What is MSME? Its Definition and Role in the Economy

You might assume that small and medium-sized industries have little or no role in India's economic growth. However, that's far from it. The MSME industries play a pivotal role in the country's economic development. 

Let's see what the statistics have to say about it: 

The Share of MSME Gross Value Added (GVA) in India's Gross Domestic Product (GDP) fluctuates. During the fiscal year 2019-20, the MSMEs share stood at 30.5%. However, it declined slightly to 27.2% in 2020-21 but returned to 29.2% in 2021-22.

Regarding employment, the total number of persons employed in MSMEs between July 1, 2020, and August 1, 2023, is 12,36,15,681.

According to a report by consultancy KPMG, the MSMEs account for nearly 30% of India's GDP and 45% of its exports.

So, to understand the primary purpose of MSMEs, let's understand what they are and their role in the Indian economy.

What are MSMEs?

So, MSMEs are Micro, Small, and Medium Enterprises that engage in the services sector or even in the manufacturing, processing, production, and preservation of goods and services. 

Today, small and medium-sized industries are the backbone of the economy. It is done to determine who are MSMEs by categorizing the amount of investment they made before 2018. However, with the regulation change, this classification changes according to their annual Turnover. 

How are the MSMEs Classified into Units?

Here's what the classification looks like now.

What Role does the MSMEs in the Indian economy?

The MSME sector is about 33% of India's GDP and has been a critical player in shaping our country's economy today. With the analysis done, it is estimated that it could contribute a significant US$ 1 trillion to India's total exports by 2028. 

There is no denying that India is one of the fastest-growing economies. Today, India'sIndia's economy is the same as the economy of China back in 2011. So, highlighting the substantial growth potential of this sector, we cannot deny the crucial role MSMEs play in driving India's economic future.

Do not forget that the landscape of MSMEs is changing, and so is the purpose of MSMEs. With increasing interest from foreign investors, it sounds like an excellent opportunity for sectors like MSMEs. As small and medium-sized industries, many can cater to the growing demands of ancillary products and services required by large companies setting their foot in India. 

Many schemes and initiatives taken by the government, like the ''Make in India' campaign, financial support schemes, funding and better access to capital, promoting partnerships, and offering training and education programs, all have enhanced MSMEs, allowing them to reach their full potential.

Challenges Face by MSMEs Sectors

Despite the foreign investors and many schemes from the Government of India, many MSMEs still face challenges in their day-to-day business growth. 

Mr. Sudarshan Chari from DBS Bank India mentioned some of these common issues. According to him, "MSMEs are facing three major challenges, i.e., access to capital, access to technology, and access to information." 

So, what is the bank or the government doing to bring an end to this challenge?

There are various schemes like

1. Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE)- The scheme provides collateral-free credit to MSMEs. It guarantees up to 85% of the loan amount, making it easier for MSMEs to secure financing.

1. Pradhan Mantri Mudra Yojana (PMMY): It provides loans up to Rs. 10 lakhs to MSMEs. Under this scheme, it has three categories of loans and is available to both new and existing MSMEs. 

• Shishu (up to Rs. 50,000)
• Kishore (up to Rs. 5 lakhs)
• Tarun (up to Rs. 10 lakhs).

The loans do not require collateral and are available to new and existing MSMEs.

1. Stand-Up India: It provides loans up to Rs. 1 crore to SC/ST and women entrepreneurs to set up new manufacturing, services, or trading ventures. This scheme aims to promote entrepreneurship among these communities. 

Looking for a Way to Access to Bigger Market?

For that, connect with MVikas, the best B2B Marketplace in India. Here, we provide security, confidentiality, and several other benefits to the MSMEs sector, giving them a platform to sell Industrial Goods under their brand. 

We ensure that we assist small and medium-sized businesses in building a good reputation and connecting with their customers throughout India, allowing them to grow and expand their business in India and globally. 

FAQ 

1. What is the meaning of MSMEs?

MSMEs stand for Micro, Small, and Medium Enterprises. These are small businesses that play a significant role in the economy by creating jobs, fostering innovation, and supporting local communities.

2. Which are MSME Companies?

MSME companies, or Micro, Small, and Medium Enterprises, are small businesses that play a vital role in the economy. They include local shops, small manufacturers, and service providers.

3. What is MSME and its benefits?

MSME stands for Micro, Small, and Medium Enterprises, consisting of small businesses contributing to the economy. The small and medium sizes help create jobs, foster innovation, and support local communities.

4. Why is MSME important?

MSMEs are crucial as they contribute significantly to India's economy, fostering innovation, creating jobs, and supporting local entrepreneurs. Their adaptability and government support amplify their role in economic growth.

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