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Status
• 38% contribution to the nation’s GDP and 40% and 45% share of the overall exports and manufacturing output, respectively • According to the estimates of the Ministry of MSME, the sector generates around 100 million jobs through over 46 million units situated throughout the geographical expanse of the country • The sector has sustained an annual growth rate of over 10% for the past few years. • MSME Tool Rooms have been credited to provide at least ten components that were used in India’s Mangalyaan (Mars Orbiter Mission probe), the Indian Space Research Organization’s (ISRO) most ambitious mission till date, which is the country’s first inter-planetary space mission.
Significance
• Amid a major decline in credit growth in the economy this year, micro, small and medium sector players are among the worst hit as banks continue to practice caution in lending to the industrial sector. • The significance of MSMEs is attributable to their caliber for employment generation, low capital and technology requirement. • They are also important for promotion of industrial development in rural areas, use of traditional or inherited skill, use of local resources, mobilization of resources and exportability of products. • The Indian MSME sector provides maximum opportunities for both self-employment and wage-employment outside the agricultural sector and contributes in building an inclusive and sustainable society in innumerable ways through creation of non-farm livelihood at low cost, balanced regional development, gender and social balance, environmentally sustainable development, etc. • The MSME sector in India boasts of diversity in terms of its size, level of technology employed, range of products and services provided and target markets. • The sector has also contributed vital inputs for other space satellites such as the Chandrayan. India seeks to launch other ambitious projects like a global sea traffic monitoring system and an earth observation satellite, in cooperation with the EU. The projects envision significant contributions and convergence opportunities from the Indian MSME sector. • Many global companies are increasingly looking to Indian MSMEs for strategic partnerships of mutual benefit due to the innovative capabilities in niche manufacturing, comparative advantages of advanced engineering, low-cost manufacturing and overheads, ability to speedily absorb new technologies and local skills and capabilities that set these enterprises apart from other national and international players in the sector. • With its vast resource pool of engineering talent and high skill labour at competitive costs, India has the potential to become a significant player in the global auto industry, especially in engineering and component manufacturing. MSMEs assume a dominant position in the automotive and auto components sector. • The globalization of businesses has increasingly drawn SMEs into global value chains through different types of cross-border activities. Many entrepreneurs are recognizing the opportunities that this advent ushers and gaining access to global markets has become a strategic instrument for their further development.
Challenges
• The sector is always fund starved. Banks are often unwilling to lend. Besides, whatever bank finance these sector gets, comes at far higher interest costs than what large enterprises can negotiate. Long receivables cycles make a mess of working capital management. • Little access to trained labour, technical progress and management support limit their growth. Other common problems faced by small enterprises are related to availability of technology, infrastructure and managerial competence, and limitations posed by labour laws, taxation policy, market uncertainty and imperfect competition.
Initiatives by GOI
• The Micro and Small Enterprises¬¬¬-Cluster Development Programme for the holistic and integrated development of these enterprises in clusters through soft interventions, hard interventions and infrastructure upgradation for enhancing their productivity and competitiveness. • The Credit Linked Capital Subsidy Scheme also assists in the technological upgradation • The National Manufacturing Competitiveness Programme to equip these enterprises with technology-based tools in the areas of quality upgradation, productivity, design development, energy efficiency and marketing. • Policy Package for Stepping up Credit to Small and Medium Enterprises (SMEs) under which it operates schemes like the Credit Guarantee Fund Scheme and the Performance and Credit Rating Scheme for fund related needs.
By: Mona Kaushal ProfileResourcesReport error
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