What is MSME?
Updated: May 3, 2021
A vibrant Micro, Small and Medium Enterprises (MSMEs) sector is a pillar of economic growth in India. Governed by the MSME Development Act, 2006, the government classifies Micro, Small and Medium enterprises into the following.
Why are MSMEs important for India?
An essential vehicle in driving financial inclusion, the MSME sector contributes to 29% of the country’s GDP. Its diverse range of products and services caters to domestic as well as global demand. MSMEs foster entrepreneurship and boost the economy from the grassroots. They have a valuable role in blurring income inequalities and reducing unemployment in the country. They employ over 80 million people across various industries like manufacturing, textiles, etc. MSMEs contribute to 33 % of the country’s manufacturing output and enable as much as 49% of its exports. They also function as ancillary units to large companies. A sector that encourages not only urban growth, MSMEs have also been credited with creating livelihoods in rural India, thereby curtailing migration, and fostering regional economic development.
Recognizing its potential, the government has set ambitious goals for MSMEs. The sector is expected to generate five crore additional jobs by 2024 and contribute $2 trillion to the economy. A slew of measures, including a robust policy framework, is needed to solidify the position of MSMEs in the future. It is also imperative to address the challenges faced by the industry. Cash flow gaps should be bridged by assisting them in gaining access to affordable finance options. Further, MSMEs need help in leveraging e-commerce, adopting digital technologies to access credit and market channels alike, and taking advantage of government schemes. These steps to nurture MSMEs can go a long way in helping them thrive in an ever-evolving business landscape.