The Govt. of India has enacted the Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 on June 16, 2006 which was notified on 2nd October, 2006 to deal with the definition of MSME’s. The Enterprises are defined in terms of Investment in Plant and Machinery/ Equipment by both Manufacturing & Service Sector. The role of Indian MSME’s for economic growth can happen in various ways such as employment generation, providing goods and services at affordable costs etc.
The SME’s in India has been a critical driver of growth by providing employment and income opportunities to a large number of people. The industry has been a significant contributor to the country’s exports, with many MSME’s engaged in the export of goods and services.
For more information also read – https://smeventure.com/champions-portal-a-single-window-system-for-msmes/
MSME’s in the Indian economy are being encouraged to market their products on the e-commerce site, especially through Government e-Marketplace (GeM), owned and run by the government, wherefrom Ministries and PSUs (public sector undertakings) source their procurement. As of March 24, 2022, the GeM portal has served 9.63 million orders worth Rs. 219,071 crore (US$ 28.70 billion) from 4 million registered sellers and service providers for 59,259 buyer organisations.
Domestic business requires a strong financial stimulus with concessional working capital loans to ensure adequate liquidity is maintained in business operations from the government and financial institutions.
India’s MSME sector is rapidly adopting digital payments over cash, with 72% payments done through the digital mode compared with 28% cash transactions. Rise in digital adoption presents prospects for further growth in the MSME sector.
Significance of MSMED Act 2006 :
With the enactment of MSMED Act 2006, a paradigm shift has taken place is the inclusion of services sector in the definition of Micro, Small and Medium Enterprises, apart from extending the scope to Medium Enterprises.
The Twelfth Plan has listed the following as the objectives for the MSME sector :
1.) Promoting competitiveness and productivity in the MSME space.
2.) Making the MSME sector innovative, improving technology and depth.
3.) Enabling environment for promotion and development of MSMEs.
4.) Strong presence in exports.
5.) Improved managerial processes in MSMEs.
Importance of MSME’s in Indian Economic growth :
The MSME sector is the growth engine of the Indian economic growth by contributing approximately 8% to the total GDP growth of the country. The development of the rural business like khadi and coir have been facilitated by the emergence and growth of MSME’s in India which has led to higher degree of employment opportunities as well as opened up another avenues to explore at the local and rural level. They have collaborated and worked with the concerned ministries, state governments, and stakeholders towards the growth of MSME’s in rural areas.
Do watch – https://www.youtube.com/watch?v=lTrTmDPDwYc
The MSME’s sector has enormously contributed to socio- economic growth development and helped in the industrialization of the rural areas with a very low capital cost in comparison to the cost incurred by large industries.
The role of SME’s in India for providing impetus towards the country’s development of certain sections like the requirement of low investment, flexibility in operations, mobility through the locations, low rate of imports, and a high contribution to domestic production have proved to be very vital and useful.
Due to the development and adoption of appropriate local technology driven solutions, these MSME’S succeeded in providing fierce competition in the international as well as in the domestic markets by helping evolve more technology-savvy industries and thus welcome new entrepreneurs by supplementing with knowledge, training and skill up-gradation through specialized training centers.
As per the global statistics, MSME’s contribute a large part towards the economies of developing nations and thus help in generating the highest rate of growth in an economy.
India is currently a global leader in terms of deployment and management of MSME’s and this in turn has led to more equitable development in the small and medium industries across the country.
On the basis of an average estimate, close to 130 million people are employed in the Indian MSME sector and thus becoming the 2nd largest employment sector after agriculture. The goal of the MSME sector is to increase its GDP contribution to almost 50% by 2025 as India is on its path to becoming a $5 trillion dollar plus economy by contributing towards 45% of the overall Indian exports.
The all-inclusive nature of the MSME’s helps in promoting and providing employment opportunities to the financially affected sections of the economy and thus boosting the growth most notably in the rural and underdeveloped areas leading to mass adoption of the products and services across strata of the society.
A lot on unbanked people living in the tier-2 and tier-3 get an opportunity to avail banking and other financial services/products which would have otherwise been difficult without the development of the MSME’s sector which is the growth engine of Indian economy catering to the needs and demands of the upcoming and rising local businesses.
Top SME’s in India promote innovation by providing an opportunity to budding entrepreneurs to help them build creative products and thereby boosting competition in business and fueling the growth. The Indian MSME sector provides silent support to the national economy and acts as a defense against global economic shock and adversities.
In order to grow rapidly in this decade, SME’s in India have a potent role to play by scaling up into large organizations enhancing the overall capital flow into the ecosystem. The current number of large scale businesses needs to triple with over 1000 businesses currently on the path of scaling up. The total budget allocation for the MSME sector has doubled to Rs. 15,700 crores (US$ 2.14 billion ) from almost half of the current amount in 2021.
Financial support from the central and state governing bodies and favourable policies can lead India into becoming a high-growth manufacturing-based economy and thus we can say that India is propelling towards a robust global economy through a silent revolution powered by the growth of MSME’s in India.