Micro, small and medium enterprises – better known by the acronym MSME, – have been in the news a lot lately. As the growth engine of new India, they’ve proved essential in this age of economic development that we’re witnessing around us. MSMEs have slowly helped revive the artisan class in the far reaches of the country by providing them with employment and in turn access to loans and other services. They constantly support the up-gradation of technology, infrastructure development within the country, and have triggered the modernization of the country as a whole.
The government of India made a proposal to redefine MSMEs by the Micro, Small and Medium Enterprises Development (Amendment) Bill, 2018, to classify them as manufacturing or service-providing enterprises. Under this bill, there would be no need for frequent inspections to check the required investments needed to be made in the plant and machinery needed. Also, the operations of MSMEs would be allowed to continue in a transparent, non-discriminatory, and objective manner.
MSMEs contribute a staggering 30% to the country’s GDP, and around 45% of the manufacturing output, and approximately 48% of the country’s exports. They’re rightly referred to as the ‘Backbone of the country.’ The MSME ministry in order to strengthen the backbone of the country targets to increase its contribution towards GDP by up to 50% by 2025 as India moves ahead to become a $5 trillion economy. But to understand the reasons better, let’s look at it from a P-M-E framework.
MSME Production & Manufacturing
With approximately 45 lac MSMEs throughout the country, it contributes around 6.11% of GDP from manufacturing and 24.63% of GDP from service activities. They are crucial to the production and manufacturing of a variety of products for both domestic as well as international markets. They have collaborated and worked with concerned ministries, state governments, and stakeholders towards the upbringing of rural areas through the growth and development of khadi, village, and coir industries.
Moreover, small businesses promote innovation as they provide an opportunity to budding entrepreneurs to build creative products and boost competition in business and fuel growth.
MSMEs employ around 120 million persons, becoming the second-largest employment generating sector after agriculture. They have played an essential role in providing employment opportunities in rural areas. These opportunities result in the need for people to use financial services and products like banks which in turn helps drive the growth of the country’s GDP. The industrialization of these areas with a low capital cost has only been possible only due to the MSME contribution.
They have been the real driving force behind socio-economic development within the country. A very important fact to note is that small businesses promote all-inclusive growth by providing employment opportunities, to people belonging to weaker sections of the society in rural areas. Development in different areas is only possible when MSMEs play a larger role within the economy.
The Indian MSME sector has always provided silent support to the national economy. It has successfully acted as a defense against global economic shock and adversities; thus pushing India towards a robust global economy. As a result, it is paramount now more than ever that schemes like Atmanirbhar Bharat try to provide the capability and capacity to develop appropriate local technology and provide fierce competition in domestic and international markets to help MSMEs.