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MSMEs and $5 Trillion Economy

How important is the MSME sector for the nation’s economy?

1. The MSME sector is the backbone of India’s national economic structure.

2. It provides resilience to ward off global economic shocks and adversities.

3. It fosters employment and generates largest employment opportunities at comparatively lower capital cost.

4. This sector contributes significantly to the inclusive industrial development of the country.

5. They produce a diverse range of products and services.

What is the contribution of MSME sector?

1. It accounts for about 1/3rd of aggregate economy Gross Value Added, 1/3rd of manufacturing output and 3/4th of all establishments in the country.

2. There are about 36.1 million units throughout the geographical expanse of India.

3. They contribute 6.11 % of the manufacturing GDP.

4. They have provided employment to around 120 million persons.

5. They contribute about 45% of overall exports from India.

6. They involve a significant amount (about 20%) of rural workforce.

7. They provide sustainable and inclusive development and also touches upon the lives of the most vulnerable and marginalized.

8. It is engaged in engineering of various products ranging from traditional to hi-tech items.

9. They generate highest employment per capita investment and also check rural-urban migration.

10. They provide raw materials to large-scale industries.

Why is MSME sector significant for employment generation?

1. MSME was the largest job creator in the last 4 years.

2. The micro firms are expected to continue this trend in the coming 3 years as well.

3. They can play a key role in countering jobless growth.

4. There is a linkage between big and small industries and together they can propel the global economy.

5. Growth of MSMEs will provide a balanced growth in India.

6. To reach the $5trillion economy, MSMEs have to play a bigger role in employment generation, in exports, in skilling people and in making the sector more formalized.

Which are the challenges faced by MSMEs?

1. They are mostly unregistered

2. Lack of access to technology

3. Face IPR and design related issues

4. Limited access to institutional finance

5. Wasteful usage of resources/manpower

6. Energy inefficiency and associated high cost

7. Low ICT usage

8. Low market penetration

9. Quality assurance/ certification and

10. Difficulty in standardization of products and getting proper marketing channels to penetrate new markets.

Where has the Government taken initiatives for MSMEs?

1. Access to credit: 59-minute loan portal and in-principle grant of loans up to 1 crore.

2. Access to market: Public sector companies now have to compulsorily procure 25% of their total purchase from MSMEs.

3. Technology up-gradation: Technology hubs are being set up.

4. Ease of doing business: Initiatives for facilitating business for getting clearances and certifications are underway.

5. Social Security for MSME Sector Employees: Through PM Jan Dhan Yojana, Provident fund and Insurance, social security is extended to MSME employees.

6. Enhancing credit flow to MSMEs, technological up-gradation and digitizing of MSMEs, can make them compete effectively with global markets and play a much bigger role in ‘Make in India’ campaign.