There’s no doubt that the contribution of Micro, Small and Medium Enterprises (MSMEs) have been tremendous in the past few decades. Several reasons can be stipulated which serves as proof that MSMEs have a positive impact and have massively contributed to the country’s economy.
Before we get into the juicy details of these enterprises and what have they done to be a significant part of the economy, let us look through some statistics.
It is incredible that this sector alone contributes to almost 45 per cent of the total employment opportunities in the country, 50 per cent of total exports from India, 29 per cent of total country’s GDP (Gross Domestic Product) and 95 per cent of total industrial units in the country. Further, the Central Government plans a contribution of $2 trillion from the Micro Small and Medium Enterprises (MSMEs), which will eventually lead India, in accomplishing the goal to become a $5 trillion economy by 2024.
The Ministry of Micro, Small and Medium Enterprises, which is a branch of the Government of India, is the apex executive body for the formulation and administration of rules, regulations and laws with regards to Micro, Small and Medium Enterprises in the country.
The statistics as per the annual reports of Ministry of Small and Medium Enterprises (MSME) show a rise in the plan amount spent on the Khadi sector from Rs 1942.7 million to Rs 14540 million, and non-plan amounts from Rs 437 million to Rs 2291 million. The interest subsidies to Khadi establishments increased from Rs 96.3 million to Rs 314.5 million during this period.
Khadi and Village Industries (KVI) are two national heritages of India. One of the most significant attributes of KVI in the economy of India is that it creates employment at a very low per capita investment. It also provides sustainable employment to the individuals in the rural areas, which is a good approach by the KVIs. Coir industries is an export-oriented industry that has a great potential to enhance exports to by adding value through technology interventions. These two industries are perfect examples of MSMEs.
The Government of India, along with various ministries and departments, are working towards the growth and development of the MSME Sector. This vision and given rise to different schemes,
Some of the major benefits that MSMEs provide are as follows –
- Produce large employment opportunities at a lower capital cost
- Helps in the industrialization of rural as well as backward areas
- Reducing imbalances in the region
- Boosting ways in there is an equal distribution of national income wealth
Micro, Small and Medium Enterprises Development Act(MSMED)
The MSMED Act was introduced in 2006 with the purpose of addressing issues regarding MSMEs. The Act is working on accelerating the development of the enterprises and at the same time enhance their competitiveness.
The Act provides a mechanism at the national level, providing a description of all sections of stakeholders, mainly categorized as three types of enterprises i.e. micro, small and medium enterprises. It also specifies details on the various functions that must be performed by the enterprises. The Act also encompasses and emphasizes on the utilization of provisions of various schemes for micro, small and medium enterprises such as progressive credit policies and practices, eliminating the problems of delayed payments to micro and small enterprises.
The Khadi and Village Industries Commission Act, 1956
This act works towards the development and promotion of the Khadi and Village industries by providing them certain commissions.
The Coir Industry Act, 1953
This Act is developed for the establishment of a Board for promoting and developing of the Coir Industry. Some ways in which the Act proves to be beneficial are – developing new products and designs, promotion of exports and internal sales, marketing of coir and coir products in India and in the foreign countries, preventing unfair competition between producers and exporters, assisting the establishment of units for the manufacture of the products, promoting co-operative organization among producers of husks, coir fibre, coir yarn and manufactures of coir products and ensuring returns to producers and manufacturers.
National Small Industries Corporation Limited (NSIC)
NSIC was established in 1955, with the major objective to promote, boost and aid the growth of the MSMEs in the country. NSIC provides many services to MSMEs and provides solutions to any issues they face in the various stages of production such as raw material procurement, product marketing, acquisition of technology etc.
Certain schemes under NSIC are mentioned below –
- Single Point Registration
- Bank Credit Facilitation
- Raw material Assistance
- Infrastructure Development
Classification of MSMEs
MSMEs are majorly divided into three different types, which depends upon one factor – the amount invested in the business.
Manufacturing / Production Sector
|Micro Enterprises||Investment up to Rs 25 lakhs|
|Small Enterprises||Investment above Rs 25 lakhs and up to Rs 5 crores|
|Medium Enterprises||Investment above Rs 5 crores and up to Rs 10 crores|
|Micro Enterprises||Investment in equipment up to Rs 25 lakhs|
|Small Enterprises||Investment in equipment more than or equal to Rs 25 lakhs and less than Rs 5 crores|
|Medium Enterprises||Investment in equipment greater than or equal to Rs 2 crores and less than or equal to Rs 5 crores|
Why should an individual set up an MSME?
Setting up an MSME is not only about establishing a business, but it is also much more than that. It is about how can that enterprise can contribute to the economy of the country.
- It brings clarity and credibility while performing various activities of the enterprise.
- The Government has laid down various schemes, benefits, financial aid so that individuals opt for MSMEs.
- As compared to large industries, MSMEs can avail certain privileges that would eventually lead to their expansion and growth.
Schemes under MSME launched by the Government
Below mentioned are some of the important schemes that were launched by the Government. The MSMEs must register under the scheme that they find suitable for their business if they want to avail its benefits.
- Udyog Aadhaar memorandum
- Zero Defect Zero Effect
- Quality Management Standards & Quality technology Tools
- Grievance Monitoring System
- Credit Linked Capital Subsidy Scheme
- Women Entrepreneurship
Udyog Aadhaar Memorandum
Aadhaar card is a 12 – digit number provided to all individuals by the Government of the country. An Aadhaar card is compulsory for all residents who are the residents of India. Registering under this scheme provides certain benefits, some of which are – ease in availing credit, MSME loans, and subsidies from the Government. Registration can be easily done in both ways – either online or offline.
Zero Defect Zero Effect
In this model, products that are manufactured for export purposes have to adhere to a certain standard of quality so that they are not rejected or sent back to India. To maintain the standard of the products to the standard set up by the authority, the Government launched this scheme. As per this scheme, if the goods are exported, they are entitled to some amounts of rebates and concessions.
Quality Management Standards & Quality technology Tools
This scheme provides support to the micro, small and medium enterprises by helping them recognize and execute certain standards of quality that are required to be maintained along with the latest technology. Under this scheme, certain activities are conducted to educate the businesses about the new technology launched through various seminars, campaigns etc.
Grievance Monitoring System
Every business, after being in the market for a certain amount of time, start to face issues and complaints from clients, customers and even employees that work in the company. This scheme is, particularly for the business owners. Registering under this scheme is beneficial as it provides ways to deal with the complaints of the business owners and get them resolved. Under this scheme, the business owners can file any complaint, check the status of their complaints if they are not satisfied with the result.
This scheme provides a platform for people with amazing ideas. It helps innovators and such individuals, to implement their new design, ideas or products. As per this scheme, 75% to 80% of the project cost will be financed by the Government. This scheme boosts new ideas, designs, products etc.
Credit Linked Capital Subsidy Scheme
This scheme is for all the businesses that are technology deprived. As per this scheme, new technology is provided to the business owners to replace their old and outdated technology. The capital subsidy is given to the businesses to upgrade and have better methods to perform various business activities. The small, micro and medium enterprises can directly approach the banks to avail these subsidies.
This scheme is designed for the women of the country who want to start their own business. The Government provides capital, counselling, training and execution techniques to these women so that they get into a better position to manage and perform different business activities and later find innovative methods for their business expansion.
MSME Registration Process
For the smooth functioning of the enterprise, it is mandatory to register MSME and follow the procedure step by step. For the purpose of transparency and accountability of the small and medium industries, registration is a must.
Below mentioned are steps to register MSME,
- File an application form with the concerned department of the Government.
- Provide specific details about the industry along with the documents
- Aadhar card number of the applicant
- Significant details of the applicant such as name, gender, PAN number, email ID and mobile number.
- Details of the enterprise such as name, PAN number of the enterprise, location of the plant where the manufacturing will take place, date of the commencement of business, number of employees.
- Bank Account Number and IFS Code
- Primary Business Activity of the enterprise
- 2 Digit NIC Code
- Investment in Plant & Machinery / Equipment
Documents Required for MSME Registration
Documents required in order to register as an MSME must be submitted to the concerned authority before the stipulated time.
- Copy of Aadhar card of the applicant
- Name of corporation or business
- The kind of corporation
- PAN card copy
- Address proof of the registered office address
- Mobile number and Email Address
- NIC code
- Number of employees
- Amount Invested in Plant & Machinery / Equipment
- Certificate of incorporation of the enterprise
- Cancelled cheque of current account
- Main business activity of the enterprise
The latest scoop on MSMEs
What’s in for MSMEs in the Union Budget – 2020
“We have sought Rs 12,000 crores budgetary allocation for MSMEs in the upcoming Union Budget,” this statement was made by the MSME minister. The allocation for the sector in the current financial year is Rs 7,011 crores.
It is significant to ensure that the industry needs more of MSMEs as their contribution is boosting the economy at many levels.
While the Government of India has been taking steps to support and provide maximum help to MSMEs, the sector needs more as it continues to face challenges in receiving adequate finance, technology and skilled labour.
Extension of MSME debt recast window
RBI extended the deadline for one-time restructuring scheme of small business loans by nine months to 31 December. “It is reemphasized that this is a one-time regulatory dispensation,” RBI said.
RBI Gives a Window of 9 Months for One-Time Restructuring Scheme of MSME Loans
RBI extends one-time restructuring scheme for MSME Loans by 9 months from March 31, 2020, to December 31, 2020. The Reserve Bank of India made a decision to extend the deadline of a one-time restructuring scheme for loans provided to Micro Small and Medium Enterprises (MSME) by December 31, 2020. This deadline extension was a relief to MSMEs which were unable to be restructured as per the previous year’s provisions, the enterprises now receive an extension period of 9 months. The restructuring scheme which was announced last year in January was about to be expired on March 31, 2020.
Launch of National Level Awareness Program
This program was introduced for the students. Their major objective is to encourage students to increase their knowledge about entrepreneurship and opt for entrepreneurship as their career.
MSMEs are undoubtedly, the backbone of the Indian economy, as proved by the numbers that are beyond impressive. If India wants the MSMEs to continue contributing and benefitting, the Government must ensure that they are not deprived of any attribute that is a must for a smooth run of the enterprises. In spite of setting up different schemes, acts, rules, it is mandatory for the Ministry of MSME to oversee the activities every MSME consistently.