IMPORTANCE, ROLE AND PROBLEMS FACED BY THE MSME SECTORS

Updated on : 2020-Nov-22 17:21:54 | Author :

Content

 

  • What are Micro, Small, and Medium Enterprises?
  • Importance, Role, and problems of the MSME sectors in the Indian economy
  • Conclusion
     

What are Micro, Small, and Medium Enterprises?

 

The Micro, Small, and Medium Enterprises (MSME) sector has flourished as a highly dynamic sector of the Indian economy since last 5 decades. MSMEs not solely play an important role in providing massive employment opportunities at relatively lower opportunity cost than large industries however conjointly facilitate in the industrialization of rural & backward areas, thereby, reducing regional imbalances, reassuring a lot of equitable distribution of national income and wealth. MSMEs are complementary to large industries as adjunct units and this sector contributes tremendously to the socio-economic development of the country. The micro small and medium enterprises (MSMEs) are accepted because of the engine of the economic process and for promoting equitable development. The labor intensity of the MSME sector is far above that of the large enterprises. The MSMEs represent over ninetieth of total enterprises in most of the economies and are attributable to generating the best rates of employment growth and account for a significant share of business production and exports. MSMEs play a significant role in the overall growth of the commercial economy of the country. With its lightness and dynamism, the sector has shown admirable originality and flexibility to survive the recent economic downswing and recession and have innumerable opportunities to grow within the future. This paper enlightens the expansion of MSMEs and outlining the opportunities out there for the MSMEs in the Indian economy.

 

Importance, Role, and problems of the MSME sectors in the Indian economy

Role of MSME in the growth of the Indian economy

 

Growth and Performance

 

 In recent years the MSME sector has systematically registered a higher rate of growth compared to the industrial sector in India. during the primary four years of the XI arrange, the MSME Sector exhibited a growth rate of thirteen on the average, a powerful performance compared to most of the other sectors. As per the fourth Census of the MSME Sector, this sector employs an estimated fifty-nine .7 million persons cover twenty six.1 million enterprises. it's calculable that in terms important, the MSME sector accounts for forty-fifths of the producing output and around four-hundredth of the whole export of the country. the key advantage of the sector is its employment potential at low capital cost.

 

Employment Opportunities

 

 SSI Sector in India creates the biggest employment opportunities for the Indian public, next only to Agriculture. it's been calculable that a hundred thousand rupees of investment in fixed assets within the small scale sector generate employment for four persons. MSMEs do not solely play an important role in providing massive employment opportunities at relatively lower opportunity costs than large industries however conjointly facilitate the industrialization of rural & backward areas, thereby, reducing regional imbalances, reassuring a lot of equitable distribution of national income and wealth. MSMEs are complementary to large industries as ancillary units and this sector contributes tremendously to the socio-economic development of the country. the sector contributes considerably to producing output, employment, and exports of the country. In terms of value, the sector accounts for forty-five % of the producing output and forty % of the total exports of the country. it's calculable to use regarding sixty million persons in over twenty-six million units throughout the country. Over 6000 products are starting from traditional to hi-tech items, that are being factory-made by thirty-five the MSMEs in India.

 

Foreign Direct Investment (FDI) Policy

 

 With the announcement of the MSMED Act, 2006, the restrictive 24-karat gold ceiling prescribed for the equity holding by the industrial undertakings, whether domestic or foreign, in the Micro, Small and Medium Enterprises or MSMEs has been done away with, and MSEs are outlined only based on investment in plant and machinery (manufacturing enterprises) and instrumentality (service enterprises). Thus, the current policy on FDI in MSE permits FDI subject solely to the sectoral equity caps, entry routes, and alternative relevant sectoral rules.

 

Testing Laboratories

 

The commerce MSME units are availing these facilities from the overseas testing labs. As such, there's a requirement for the creation of further testing facilities within the country. it had been suggested that putting in place a minimum of one hundred nos. quality testing laboratories for MSMEs in cluster/industry concentration, district/major industrial space. This activity is underneath taken under the Public-Private Partnership model. there's conjointly a requirement for the up-gradation of existing take a look at Laboratories underneath the Ministry. MSMEs conjointly perform a crucial role in Infrastructure development, Competitive technology, De-reservation, etc.

 

Importance of MSME in the Indian economy

 

  • There are heaps of importance in providing opportunities in the following factors-
  •  Less Capital Intensive
  •  Extensive Promotion & Support by Government
  •  Reservation for Exclusive Manufacture by small scale sector
  •  Project Profiles
  •  Funding - Finance & Subsidies
  •  Machinery procurance
  •  Material procurance
  •  Personnel training
  • Technical & social control skills
  • Tooling & Testing support  
  • Export Promotion
  • Growth in demand within the domestic market size thanks to overall economic growth
  • Increasing Export Potential for Indian product
  • Growth in needs for ancillary units thanks to the rise in the variety of greenfield units arising within the large scale sector. the small business sector has performed extremely well and enabled our country to realize a large life of business growth and diversification.

 

 Problems faced by the MSME sectors

 

MSME holds an important role in the growth of the Indian economy. Still, It has to face many problems or challenges. They are not still getting the required support from the concerned govt. departments or banks or financial institutes or corporations. These things are creating hurdles in the path of the growth of MSMEs. The most common problem faced by the Micro, Small, and Medium Enterprises or MSMEs are mentioned below-

 

  • Absence of adequate banking finance
  • Absence of enough timely banking finance
  • Absence of suitable technology
  • The low production capacity
  • The improper marketing strategy
  • Constraints on the modernization and expansions
  • Absence of skilled laborers with affordable cost
  • Not being able to invest in the manufacturing and purchasing raw materials timely
  • Lack of funds
  • Lack of adequate handholding on several fonts
  • Lack of good quality branding and packaging
  • Lack of manpower and knowledge etc

 

 Conclusion

 

It is very crucial to help these MSME sectors so that they can utilize the available limited human and economic resources in an optimum manner. The MSME sectors need more educated and skilled people and the latest developed technologies to be informed to these sectors. The globally taken developments are necessary to grow these MSMEs. Indian market is progressing very fast these days and the Indian Entrepreneurs are constantly making tremendous progress in all the sectors like manufacturing, food processing, IT and ITES, agro and service sectors, etc. MSMEs have to counter the challenges faced and grab the opportunities available in the market. To help the MSMEs government has announced to launch an E-commerce portal known as the ‘Bharat Craft’ soon that will perform as a direct interface between the sellers and the buyers. To boost the employment opportunities, the MSME ministry led by Nitin Gadkari has launched a scheme called the ‘second financial assistance’ to help the MSMEs.

 

 

 

 

Additional resources

 

 

 

 

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