Micro Small and Medium Enterprises Msme
Micro Small and Medium Enterprises Msme
Micro Small and Medium Enterprises Msme
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Introduction
Worldwide, MSMEs have been accepted as the engine of economic growth and for promoting equitable
development.
They constitute over 90% of total enterprises in most of the economies and are credited with generating
the highest rates of employment growth.
With low investment requirements, operational flexibility and the capacity to develop appropriate
indigenous technology, SMEs have the power to propel India to new heights.
Hence, it seems like there is a silent revolution happening in India powered by MSMEs.
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.
MSME redefined
The Micro, Small and Medium Enterprises Development (Amendment) Bill, 2018 proposes to reclassify
all MSMEs, whether they are manufacturing or service-providing enterprises, on the basis of their
annual turnover.
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The bill was introduced in the Lok Sabha and further referred to the Standing Committee which tabled
its report on 28 December 2018.
Access to credit Launch of the 59 minute loan portal to enable easy access to credit for
MSMEs.
90% of the MSMEs are 2 percent interest subvention for all GST registered MSMEs, on fresh or
dependent on informal incremental loans.
sources for funding Trade Receivables e-Discounting System (TReDS) to enable access to
Lack of sufficient credit from banks, based on their upcoming trade receivables from
collateral and high corporate and other buyers.
working capital needs
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Access to Markets Union government announced to launch an e-commerce platform on the
lines of “Amazon and Alibaba" to sell products from MSMEs and the
Low outreach and non Khadi and Village Industries Commission.
availability of new Public sector companies now compulsorily procure 25%, instead of 20%
markets. of their total purchases, from MSMEs.
Lack of skilled manpower More than 40,000 MSMEs registered on Government e-Marketplace
and ineffective marketing (GeM) portal. It provides transparency in procurement and facilitates
strategy. MSMEs to directly reach out to the buyers.
Difficult for MSMEs to sell
products to government
agencies.
Competition from MNCs
and other big industries.
Technology Access 20 hubs and 100 spokes in the form of tool rooms will be established
across the country. This will facilitate product design and easy access to
Limited human resources latest technology to MSMEs.
and weak financial Financial assistance is provided for implementation of lean
standing. manufacturing techniques to enhance the manufacturing
MSMEs, particularly in the competitiveness of MSMEs.
unorganised sector, show
lower adaptability of new
technology and
innovation.
Quality and Export Issues Financial support to MSMEs in ZED(Zero Defect Zero Effect) certification to
improve quality of products.
Low quality products Government provides subsidy towards the expenditure incurred by
impact export enterprises to obtain the product certification licenses from national and
competitiveness. international bodies.
Inadequate access to
quality raw materials.
Use of traditional
machines causes low
productivity.
Ease of Doing Business The return under 8 labour laws and 10 Union regulations must now be
filed only once a year.
Cumbersome Computerised random allotment for inspector visits to the
government procedures establishment.
and rules for establishing Environmental Clearance under air pollution and water pollution laws,
new units. have been merged into one. Also, the return will be accepted through
Bureaucratic delays in self-certification.
getting clearances. For minor violations under the Companies Act, the entrepreneur will no
Poor litigation system in longer have to approach the courts, but can correct them through simple
the country. procedures. This signifies simplification of government procedures and
instilling confidence among entrepreneurs.
Therefore, the government should continue to put concerted efforts for holistic development of MSMEs in
key areas like human capacity development, knowledge services, access to finance, technology,
infrastructure, market access, and ease of doing business.
International Experiences
According to World Bank, formal SMEs contribute up to 60% of total employment and up to 40% of
national income (GDP) in emerging economies.
600 million jobs will be needed in the next 15 years to absorb the growing global workforce, mainly in
Asia and Sub-Saharan Africa. In emerging markets, most formal jobs are generated by SMEs, which also
create 4 out of 5 new positions.
However, access to credit remains a major problem to the MSME sector globally.
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In globalised world, it is imperative to enable MSMEs to adapt and thrive in a more open environment and
participate more actively in the digital transformation, to boost economic growth and deliver a more inclusive
globalisation.
Way Forward
Today enterprises need to adopt best practises and follow international standards to go forward for
offering innovative solutions.
Focus should be on transfer of information and skill development to effectively use the transferred
technology.
There is an urgent need to upgrade infrastructure utilities (like water, power supply, road/rail) for any
enterprise to run its operations successfully.
Entrepreneurs need to develop quality conscious mindsets embedded in the organisational culture.
Sensitisation and handholding of MSMEs at different and upgraded level of certification is the need of
the hour.
Finally, as recommended by India MSME Report 2018, we need an entitlement approach that can have the
potential of compelling all related stakeholders to work on a common national agenda and solutions under a
scientifically structured framework. This approach demands the identification and analysis of major security
threats to the MSMEs, and entrepreneurship at the grass root level.
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