Abstract

Small and medium-sized enterprises (SMEs) contribute significantly to the growth of both
developed and developing countries. These sectors of the economy are critical to India's
development. Economic growth has been spurred by the growth of these businesses.
Manufacturing accounts for over 45 percent of the country's GDP and more than 40 percent
of its export revenues. Ministerial MSMEs and its organisations are assisting the States in
their efforts to promote entrepreneurship and employment, as well as strengthen the
competitiveness of MSMEs in the changing economic environment. As far as India is
concerned, they are crucial in terms of the number and production of units, as well as exports
and employment. MSMEs' performance is being examined in this study in terms of several
factors and policy actions done by the government in order to promote their growth. Data
from many ministries' websites was used in this paper's research.
The following are the study's aims:
1. To learn more about the importance of micro, small, and medium-sized enterprises
(MSME) in spurring economic development in India.
2. To find out the state wise distribution of Micro, Small and Medium enterprises in 2018-
19 and
3. To examine the impact of MSME manufacturing production on GDP.
There is no primary data in this publication. The Directorate of Economics and Statistics,
books, journals, RBI bulletins, theses, and websites were the main sources of secondary data.
The expansion of each economy is greatly aided by micro, small, and medium-sized
enterprises (MSMEs). Those industries that are not registered under the MSME platform
make up a large portion of India's MSMEs, which are largely unregulated. Indian businesses
are forced to join the MSME site so that they can take advantage of government programmes.
Keywords: Micro, Small and Medium Enterprises, Production, Employment, poverty
alleviation and rural development

Introduction
Given the size, scope and diversity of the country, it is crucial that the industrial sector
contributes to India’s economic development and attempt to make that progress inclusive.
Since independence, all levels of government have created plans and programmes to
encourage industrialisation-driven economic growth. The Ministry of Micro, Small and
Medium Enterprises in India has distinguished and divided small and medium enterprises
based on their size and investment in the Micro, Small and Medium Enterprises Development
Act, 2006. This division is based on the categories of businesses—manufacturing and service
businesses—performed by the enterprise. Manufacturing enterprises consist of all those
business activities that are engaged in the manufacture or production of goods specified in the
first schedule of the Industries (Development and Regulation) Act, 1951. Similar to this,
service enterprises are companies that carry out operations, including giving or supplying
services to another company or a private individual.
For a manufacturing enterprise to be classified as a microenterprise, the limit for investment
in plant and machinery has been fixed at less than or equal to 25 lakh rupees. The same limit
on investment in equipment for service enterprises has been fixed at less than or equal to 10
lakh rupees. The limit of investment in a manufacturing enterprise to be classified as a small
enterprise is more than 25 lakhs and less than or equal to 5 crore rupees. The same limit for
service enterprises to be classified as small enterprises has been more than 10 lakh rupees but
less than or equal to 2 crore rupees. Medium manufacturing enterprises are those whose total
investment in plant and machinery is more than 5 crore rupees but less than or equal to 10
crore rupees. The same limit for service-rendering enterprises has been set at more than 2
crore rupees and less than or equal to 5 crore rupees.
With such a categorical classification of the micro-, small- and medium-sized enterprises
(MSMEs) in India, these enterprises are playing a very vital role in the growth of our
economy. The MSMEs have received recognition for being the driving force behind
economic expansion and for advancing fair and equal development opportunities for
everybody. They are essential to every country’s industrial growth. The expansion of the
Indian economy’s social and economic sectors is greatly influenced by the MSMEs. They
provide significant contributions to the nation’s exports, employment and industrial
production. For the country to move towards a quicker and more equitable growth, this sector
is crucial.
MSMEs aid in reducing the disparity in income distribution by providing individuals with
numerous job possibilities and industrialising rural regions. Next to agriculture, this industry
employs the most people. In comparison to large businesses, the MSME sector has a far
higher rate of growth for the level of labour concentration. The sector’s employment potential
at minimal capital cost is its key advantage.
They are widely scattered around the country and produce a diverse variety of goods and
services to meet the demands of regional, national and international value chains as well as
local and worldwide markets. The huge industries that are active in the economy and making
significant contributions to the socio-economic advancement of the nation are complemented
by the MSMEs. Averaging 3.6 crore MSME units, there are over 8 crore people who have
jobs because of them. MSMEs provide almost 22% of the nation’s gross domestic product
(GDP), 45% of industrial output and 40% of exports.
In light of the crucial role MSMEs play in the growth of any economy, this article makes an
effort to investigate the situation of micro-, small- and medium-sized businesses in India. The
study also examines how micro-, small- and medium-sized businesses might contribute to
inclusive growth. The article would try to end by bringing attention to the problems,
difficulties and possibilities that MSMEs in India are facing.

Review of Literature
In their 2012 study titled ‘Role of Manufacturing Industries in India for Inclusive Growth’,
Anjum and Tiwari (2012) investigated the role that labour reforms and manufacturing
industries have had in enabling India to benefit from globalisation and ensure inclusive
growth. According to the report, India’s economic performance during the past 10 years has
been outstanding. The main areas of worry, however, are out-of-date labour laws, inspector
raj and a heightened chance of labour disputes. According to the report, the labour market’s
flexibility may be exploited to leverage India’s demographic dividend and promote inclusive
growth. In his article titled ‘Role of Micro, Small and Medium Enterprises in Inclusive
Growth’, Srinivas (2013) argued that MSMEs should be seen as the nation’s growth engine.
It has been noted that there have been notable changes at the national and state levels in
recent years towards consolidating this industry. The primary causes of the MSMEs’ slow
growth in India are poor infrastructure and weak marketing ties. According to the report, the
Indian government can take various steps to advance the growth of these MSMEs. MSMEs’
performance in India’s economy and government policies has been examined by Lama
(2013). He has also researched the many opportunities and difficulties that MSMEs face.
According to the report, MSMEs must increase their production and quality while cutting
expenses and innovating. Focus must be placed on creating benevolent policies, a supportive
workplace, adequate funding and cutting-edge technology for MSMEs if MSMEs are to stay
on the correct track and direction. Manna and Mistri (2017) examined the state of MSMEs in
India and their trends. They gathered and examined supplementary data. Unsurprisingly, they
discovered that micro companies hold the top spot in every state, although several advanced
states are also consistently strengthening their small- and medium-sized enterprises. The
industry supports regional growth and lessens regional disparities. Mohanty (2018) analysed
the condition and performance of the MSME sector and outlined the several initiatives
undertaken by the government and SIDBI. According to the research, MSMEs have
performed admirably over the previous 5 years. This industry’s importance for urban and
rural development is increasing significantly, and it is expanding quickly. Zanjurne (2018)
studied the performance of MSME and its development potential in great detail. She did an
exploratory study and came to the conclusion with the help of secondary data that the MSME
sector significantly contributes to exports, employment and manufacturing production. Singh
(2021) examined the MSME sector’s function, performance, various difficulties and future
possibilities in India. The study came to the conclusion that this industry significantly
contributes to India’s industrial output, export, employment and creation of a broad
entrepreneurial base. However, the pandemic has impacted MSMEs in a variety of ways,
suggesting that the government should implement the right policies to counteract its effects.
Das (2021) investigated the importance of MSMEs in India’s economic development. The
study stated that MSMEs have made significant contributions to the country’s socio-
economic growth by creating job opportunities, contributing to production and export and
supporting development in backward and rural areas.

Definitions of Micro, Small & Medium Enterprises

MSME sector is a crucial component of India’s industrial sector and it occupies a position of
strategic importance in the Indian economic structure due to its significant contribution in
terms of output, employment and exports. The definition of small-scale industries has
undergone several changes over the years. The earliest definition of small-scale industries
was given in 1950, on the basis of the twin criterion of investment limits and labour force;
later the employment criterion was removed and the SSI/MSME sector was solely defined on
the basis of invest limit in Plant and Machinery (P &M) with several revisions in cut-off
limits. The recent Micro, Small and Medium Enterprises Development Act (MSMED) 2006,
while increasing the upper limit of investment also divided the MSM enterprises into two
separate categories namely, manufacturing and services enterprises. The manufacturing
enterprises are defined in terms of investment in plant and machinery whereas the service
enterprises are defined in terms of investment in equipment. The investment limit for both
types of enterprises
In accordance with the provisions of Micro, Small & Medium Enterprises Development
(MSMED) Act, 2006, the Micro, Small and Medium Enterprises (MSME) are classified into
two Classes:
• Manufacturing Enterprises: The enterprises engaged in the manufacture or production of
goods pertaining to any industry specified in the first schedule to the industries (Development
and regulation) Act, 1951). The Manufacturing Enterprises are defined in terms of investment
in Plant & Machinery.
• Service Enterprises: The enterprises engaged in providing or rendering of services defined
in terms of investment and are in equipment.
The limit for investment in plant and machinery / equipment for manufacturing / service
enterprises, as notified, are as under:

Objectives of the study

The objectives of this paper are:
• To understand the definition of MSMEs.
• To discuss the role of MSMEs sector towards the contribution to GDP in the country.
• To assess the growth and performance of MSMEs in terms of employment and
investments.
• To analyse the present policy framework of MSMEs.
To achieve these objectives, the paper is divided into various sections. Section I which is the
present section, explains the definition of MSMEs. Section II explains the research
methodology used in this paper. The next section shows the contribution made by MSMEs in
the Indian economy during the past few years. Section IV assesses the performance of
MSMEs with respect to total working hours, employment and investments in fixed assets.
Section V presents the policy framework of MSME in the economy. References form the last
section of the paper.

Methodology of the Study

This article is the outcome of the examination of secondary data that was gathered from
the Indian Economy Statistics Handbook and the Ministry of MSMEs’ Annual Reports, among
other public sources.

The analysis is done in terms of simple percentages; however, in order to study growth, the
annual compound growth rate (ACGR) is also calculated. The formula used is:

where r stands for the rate of growth, xn stands for final year figures and xo is the base year
figure and n stands for the number of years.

MICRO, SMALL AND MEDIUM ENTERPRISES (MSMEs) SCHEMES

a) Prime Minister’s Employment Generation Programme (PMEGP)

PMEGP (Prime Minister's Employment Generation Programme) was created in 2008 by

merging the Prime Minister's Rozgar Yojana (PRY) and the Rural Employment
Generation Programme (REGP) of the Ministry of MSME, New Delhi. First-generation
entrepreneurs are encouraged to start micro-enterprises through this programme. Loans
of up to Rs.10 lakhs are available for service firms and up to Rs.25 lakhs for
manufacturing enterprises under this programme. The Khadi and Village Industries
Commission (KVIC) is the key agency at the national level. District Industries Centers
(DICs) and State Tamil Nadu Khadi and Village Industries Boards (KVIB) and the State
Khadi and Village Industries Commissions (KVICs) carry out the programme at the state
level.

b) Rajiv Gandhi Udyami Mitra Yojana (RGUMY)

The "Rajiv Gandhi Udyami Mitra Yojana" is a scheme devised by the Ministry of Micro,
Small and Medium Enterprises of the Government of India to provide assistance to first-
generation entrepreneurs in starting and running their companies. Government of India
has designated the Entrepreneur Development Institute (EDI), Chennai as a Category-II
training institution. 26 Udyami Mitras, on the other hand, have been designated by the
Indian government as Category III. The government of India has made available a grant-
in-aid of Rs.21.14 lakhs from plan funds to assist first-generation entrepreneurs under
this programme. 120 enterprises have received Rs.1.84 lakhs from four Udyami Mitras
thus far (Udayamis).

c) Unemployed Youth Employment Generation Programme (UYEGP)

For the past five years, the Unemployed Youth Employment Generation Program
(UYEGP) has been in place to help educated young people in economically and socially
disadvantaged areas find work through micro-enterprises in manufacturing, service, and
commercial sectors. There is a maximum financial aid of Rs.5lakhs, Rs.3lakhs and
Rs.1lakh available under this scheme, which includes a 15% government subsidy on the
Project Cost. Generally, the promoter contributes 10% and 5% of the total project cost,
respectively, for the General and Special categories. The programme is open to anyone
who is at least 18 years old and has a high school diploma or equivalent. To be eligible, a
candidate must be at least 35 years old in the General Category, and at least 45 years old
in the Special Category, which includes those with disabilities and those who have
served in the armed forces. Several Rs.17.00 crores were earmarked for the subsidy
component and contingencies in the year 2010-11. The programme went into effect in
the fourth quarter after it was approved by the State Level Bankers' Committee and 4468
applications with a subsidy component totaling Rs.14.19 crores were sent to the banks.
The beneficiaries are receiving training, and Rs.1.5 crores in subsidies and Rs.10 crores
in project costs have already been disbursed for 521 recipients, and more training and
payout are planned for the 2011-12 fiscal year. The plan would be implemented with a
budget of Rs.17.00 crores.

d) District Industries Centre (DIC)

These centres are located at the district level, as the name suggests. As of right now,
there are 422 DICs operating in our country's 431 districts. Starting in 1978, the DIC
programme was designed to provide entrepreneurs with all the information they need to
launch and maintain an industrial unit under one roof, including information on perks
and guidance. An agency with "many functions" that coordinates everything else. Their
job is to implement the many government programmes and schemes that are supplied by
the federal and state governments on a regular basis. Through its District Level Bankers
Meeting, Single Window Committee Meeting, Sick Unit Rehabilitation Meeting, and
Grievance Meeting with Industrial E.B. Consumers Meeting, among other things,
District Industries Centre, Thoothukudi, has provided invaluable assistance and guidance
to Micro, Small and Medium Enterprises. The DIC, Thoothukudi has a General Manager,
three functional Managers, an Assistant Director (Industrial Cooperatives), three
Assistant/Junior Engineers, a Survey & Statistical Inspector and Investigator, and other
ministerial employees to handle the administrative duties.

Contribution of MSME in the Indian Economy

The micro, small and medium enterprise (MSME) sector is an important constituent of
the Indian economy, contributing significantly to the Gross Domestic Product (GDP),
manufacturing output, employment and exports. This sector also plays a decisive role in
nurturing entrepreneurial talent as well as distributing wealth at grassroots level. This
sector has contributed considerably in promoting balanced and equitable growth in the
country. Performance of Micro, Small & Medium Enterprises (MSME) Sector in the
country is evaluated mainly by conducting of periodic All India Census of the Sector.
Since the Fourth All India Census of MSME was conducted in the year 2006-07, the
estimates based on trends of Number of Working Enterprises, Employment, and Market
value of Fixed Assets based on the Fourth All India Census of MSME is projected for
latest years. The comprehensive results of Fourth All India Census of MSME are given
below:

MSME have great role in the balanced development of the economy. MSME sector
presently employs over 80 million people over 36 million units and MSME accounts for
8 percent of the country’s GDP. As per the Annual report of Ministry of MSME, the
sector accounts for about 45 percent of total export of the country. MSME sectors
produce more than 6000 quality products. MSME sector, thus, shows greater opportunity
for expansion and diversifying its activities in various sectors. MSMEs are dominated by
micro enterprises with 94.9 percent share followed by small enterprises with 4.9 percent
of share. These enterprises are organized in throughout India by operating 55 percentages
in rural India and rest operating in semi-urban and urban region of India. And hence
MSMEs contribute a commendable portion to the balanced growth of Indian economy.
On the activity basis, if we are exploring, it can be seen that 67.1 percent of total
registered units are manufacturing units, 16.8 percent of total registered units are service
units and 16.1 percent units of total registered units are repair and maintenance units.
From the diagram given below we can get some clearer picture about the distribution of
6000 units of MSME into their respective sectors.
EVALUATION OF PERFORMANCE OF MSMEs

Number of Entrepreneurs Memorandum-II filed by MSMEs at DICs under Various State/UT

Commission rates/Directorates of Industries during 2007-08 to 2014-15
Number of Entrepreneurs Memorandum-II Filed by Type of Enterprises

Journal of Applied Management-Jidnyasa, Volume 10, Issue 2, 2018

The State/UT Commission rates/Directorates of Industries & MSME-Development Institutes

Status of MSME Units in Terms of Employment and Investments

Annual Report on MSMEs 2015-16

Performance of MSME sector is assessed by conduct of periodic All India Census of the
Sector. The coverage and scope of MSME sector was broadened significantly under the
MSMES Act, 2006, which recognized the concept of “enterprise” and to include both
manufacturing and services sector, besides defining the medium enterprises under MSME
sector. It is clear from the table above that number of enterprises, employment and
investment in fixed assets in India show an increasing trend over the period of time. From FY
2006-07, figures include activities of wholesale/retail trade, legal, education & social
services, hotel & restaurants, transports and storage & warehousing (except cold storage) for
which data were extracted from Economic Census 2005, Central Statistics Office, M/o SPI.
Number of enterprises and employment registered an annual growth of 14% approx. whereas
the value of fixed assets and output witnessed a growth of 20% approx.
Contribution of MSME Sector in the Gross Domestic Product
The estimated contribution of MSME sector to GDP and Output, during 2006-07 to 2012-13
is shown in the table given below:

Contribution of MSME Sector in the Gross Domestic Product and Output

At price:2004-05

1. Fourth All India Census of MSME 2006-07 2. National Account Statistics (2014), Central Statistics
Office (CSO), Ministry of Statistics & Programme Implementation (MoSPI) 3. Annual Survey of
Industries, CSO, MoSPI.

MSME has shown stable growth rate around 11 percent every year till 2010-11. The highest
growth in recent time was witnessed during 2011-12 (18.45 percent) whereas during year
2012-13 and 2013-14 growth rate was around 14 percent and 12 percent, respectively. But it
jumped to 17 percent in 2014- 15. However, recent data for 2015 shows impressive growth of
18.74 percent (year-on-year growth). This is shown in the diagram given below:

Annual Growth Rate in Preceding Years

Annual Report FY 15-16, Ministry of Micro, Small and Medium Enterprises, Govt. of India
MSME Gross Value Added (GVA) and Its Share in Total Indian GDP

The MSMEs have been manufacturing a variety of goods and services to meet local and
international market demands. Table below shows the contribution of the MSME sector to the
GVA and GDP of the nation for the years 2011–2012 to 2018–2019, at current prices.
According to the table, the percentage of gross value generated by micro-, small- and medium-
sized businesses in the country’s GDP was 29.57% in 2011–2012 and increased slightly to
30.27% in 2018–2019. The increasing trajectory of MSME GVA is consistent with the total
GVA, as MSME GVA grows at ACGR of 11.628%, as against it, total GVA increased at
11.071% during the period 2011–2012 to 2018–2019.

Share of MSME Exports in Total Exports

Table below provides information on the MSME sector’s export performance in India. The
figure clearly shows that the MSME sector in India accounts for more than 40% of exports.
From 42.61% in 2012–2013 to 48.58% in 2017–2018, MSME exports have surged in
percentage. The ACGR of MSME exports was 2.122% from 2012–2013 to 2017–2018,
compared to -1.489% for total country exports.
MSMEs’ Role in Inclusive Growth in India

MSMEs in India play a catalytic role in promoting fair growth. For the country to prosper in a
balanced way, this sector must function well. The MSMEs play an important role in India’s
inclusive growth and its role is presented in the part that follows by taking into account the
following factors:

1. The creation of jobs in both urban and rural regions.

2. The regional distribution of industries across urban and rural areas and between
states.
3. The entrepreneurship of various socio-economic groups such as Other Backward
Class (OBC), Schedule Caste (SC), Schedule Tribe (ST) and other groupings.
4. Women’s involvement in entrepreneurship.

Employment Creation

Due to its minimal investment needs, the MSME sector is significant in India since it is
regarded as the second largest employer after the agricultural sector. Table below shows the
distribution of employment generated by the MSMEs in rural and urban locations. As per the
results of the 73rd round of the National Sample Survey which was performed in 2015–2016,
the MSME sector has been adding 1,109.89 lakh of employment in India. Rural areas account
for 44.85% of the sector’s total employment while urban areas account for 55.85% of it.

Regional Dispersal of Industries

The distribution of industries throughout India’s regions is greatly influenced by the MSME
sector. The MSME firms have a stretch over the entire country, but big-scale industries have
a propensity to centre in significant states and around metropolitan areas, sinking the regional
differences in industrial growth. Table below shows the distribution of the estimated number
of businesses between rural and urban locations. According to the table, there are 48.75%
MSME units in urban areas and 51.25% in rural areas.

Table below shows the distribution of the expected number of businesses in a few different
Indian states. In India, the inter-state distribution of MSMEs is comparatively more even than
that of large-scale companies. The table shows that whereas Uttar Pradesh, West Bengal and
Tamil Nadu together account for 36% of all units according to the NSS 73rd cycle, their
proportion in total units according to the fourth all-India MSME Census was closer to 31%.
According to the NSS 73rd cycle, Uttar Pradesh is expected to have the most MSMEs,
accounting for 14.00% of all MSMEs in the country. The top 10 states, which account for
74.00% of the country’s total number of MSMEs, are given in Table below.

Entrepreneurship by Different Social Groups

However, MSME enterprises are owned by a diverse range of people from many socio-
economic categories, including SC, ST, OBC and others. Businesses in large-scale industries
are frequently controlled by entrepreneurs from the social elite. Table below depicts the
socio-economic category of owner distribution of MSMEs in India’s rural and urban
locations. According to data from the NSS’s 73rd round, socially disadvantaged groups held
about 66.27% of MSMEs, of which 49.72% were owned by OBC business owners, 12.45%
by SC business owners and 4.10% by ST business owners. Nearly, 73.67% of MSMEs in
rural regions were held by socially disadvantaged groups.

MSME Sector Employment Distribution in India’s Rural and urban location [in lakhs]

MSME Units Distribution in India by Rural and Urban location [in lakhs]

Comparative Distribution of MSME Unit in India Top 10 States

MSME Distribution on the basis of percentage by Social Group Ownership in Rural and Urban Areas
in India

MSMEs and Women’s Participation

Our traditional communities have undergone a very slow but steady transition over the past
few decades, and more and more Indian women are stepping forward to participate in the
workforce. Despite the fact that men still predominate in the business sector, the participation
of women is growing. They now have the opportunity to pursue entrepreneurship and make a
contribution to the national economy thanks to the MSME sector. The percentage of women-
owned businesses in all Indian MSME companies was 20.37%, according to the NSS 73rd
cycle Table below.
Percentage Distribution of Ownership of MSME by Male and Female in India

Present Policy Framework

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 seeks to
enhance the competiveness of the sector. The act also facilitates the development of these
MSMEs enterprises. The Act provides the establishment of specific funds for the promotion
and development as well as for enhancing the competiveness of these enterprises. Other
features of the Act include the notification of the schemes for the development, progressive
credit policies and many more. The policy of de-reservation has helped the sector in
enlarging in scale of operations and paved the way for the entry of the large enterprises in the
manufacture of these products in keeping with the global standards. Credit/Finance-Credit to
the MSEs is part of the Priority Sector Lending Policy of the banks. Any shortfall in lending
by the foreign banks has to be deposited in the Small Enterprise Development Fund (SEDF)
to set up by the Small Industries Development Bank of India (SIDBI). The SIDBI is the
primary financial institution for the promotion, financing and development of the MSME
sector. The Government has announced a ‘Policy Package for Stepping up Credit to Small
and Medium Enterprises’ with the objective of doubling the flow of credit to this sector
within a period of five years. Competitive technology- in today’s fast moving globalized
business scenario, technology is playing a vital role than ever before. Government has set up
ten state-of-the-art Tool rooms and training centers to foster the growth of MSME sector. The
Tool rooms provide the well trained craftsmen in the area of tools and die making to the
Indian industry. Skill Development-The Ministry of Micro, Small & Medium Enterprises
promotes the development of micro and small enterprises in the country with the objective of
creating self-employment opportunities and upgrading the relevant skills of existing and
potential entrepreneurs. Export Promotion Export promotion from the MSE sector has been
accorded a high priority. To help MSEs in exporting their products, the following
facilities/incentives are provided: (I) Products of MSE exporters are displayed in international
exhibitions and the expenditure incurred is reimbursed by the Government; (ii) To acquaint
MSE exporters with latest packaging standards techniques, etc., training programme on
packaging for exporters are organized in various parts of the country in association with the
Indian Institute of Packaging

Problems Faced by MSMEs

The MSME sector confronts a variety of obstacles despite the sector’s strategic relevance for
the Indian economy in general and inclusive growth in particular. The following are the main
obstacles that are making it difficult for MSMEs to develop:
1. The MSMEs faced problem regarding absence of adequate and timely credit from the
banks. At present, banks do not provide sufficient amount of loan to the MSMEs.
They are often not able to secure adequate financial resources for the buying of
machinery, equipment and raw materials and sometimes finances to meet day-to-day
expenses.
2. The MSMEs also face tough competition from large firms and multinational
companies. Multinational companies are offering quality goods at affordable price.
3. MSMEs’ growth is so rapid that infrastructural amenities are in short supply. Because
of their weak infrastructure, their capacity to produce is limited and their production
costs are quite expensive.
4. Due to lack of raw materials, skilled labour and other inputs in the market, it is
difficult to create items at reasonable rates. Because the MSMEs have a low paying
capacity, trained human resources are scarce, resulting in inadequate management
capabilities, marketing channels and brand development capacity. There is obsolete
technology and environmental constraints, which results in lack of awareness towards
advanced technologies of production. They are still using traditional methods of
production.
5. There are problems related to market accessibility at national and international levels.
They find it very hard to sell their produce at competitive prices and are not able to
spend much on advertising and marketing research.
Despite the numerous hurdles, the MSME sector has demonstrated outstanding inventiveness,
flexibility and resilience in order to survive the current economic environment.
Policy Implications
During the last several years, India’s economy has expanded rapidly. However, this growth
has not resulted in the desired changes in the population’s socio-economic status, as
evidenced by the slow rate of poverty reduction, a scarcity of high-quality employment
opportunities, an increase in provincial disparities and inequalities between individuals and
social groups. This sets the stage for the need of an inclusive growth approach, which the
government has prioritised in its development policy. Given this circumstance, MSMEs are
critical to the general growth of the country as it significantly influence job creation, exports,
manufacturing output, GDP growth generally and inclusive growth in particular.
The MSME sector is currently aiding India’s inclusive growth by producing a large number
of job opportunities, eliminating regional disparities and integrating impoverished citizens
into the economy. With government efforts such as ‘Make in India’ and ‘Digital India’, the
MSME sector has a great opportunity to grow in the future. However, due to the lack of
infrastructure, finance facilities and technical advancement, the sector’s expansion is
imminent. To overcome these issues, the government must strengthen its support for the
MSME sector. In order to make this process of growth inclusive, a proper care of this sector
is needed.

Future Prospective of MSMEs

With a GDP growth rate of 8.5% and a predicted GDP of USD 5 trillion by 2025, the Indian
economy is expected to emerge as one of the world’s main economies. The micro-, small-
and medium-sized businesses are probably going to play a big part in how the economy
develops. MSME must be developed to the fullest extent possible in order to promote
inclusive growth.
With both domestic and foreign corporations participating in the ‘Make in India’ initiative,
MSMEs might support the nation’s ongoing and anticipated rapid growth. These sectors can
aid in the process of indigenisation. The concept ‘Make in India with zero defect and zero
effect’ provides MSMEs with an excellent opportunity to expand while minimising
environmental impact. The ‘Digital India’ revolution provides another huge opportunity to
enhance MSMEs’ contributions to the information, communication and telecommunications
industry. The MSME sector is projected to contribute to the Indian economy by increasing
the MSME share of GDP.
In this industry, there are several prospects to create jobs. The MSME sector is anticipated to
make use of rural areas’ labour force. Therefore, this will aid in eliminating regional
inequities. MSMEs have the potential to significantly increase both the quality and volume of
India’s exports. This industry has a great deal of potential to bring in foreign capital to India.
It’s critical to build world-class technology and to train the nation’s people resources if the
country wants to develop a robust MSME sector comparable to some of the nations where
MSMEs contribute 35%–60% of the country’s GDP. In order to create an atmosphere where
MSME businesses may readily develop, the government must offer more assistance to these
industries.
Conclusion
India benefited immensely specially in field of technology from the experience of several
countries. Some of the areas which provide ample of opportunities for cooperation in the
MSMSE sector are:
• Establishment of turnkey projects for setting up manufacturing MSMEs on commercial
terms.
• Providing turnkey assistance to set up tool rooms and training centers.
• Providing tailor made training courses for specific target groups.
• Assistance in product design, tool design and manufacturing of intricate tooling’s.
• Product development and rapid prototyping services.
In nutshell we can conclude that Micro, Small and Medium Enterprises (MSMEs) have
emerged as an engine of growth in Indian economy. They have emerged as a vibrant and
dynamic component of the economy by virtue of their considerable contribution to GDP,
industrial production and exports. However, the most significant contribution of this sector is
towards employment generation which is second only to agriculture in India. The experiences
of recent years show that employment in agriculture sector has been declining as well as large
industries are also experiencing jobless growth. In such a situation, the main responsibility
for job creation rests with unorganized sector including small and medium enterprises and the
service sector. A technologically vibrant, internationally competitive small and medium
industry should be encouraged to emerge, to make a sustainable contribution to national
income, employment and exports. It is essential to take care of MSME sector to facilitate it to
take care of the Indian economy.

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