MSME sector is the key area for marking the economic growth in any country. The rise in the MSME sector plays a crucial role, especially in a developing country like India. It is a significant employment booster for many people, where they receive great monetary benefits.
Tamil Nadu is one of the most crucial states excelling in the MSME sector. With its vivid and dynamic culture, it has given rise to small and micro-scale enterprises. However, the state government has also provided various incentives and rewards for the different industries, which has further enhanced the growth in the sector. The following sections give a detailed overview of the support of the Tamil Nadu government toward the MSME sector.
Tamil Nadu is undoubtedly the land of opportunities, especially in the MSME sector. It is filled with people with excellent skills and the ability to deliver consistently and quality services. According to recent statistics, it is the third-largest Indian state in terms of the number of MSMEs, with over five million micro, small, and medium-scale businesses.
It has a total population of more than 72.14 million. The state’s total exports currently stand at third position in the country’s total exports, with around USD 46.46 Billion. Businesses have an excellent opportunity for establishing their businesses in the state. Apart from this, the customer base is inclined towards domestic goods.
It also masters various crucial sectors like fruits, dairy, vegetables, spices, and poultry. When it comes to eye-catching opportunities, Tamil Nadu is an important hub of smartphones and electronics manufacturing. It also has an excellent infrastructure with decent road connectivity and amenities.
Furthermore, the state has also garnered attention for being a central location for auto-components production with the presence of reputed engineering companies. Therefore, these are early signs of growth and market potential for MSME businesses.
Overview of MSME Sector in Tamil Nadu
The MSME sector in Tamil Nadu accounts for 8% of the total MSMEs in the country. This converts to over 49.48 lakh MSMEs in the state. As a result, it has a massive employment generation power with around 113.57 employees involved in the sector.
Various MSMEs in Tamil Nadu offer vivid products ranging from pharmaceuticals to dairy products. There are more than 6000 products offered by different micro, small, and medium enterprises.
Another impressive achievement of the Tamil Nadu MSME sector is that it ranks 1st in the number of factories it contains. If trends are to be believed, the sector is growing at a tremendous rate with incredible prospects.
Employment numbers are quite remarkable, with the number of people employed in the sector growing rapidly. It ranks 1st in the number of employees in the MSME sector. Moreover, employment in various enterprises increased from 5,02,381 in 2012 to 13,78,544 in 2018.
State Government Initiative And Schemes
The growth of the MSME sector in Tamil Nadu can be accredited to the freedom and support provided by the state government. It has provided numerous incentives to support businesses through financial aid or infrastructural development. The topmost influential government schemes and programs are shown below.
New Entrepreneur cum Enterprise Development Scheme (NEEDS)
The Directorate of Industries and Commerce, Government of Tamil Nadu, is the supervisory body of this scheme. The initiative aims to prepare the future generation to take up business opportunities in MSMEs by offering them subsidies.
The scheme partners with financial institutions to provide funds to train youth in entrepreneurship. The annual target of training is 1000 young adults with 50% women. The subsidies provided under the scheme include 25% of the total project cost (up to 75 lakhs)
Institutions provide training in different industries and specializations such as the cement industry, sericulture, agriculture, etc. The age bracket for applying for the scheme is between 21 to 35.
However, people belonging to special categories are provided relaxation. They should be aged between 21 to 45 years of age. Apart from this, the applicant should hold a degree, diploma, ITI, or vocational training from a recognized institute.
Unemployed Youth Employment Generation Programme
As the name suggests, the scheme is set to provide employment opportunities for the unemployed youth belonging to socially and economically backward regions of the state.
Commercial banks and financial institutions offer financial assistance for the training period. The scheme also gives subsidies for the project costs. According to the plan, the scheme covers 90% of the total project cost by providing loans (in the case of the general category). The percentage increases to 95% for applicants belonging to the special categories.
The applicants for this scheme should be 18 to 35 years of age with an educational qualification of 8th pass. The subsidies are provided at the rate of 25% of the project cost up to the limit of 2.5 Lakhs.
Pacts With Tansidco and TAICO Bank
The Tamil Nadu government recently took an excellent initiative to boost the industrial infrastructure. It signed two agreements or Memorandum of Understandings (MoUs) to execute the lending system to empower various MSMEs of the state.
Firstly, it joined hands with Tansidco (Tamil Nadu Small Industries Development Corporation) to execute the TIIC-powered Industrial Infrastructure Initiative Scheme. On the other hand, the second MoU was signed with the TAICO Bank to provide loans and credit to different MSMEs for smooth and uninterrupted business conduct. The government has utilized both the MoUs to give various enterprises a liquidity cushion for their daily operations.
Subsidies are provided to the enterprise through various means. One of the most effective subsidies is the capital subsidy. Under this, a subsidy of 25% on the total value of plant and machinery. The subsidy amount can be up to 150 Lakh.
When it comes to scheduled categories like women/Scheduled Caste/Scheduled Tribe /Differently Abled and transgender community, these subsidies are provided at 5% on the value of plant and machinery (up to 5 lakh).
There are different blocks (24) allotted under this incentive, with new enterprises entering any block being provided subsidies accordingly. Moreover, the authorities have defined different industries as eligible for capital subsidies and other benefits for particular industries. These eligible industries or 24 sectors are shown below.
- Electrical and electronic industry
- Aero Space, Defense Applications and Components
- Leather and related goods
- Auto parts and components
- Gold/diamond jewelry for exports
- Pollution control equipment
- Readymade garments
- Drugs and pharmaceuticals
- Plastic (except ‘one-time use and throw away plastics’)
- Medical Devices, tools, equipment, and components
- Sports goods and accessories
- Electric vehicle components, charging infrastructure, and components
- Technical and medical textiles
- Electronic system design and manufacturing
- Food processing
- Alternate products for ‘one-time use and throwaway plastics’
- Electronic Waste Processing
- Industry 4.0
- Petrochemicals and specialty chemicals
- Cost-effective building material
- Traditional industries
- Solar energy equipment
Prime Minister’s Employment Generation Programme
PMEGP is a national-level initiative by the Central Government to reduce the unemployment problems in the country. Tamil Nadu has made great use of this scheme by providing loans to people for setting up their MSME businesses.
People who are above 18 years of age can apply under this program. The upper limit for financial assistance is 25 lakhs for the manufacturing sector and 10 lakhs for the service sector. Subsidies of 35% of the total project cost are also provided under the scheme.
Tamil Nadu Small Industries Development Corporation (SIDCO) Initiative
SIDCO plays a crucial role in implementing infrastructural development in the state. It helps in raw materials supply and extends support for marketing activities. Under this initiative, there are 118 industrial estates developed for powering MSME growth.
There are different clusters established in different states for specialization. For example, ceramic clusters are developed in Cuddalore, auto component clusters are developed in Chennai, Tiruvallur, Krishnagiri, and so on.
Implementation Of Single Window Portal
The state government has introduced a portal called Single Window Portal, which helps MSMEs set up faster. Through this online portal, any enterprise can easily get approvals, clearances, and No Objection Certificates (NoCs) from various responsible government departments. This clears out any legal obstacles in the way of setting up a small or medium-scale enterprise.
Vision Of State Government Towards The Growth Of MSME
The Tamil Nadu government has laid down various goals for the MSME sector. The vision of the state government can be summed up in the following points.
- The primary aim is to attract investments from people. By 2031, it targets to rope in investments worth Rs. 5 lakh crore.
- Apart from the investments, it also focuses on providing more employment opportunities by recruiting 50 lakh people.
- Tamil Nadu government also aims to enhance the credit system in the state and provide easy access to banks.
- With regards to industries, it objectifies developing 15 mega clusters and 100 common facility centers. It will assist in overall industrial growth.
- There are special units prepared for helping entrepreneurs in solving problems, creating valuable projects, maintaining a smooth credit system, etc.
Tamil Nadu has enhanced its credit and infrastructural system to become one of the fastest-growing states in MSMEs. Businesses enjoy a high degree of comfort and ease of doing business.
These developments would not have been possible without the sheer efforts of the Tamil Nadu government. It has provided numerous subsidies such as power subsidies, generator subsidies, interest subsidies, payroll subsidies, and many other schemes and programs to assist entrepreneurs in starting their enterprises in the state.