MSME – Its Meaning, Features, Role and Importance in India

MSME (Micro, Small, and Medium Enterprise) term was introduced by the Government of India in agreement with the Micro, Small & Medium Enterprises Development (MSMED) Act, 2006. MSME is initiated and managed under the Ministry of MSME (MoMSME) are entities engaged in the production, manufacturing, processing, or preservation of goods and commodities.

MSME sector is considered the backbone of the Indian economy and contributes nearly accounts for 27% of the country’s GDP. It primarily works for the development of people from backward and rural areas. As per the official data as of 31st April 2022, there are presently more than 6.33 crore MSMEs that employes approx. 11.10 people across the nation.

To know more regarding MSMEs in India, let’s discuss their basics, such as classifications, loan schemes, role, and importance in the socio-economic development of India.

Also Read: 5 steps to register MSMEs and Know documents required, Process, Fees

New MSME Classification

The distinction between the manufacturing and services enterprises has been removed by making the investment amount and annual turnover similar for enterprises engaged in both sectors.

MSME Loan Schemes initiated by the Govt. of India

MSME schemes offered by financial institutions and initiated by the Indian Government are mentioned below:

• CGTMSE: Credit Guarantee Fund Trust for Micro and Small Enterprises
• CLCSS: Credit Linked Capital Subsidy Scheme
• Credit Guarantee Scheme
• MUDRA Yojana under PMMY
• National Small Industries Corporation (NSIC) Subsidy
• PMEGP: The Prime Minister Employment Generation Programme
• PMRY: Prime Minister’s Rozgar Yojana
• PSB Loans in 59 minutes
• Standup India
• Startup India

Also Read: What are the documents required for getting a quick MSME loan?

Comparison of Business Loan Interest Rates offered by Top Banks/NBFCs – 2022

Features of the Ministry of MSME (MoMSME)

• Works for the welfare of artisans and workers
• Provides credit limit or funding support from banks
• Promotes entrepreneurship development and skill up-gradation via specialized training centers
• Supports technology up-gradation, infrastructural development, and modernization
• Offers assistance for improved access to domestic and export markets
• Provides modern testing facilities and quality certification
• Supports packaging, product development, and design intervention

Key entities that work under the MoMSME:

• A Scheme for Promotion of Innovation, Rural Industries, and Entrepreneurship (ASPIRE)
• Khadi and Village Industries Commission (KVIC)
• Mahatma Gandhi Institute for Rural Industrialization (MGIRI)
• National Institute for Micro, Small, and Medium Enterprises (NIMSME)
• National Small Industries Corporation (NSIC)
• Scheme of Fund for Regeneration of Traditional Industries (SFURTI)

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Opportunities in MSMEs

The opportunities in the MSME industry are massive due to the succeeding factors:

• Export Promotion and potential for Indian products
• Funding – Finance & Subsidies
• Government’s Promotion and Support
• Growth in demand in the domestic market
• Less Capital required
• Manpower Training
• Project Profiles
• Raw Material and Machinery Procurement
• Tooling & Testing support and much more

Factsheet of MSME Registration 2021-22

Source: Udyam Registration’s Official website. Numerics updated as on 27/04/2022

Estimated numbers of MSMEs in India – 2021-2022

Source: https://msme.gov.in/ (Last updated as on May 2022)

List of projects that have been identified by the Ministry of MSME for promoting MSMEs in aspirational districts with a number of projects:

• Prime Minister Employment Generation Program (PMEGP) – 178
• Micro & Small Enterprises Cluster Development (MSE-CDP) – 81
• EDP/MDP schemes – 46
• Entrepreneurial and Managerial Development of SMEs through Incubators – 13
• MSME Market Development Assistance (MDA) – 12
• Marketing Assistance & Technology Upgradation (MATU) – 10
• Revamped Scheme of Fund for Regeneration of Traditional Industries (SFURTI) – 10
• Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE) – 7
• Credit Linked Capital Subsidy for Technology Upgradation – 6
• Financial Support to MSMEs in ZED Certification Scheme – 4
• Technology and Quality Upgradation Support to MSMEs – 4
• Lean Manufacturing Competitiveness for MSMEs – 3
• Design Clinic for Design Expertise to MSMEs – 1
• Assistance to Training Institutions (ATI) – 1
• A Scheme for Promoting Innovation, Rural Industry & Entrepreneurship (ASPIRE) -1
• Skill Upgradation & Mahila Coir Yojana (MCY) – 2
• Market Promotion & Development Scheme (MPDA) 1
• Performance and Credit Rating Scheme 1
• Marketing Support/Assistance to MSMEs (Bar Code)
• Others – 52

Role of MSMEs in the Indian Economy

In 1961, with the merger of the Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries; the Ministry of Micro, Small, and Medium Enterprises (M/o MSME) was formed.

MSMEs produce and manufacture a wide variety of products for domestic, as well as international markets. MSMEs help in the promotion of growth and development of Khadi, Village, and Coir Industries, in cooperation with concerned ministries, state governments, and stakeholders.

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Below mentioned data in tabular representation is as per the Central Statistics Office (CSO) and Ministry of Statistics & Program Implementation.

Contribution of MSMEs to Country’s Economy at Current Price

Source: Central Statistics Office (CSO), Ministry of Statistics & Program Implementation

Under the Micro, Small, and Medium Enterprises Development Act, 2006, the Government of India established The National Board for Micro, Small, and Medium Enterprises (NBMSME) to examine the factors affecting the promotion and development of MSME. This board also reviews the existing policies and suggests recommendations to the Government for the growth of the MSME sector.

The term Micro Small and Medium Enterprise (MSME) was launched to become an integral part of the supply chain for products and services; moreover, a creator of large-scale employment opportunities in rural India.