Role of MSME in the Indian Economy and Various Govt Schemes: Let us comprehend

MSME

MSMEs in India generate almost 8% of the country's GDP, approximately 45 percent of manufacturing output, and approximately 40% of exports. It would not be incorrect to call them the "backbone of the country."

In accordance with the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006, the Government of India established MSME or Micro, Small, and Medium Enterprises. These businesses are typically involved in the production, manufacture, processing, or storage of goods and commodities.

MSMEs are a major segment of the Indian economy and have made significant contributions to the country's socioeconomic growth. It not only creates job possibilities, but it also contributes to the development of the country's backward and rural areas. According to the Government's annual report (2018-19), India has around 6,08,41,245 MSMEs.

What is MSME Schemes?

MSME is an acronym that stands for Micro, Small, and Medium Enterprises. These businesses or firms are the backbone of our economy, and they require aid and protection from larger corporations due to a lack of resources and technology. To do this, the government offers subsidies, rebates, or counseling to these businesses.

Highlights of new MSMEs

The Government of India's 'Atma Nirbhar Bharat Abhiyan,' or Self-Reliant India Scheme of 2020, has offered a new definition for MSMEs.

The following are some distinguishing characteristics of new MSMEs:

• A provision for Collateral-Free Loans to MSMEs A credit arrangement worth Rs. 3 lac crores for MSMEs.

• A 12-month moratorium period is being offered to MSMEs.

• MSMEs in manufacturing and service are treated as the same entity.

• MSM has been awarded a payback. 48-month contract.

• MSMEs are guaranteed a credit guarantee of 100 percent.

• Approximately 45 lac units will gain from MSMEs reclassification.

Features of MSMEs

The following are some of the most important aspects of MSMEs:

1. MSMEs seek to improve the lives of workers and craftsmen. They assist them by offering employment, loans, and other services.

2. MSMEs provide banks credit limits or finance assistance.

3. They encourage the growth of business as well as skill development by establishing specialized training facilities.

4. They advocate for the advancement of developmental technologies, the development of infrastructure, and the overall modernisation of the industry.

5. MSMEs are well-known for providing fair support to improve access to both local and export markets.

6. They also provide cutting-edge testing facilities and high-quality certification services.

7. MSMEs now support product development, design innovation, intervention, and packaging, in line with recent developments.

MSMEs' Role in the Indian Economy

Since its inception, the MSME sector has shown to be a highly active sector of the Indian economy. MSMEs create and manufacture a wide range of goods for both domestic and international markets. They have aided in the expansion and development of the khadi, village, and coir industries. They have coordinated and worked with relevant ministries, state governments, and stakeholders to improve rural areas.

MSMEs have played a critical role in creating job prospects in rural areas. They have aided in the development of these places at a lower capital cost than huge businesses. The MSME sector has made significant contributions to the country's socioeconomic growth by serving as a complement to larger sectors.

MSMEs also contribute to and play an important part in the country's growth in a variety of ways, including the need for minimal investment, flexibility in operations, mobility among sites, a low rate of imports, and a large contribution to domestic output.

With the ability and capacity to develop appropriate local technology, provide fierce competition in domestic and international markets, technology-savvy industries, contribute to the development of defense materials, and generate new entrepreneurs through the provision of knowledge, training, and skill up-gradation through specialized training centers.

MSMEs' Importance in the Indian Economy

MSMEs are widely recognised around the world as a source of economic growth and a means of fostering equitable development. They are recognised to generate the highest rate of economic growth. MSMEs have propelled India to new heights by requiring cheap investment, flexible operations, and the ability to generate appropriate indigenous technologies.

1. MSMEs employ around 120 million people, making them the second-largest employer after agriculture.

2. It provides around 6.11 percent of GDP from manufacturing and 24.63 percent of GDP from service activities, with approximately 45 lac units spread over the country.

3. As India strives to become a $5 trillion economy, the MSME ministry hopes to raise its contribution to GDP by up to 50% by 2025.

4. Contributing around 45 percent of total Indian exports

5. MSMEs encourage inclusive growth by creating job possibilities, particularly for persons from the poorer parts of society in rural areas.

6. MSMEs in tier 2 and tier 3 cities contribute to the creation of chances for individuals to use banking services and products, which can result in the eventual inclusion of MSMEs' contribution to the economy.

7. MSMEs foster innovation by allowing aspiring entrepreneurs to produce innovative products, hence increasing company rivalry and fueling growth.

The Indian MSME sector contributes invisibly to the national economy and serves as a buffer against global economic shocks and adversities. As a result, we may argue that India is propelling itself toward a strong global economy via a silent revolution fuelled by MSMEs.

Benefits to MSMEs under- Atma Nirbhar Bharat Abhiyaan

In June 2020, the Minister of Finance planned to boost the MSME sector by revising the definition of MSME in accordance with the Atma-Nirbhar Bharat (Self Reliant India) Abhiyan economic package.

This change occurred shortly after the definition was updated in May 2020, when the Cabinet agreed a change to change the criterion for classifying MSME's from "investment in plant and machinery" to "annual turnover."

As a result, many businesses will now fall under the MSME sector and benefit from government incentives. We can now examine the benefits accessible to the MSME sector.

The Atma Nirbhar Package also included an Emergency Credit Line Guarantee Scheme. This is a working capital term loan designed to help MSME sector borrowers fulfil operational liabilities and relaunch their businesses. To be eligible for the scheme, certain conditions must be met, which are as follows:

• Borrowers with up to Rs 25 crore in outstanding debt as at Feb 29, 2020 and up to Rs 100 crore in yearly revenue for fiscal year 2020 will be eligible.

• Loans approved would be up to 20% of the borrower's total outstanding credit on February 29, 2020.

• Borrower accounts with NPA or SMA-2 status as of February 29, 2020 will be ineligible for the plan.

• There are no processing fees, and the foreclosure/prepayment charges are waived.

• There are no further collateral requirements.

• Loans will have a 4-year term with a 12-month moratorium on the principal amount.

• The loan's interest rate will be limited.

The government has modified the General Financial Rules to ensure that tenders worth less than 200 crores are only awarded to domestic enterprises.

MSME Schemes Launched by the Government

1. Udyog Aadhaar Memorandum

The Aadhaar card is a 12-digit number issued by the government to all persons. The Aadhaar card is a mandatory requirement in this case. The advantage of enrolling in this system is the ease with which you can obtain government credit, loans, and subsidies. Registration can be completed in two ways: online or offline.

2. Zero Defect Zero Effect

In this paradigm, commodities created for export must meet a specific standard in order to avoid being rejected or returned to India. The administration has created this strategy to do this. If the goods are exported, they are entitled for certain rebates and incentives.

3. Quality Management Standards & Quality Technology Tools

Registering for this initiative will assist micro, small, and medium-sized businesses in understanding and implementing the quality standards that must be maintained in conjunction with new technologies. Various seminars, initiatives, and events are used in this scheme to educate businesses on the new technologies accessible.

4. Grievance Monitoring System

Registering under this system is advantageous in terms of getting business owners' issues handled. This allows business owners to check the progress of their complaints and open new ones if they are dissatisfied with the outcome.

5. Incubation

This programme assists innovators in putting their novel designs, ideas, or products into action. The government can finance up to 80% of the project cost under this arrangement. This programme encourages the development of innovative ideas, designs, and products.

6. Credit-Linked Capital Subsidy Program

This initiative provides new technology to business owners to replace outdated and outmoded technology. The capital subsidy is granted to the firm in order for them to improve and have better methods of doing business. These tiny, micro, and medium-sized businesses can approach banks directly for these subsidies.

7. Female Entrepreneurship

This programme was created specifically for women who aspire to start their own businesses. The government gives these women with financing, counseling, training, and delivery tactics to help them manage and build their businesses.

Conclusion

Apart from the existing initiatives offered by the Government of India, it is reasonable to conclude that the Atma Nirbhar Package has been a significant support and boost to MSMEs. The epidemic has had the greatest impact on MSMEs, hence the government's efforts must be praised.