associate in Nursing exclusive policy for MSME in 1991. Since
then, the policy support within the Nineties and early 2000s has been massive
to modify the MSMEs to beat key challenges to their performance and growth,
namely, finance, technology, and promoting, among others.

To
operate these programs and to watch their progress, new agencies and
establishments are came upon, and therefore the existing ones strong at the
national, regional, state, and lower levels. There’s conjointly a special bank
for MSMEs – SIDBI. The SSIs have their own associations and also are
diagrammatic within the national and state level associations of large-scale
industries.

Evaluation of the
Reservation Policy

The policy of reserving
merchandise for exclusive manufacture within the small-scale sector was started
in 1967 with 47 things; the list of reserved items rose to 873 in 1984.

The number of things on
the reserved list for the SSI sector was brought all the way down to 836 by
1989.

The pace of reforms
accelerated once 1991: average tariff rates are steady down, quantitative
restrictions are removed, and domestic investment policies are liberalized.

Over time, the quantity
of things on the reserved list has conjointly been reduced and stands at 605 in
2005.

With relief, since all
the things on the reserved list will currently be foreign, MSMEs face
competition from foreign enterprises even if massive scale industries in India
cannot manufacture these merchandise.

The Censuses of the
SSIs conjointly counsel that the policy of reserving product for production by
SSIs has not been terribly effective. the quantity of units creating reserved
merchandise was small compared to the size of the MSME sector, and therefore
the reserved merchandise account for atiny low share of the overall price of
output within the MSME sector.

Also, it seems that the
export performance of India might have suffered as a result of the reservation
policy. Most growing economies witness a dynamic  structure of exports, with a high growth of
exports of effortful and resource-based industries. The export structure of
India has not modified a lot of within the last 20 years, and this could be as
a result of several commodities within the potential high-growth class come
back underneath the reserved list.

Major Plan Schemes Implemented by the Ministry:

Performance
& Credit Rating Scheme

The scheme is being implemented through
National Small Industries Corporation (NSIC) Limited. The main objective of the
scheme is to provide a trusted third party opinion on the capabilities and
creditworthiness of the MSEs so as to create awareness amongst them about the
strengths and weakness of their existing operations. Rating under the scheme is
being carried out through empanelled rating agencies i.e. CRISIL, CARE, ONICRA,
SMERA, ICRA and Brickwork India Ratings. Under this Scheme, rating fee payable
by the micro & small enterprises

is subsidized for the first year only and that is subject
to maximum of 75% of the fee or           
Rs. 40000/-, whichever is less.

 

 

Marketing
Assistance Scheme

The scheme is being implemented through
National Small Industries Corporation (NSIC) Limited. The main objectives of
the scheme is to enhance the marketing competitiveness of SMEs; to provide them
a platform for interaction with the individual/institutional buyers; to update
them with prevalent market scenario and to provide them a form for redressing
their problems. MSMEs are supported under the Scheme for capturing the new
market opportunities through organizing/ participating in various domestic
& international exhibitions/ trade fairs, Buyer-Seller meets intensive
campaigns and other marketing events.

 

International Cooperation (IC) Scheme

Technology infusion and/or upgradation of
Indian micro, small and medium enterprises (MSMEs), their modernisation and
promotion of their exports are the principal objectives of assistance under the
Scheme. The Scheme would cover the following activities: (a) Deputation of MSME
business delegations to other countries for exploring new areas of technology
infusion/upgradation, facilitating joint ventures, improving market of MSMEs
products, foreign collaborations, etc; (b) Participation by Indian MSMEs in
international exhibitions, trade fairs and buyerseller meets in foreign
countries as well as in India, in which there is international participation;
(c) Holding international conferences and seminars on topics and themes of
interest to the MSME. IC Scheme provides financial assistance towards the
airfare and space rent of entrepreneurs. State/Central Government
Organisations, Industry/Enterprise Associations and Registered Societies/Trusts
and Organisations associated with the promotion and development of MSMEs are
eligible to apply.

 

Assistance to Training Institutions Scheme

The
Scheme envisages financial assistance for establishment of new institutions
(EDIs), strengthening the infrastructure of the existing EDIs and for
supporting entrepreneurship and skill development activities. The assistance
shall be provided to these training institutions in the form of capital grant
for creation/strengthening of infrastructure and programme support for
conducting entrepreneurship development and skill development programmes.
Maximum assistance for creation or strengthening of infrastructure will be Rs.
150 lakhs on matching basis, not exceeding 50% of project cost. However, for
the North Eastern region (including Sikkim), Andaman & Nicobar and
Lakshadweep, the maximum assistance on matching basis would be Rs. 270 lakhs or
90% of project cost, whichever is less. Any State/Union Territory Government,
Training Institutions, NGOs and other development agencies can apply for
assistance for creation or strengthening of infrastructure.

 

Recent Initiatives in
MSMEs

As
a part of the National producing aggressiveness Programme (NMCP) – ten specific
initiatives were taken to reinforce the aggressiveness of the complete price
chain of the MSME sector.

Limited
Liability Partnership (LLP) Act, 2008 was introduced to modify early corporatisation
of MSMEs and faucet the capital marketplace for fund raising. Therefore, MSME platform
square measure created in animal disease and NSE in 2012.

To
develop a action plan for the event and promotion of MSMEs, a task force was
created by the Prime Minister of India in 2009. The Task Force that comprised,
among others, six specific theme-based sub-groups like credit, marketing,
infrastructure, technology, talent development, exit policy, labor, and
taxation submitted its report in 2010 suggesting:

Ø  Immediate
policy measures

Ø  Medium-term
institutional measures

Ø  Legal
and restrictive structures to form a tributary atmosphere for entrepreneurship
and growth of MSMEs.

The
Inter-Ministerial Committee for fast producing in small, small and Medium
Enterprises created recommendations on –

Ø  The
promotion of start-ups

Ø  Facilitating
operation and growth (covering credit, technology, and marketing)

Ø  Closure
and exit

Ø  Labour
laws and laws.

These
policy initiatives square measure clear and consistent, geared toward
remodeling the scheme for the MSMEs sector by influencing: (1) Birth
(encouraging Start-Ups)  (2) Operations
and growth (by simplifying laws and laws, and facilitating their access to
credit. higher technology and dynamic markets, except sure-handed labour and reliable
infrastructure)  (3) Orderly and simple
exit

Thus,
the rising focus of India’s MSME policy aims at covering the complete lifecycle
of MSMEs to confirm a healthy, spirited and competitive MSME sector.

Conclusion:

 

MSMEs
are complementary to large industries as ancillary units and contribute
enormously to the socio-economic development of the country. Fast changing
global economic scenario has thrown up various opportunities and challenges to
the MSMEs in India. While on the one hand, many opportunities are opened up for
this sector to enhance productivity and look for new markets at national and
international level, it has also, on the other hand, put an obligation to
upgrade their competencies to meet the competition as new products are launched
at an astonishing pace and are available worldwide in short time. Micro, Small &
Medium Enterprises do not have any strategic tools / means for their business/
market development as available with large industries.

 

The
Sector consisting of 36 million units, as of today, provides employment to over
80 million persons. The Sector through more than 6,000 products contributes
about 8% to GDP besides 45% to the total manufacturing output and 40% to the
exports from the country. The MSME sector has the potential to spread
industrial growth across the country and can be a major partner in the process
of inclusive growth.