Growth of MSMEs in India
In recent years, the growth of Micro, Small and Medium Enterprises (MSMEs) in India has been significant. These businesses play a crucial role in the country's economy by creating employment opportunities, promoting inclusive growth, and contributing to GDP. As per the Government of India's MSME Annual Report 2020-21, the sector contributes 30% of India's GDP and employs over 110 million people.
Definition of MSMEs
MSMEs are classified into two categories, namely Manufacturing and Services. In the manufacturing sector, businesses with an investment of up to INR 50 million and an annual turnover of up to INR 250 million are classified as Micro, Small, and Medium Enterprises. In contrast, in the services sector, businesses with an investment of up to INR 10 million and an annual turnover of up to INR 50 million are classified as MSMEs.
Government initiatives to promote MSME growth in India
The government has implemented various initiatives to promote the growth of MSMEs in India. Some of these initiatives are:
- Udyam Registration: In July 2020, the government introduced Udyam Registration, which simplified the registration process for MSMEs. The registration process is entirely online and free of charge. Through the Udyam Registration Portal, businesses can obtain a unique identification number, making it easier to apply for loans and other government schemes.
- Atmanirbhar Bharat Abhiyaan: The government launched the Atmanirbhar Bharat Abhiyaan (Self-Reliant India Campaign) in May 2020 to promote local manufacturing and reduce the dependence on imports, creating a favorable environment for MSME growth.
- MSMEs Loans: The Government has introduced various schemes such as Credit Guarantee Fund Trust for micro and small enterprises (CGTMSE), Credit Guarantee Scheme for Subordinate Debt(CGSSD), etc. to provide collateral-free loans to the MSME sector.
- Technology Upgradation: The Ministry of Micro, Small and Medium Enterprises (MSME) has launched various schemes to provide technical assistance to the MSMEs such as Scheme of Fund for Regeneration of Traditional Industries (SFURTI), Credit Linked Capital Subsidy and Technology Upgradation Scheme(CLCSTS), etc. This has enabled MSMEs to adopt new technology and enhance efficiency, leading to increased productivity and competitiveness.
- Digital Empowerment through e-marketing: The government has launched various schemes like the e-marketplace, Digital MSME, e-commerce website, etc to provide a platform for MSMEs and improve their online visibility and reach.
- Single Window for Clearance: The Government's initiative to provide a single window for all regulatory clearances to promote ease of doing business has also benefitted the MSME sector, as MSMEs have limited resources and find it challenging to handle the bureaucratic burden.
COVID-19 impact on MSMEs in India
The COVID-19 pandemic hit MSMEs hard, leading to a significant downturn in their business activities. The lockdown, supply chain disruptions, and a dip in demand from consumers were some of the reasons for this downturn. Due to their limited financial resources and the unprecedented nature of the pandemic, MSMEs struggled to survive.
To combat the economic slowdown caused by COVID-19, the government launched various initiatives such as the Atmanirbhar Bharat Package, which provided relief measures for MSMEs, including collateral-free loans of up to INR 3 million, a 100% credit guarantee scheme, and a fund of INR 500 billion to support MSMEs through equity infusion. The initiatives helped MSMEs to tide over the crisis and revive their operations.
MSMEs' role in the Indian economy post-COVID-19 pandemic
MSMEs are going to play a critical role in the Indian economy's recovery post-COVID-19 pandemic. The pandemic has led to a paradigm shift in business conduct, with most businesses shifting their operations online. The digital ecosystem has become more important than ever. MSMEs can leverage this opportunity to digitize their operations and participate in e-commerce, cross-border trade, and online payment systems.
MSMEs can also benefit from the increased focus on local manufacturing and supply chains. The pandemic has highlighted the vulnerabilities of global supply chains, and businesses are looking to reduce their dependence on imports. MSMEs can take advantage of this changing landscape by becoming an integral part of the local supply chains, thereby boosting their business prospects.
In conclusion, the Indian government's initiatives have provided a conducive environment for the MSME sector's growth, contributing significantly to the Indian economy's overall growth. The MSME sector's resilience during the COVID-19 pandemic is a testament to its potential and importance in the Indian economy. MSMEs have the potential to be a game-changer in the post-pandemic Indian economy, and it's time to harness this potential fully.
