Importance of MSME

MSMEs are important to the economy’s growth. MSMEs are consistently a good solution to significant economic difficulties such as poverty, unemployment, income inequality, regional imbalances, and so forth. This ensures that local growth is balanced and that income inequality is preserved. This industry is responsible for reawakening millions of individuals in our nation and utilizing local talent, both of which contribute considerably to the country’s GDP.

• Currently, the MSME sector in India is responsible for the development of around 11.10 crore employment. As a result, this industry is often regarded as India’s development engine.
• MSMEs contribute significantly to the country’s GDP, accounting for 6-7 percent of the manufacturing sector’s GDP and around 25% of the service sector’s GDP.
• MSMEs account for around 40% of overall exports and 45 percent of the country’s industrial output.
• In India, there are around 40 million Micro, Small, and Medium Enterprises (MSMEs), both registered and unregistered.

Both organized and unorganized sectors have MSMEs. An MSME firm, like other start-up businesses, confronts several problems in obtaining the necessary financial assistance for various sorts of operations, including establishing the necessary infrastructure to sustain continuous corporate operations. Performing or extending a business, or starting a new one.

The Government of India started the MSME plan, which is a ministry that seeks to offer financial help to small and medium-sized businesses. This plan also provides financial support as well as the essential marketing and branding for the firm. The Micro, Small, and Medium Enterprises Development (MSMED) Act established the Ministry of MSME in 2006, with the primary goal of the government developing small and medium companies and providing help as needed. The MSME industry is divided into two types:

• Manufacturing Enterprise
• Service Enterprise

1. Manufacturing enterprise: The work of creating new products is done in the manufacturing business. The term “manufacturing” refers to the process of creating something. When something is manufactured, it is in the process of being built. The manufacturing business of MSMEs produces a wide variety of valuable items. For example, A bakery is an excellent example of an MSMEs manufacturing industry. The operation of a bread-making facility does not need a large amount of area. After obtaining authorization from the district government, a person can also set up bread, toast, and other bakeries in his home.

2. Service Enterprise: The service sector is primarily responsible for service delivery. It’s also known as the service industry. This sector is responsible for delivering services to individuals and organizations. When it comes to the MSME industry, the service sector includes anything from owning a travel agency to running a restaurant and supplying staff. Many different types of companies fall under the umbrella of service firms. Dry cleaners, shoe stores, barbershops, restaurants, ski resorts, and hotels are just a few examples. Because they employ automated services, many services are somewhat tiny. They only serve as many people as they can accommodate at one time. 

The federal government and state governments support MSME merchants in a variety of ways. The Micro, Small, and Medium Enterprises (MSME) sector make a significant contribution to the country’s growth. Government banks and private sector non-banking financial organizations (NBFCs) are giving low-interest business loans in recognition of the small-scale sector’s contribution.

In addition to this definition, the government defined MSME in 2018 based on the industry’s yearly revenue. The government argued that sectors should no longer be classified based on their size but rather on their yearly sales. The following are the definitions based on the 2018 turnover:

• Micro Industries: Micro industries, or tiny businesses, have annual revenue of fewer than 5 crores rupees.
• Small Scale Industries: Small scale industries have annual revenue of between 5 crores and 75 crores rupees.
• Medium Industries: The term “medium industry” refers to businesses with yearly revenues ranging from 75 crores to 250 crores rupees.