Project Report

(Submitted for the Degree of B.Com Honours in Accounting & Finance

Under the University of Calcutta)

Area / Topic of the study

MSME (Micro Small and Medium Enterprises)

Title of the Project
Roll of MSMEs in the Indian Economic Development

Submitted by

Name of the Candidate – GYAN BHUSHAN ARYA

C U Registration No. – 122-1111-0110-20
C U Roll No. – 201122-21-0102

College Roll No. – 160

Supervised by

Name of the Supervisor: Dr. D. Biswas

Name of the College: City College of Commerce and Business Administration

Month & Year of Submission

May, 2023
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 ACKNOWLEDGEMENT

It is a matter of great pleasure to present this project on

“MICRO SMALL MEDIUM ENTERPRISES”
I take this opportunity to thank our respected Principal Dr. Sandip Kumar Paul for giving me
an opportunity to work on this field.
I am grateful to our respected Vice- Principal Prof. Tarasankar Maiti without whom this
project would not have been successful.
I am very thankful to my Supervisor Dr. D. Biswas for his full support in completing this project
work.
Finally, I am grateful to acknowledge my family and friends and all the teachers who filled the
questionnaire providing me full support and coordination without which this project wouldn’t be
possible.

GYAN BHUSHAN ARYA

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Annexure – I

Supervisor’s Certificate

This is to certify that Mr. GYAN BHUSHAN ARYA a student of B.Com Honours in Accounting & Finance of
City College of Commerce and Business Administration under the University of Calcutta has worked under my
supervision and guidance for his Project Work and prepared a Project Report with the title “MICRO SMALL
MEDIUM ENTERPRISES”.

The Project report, which he is submitting, is his genuine and original work to the best of my knowledge.

Signature :
Place : KOLKATA Name : Dr. D. Biswas
Date : Designation :
Name of the College : CITY COLLEGE OF
COMMERCE AND BUSINESS ADMINISTRATION

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Annexure-II

Student’s Declaration

I hereby declare that the Project Work with the title ‘MICRO SMALL MEDIUM
ENTERPRISES’.
submitted by me for the partial fulfillment of the degree of B.Com. Honours in Accounting &
Finance under the University of Calcutta is my original work and has not been submitted earlier
to any other University / Institution for the fulfillment of the requirement for any course of study.

I also declare that no chapter of this manuscript in whole or in part has been incorporated in this
report from any earlier work done by others or by me. However, extracts of any literature which
has been used for this report has been duly acknowledged providing details of such literature in
the references.

Signature :
Place : KOLKATA Name : GYAN BHUSHAN ARYA

Date : Address : SKB Sarani, Kalindi

C.U. Registration No.- 122-1111-0011-20

C.U. Roll No.- 201122-21-0010

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 TABLE OF CONTENTS
SL No. Title Page no

1 Introduction 3-4

2 Micro, Small and Medium enterprise in India 5-7

3 Growth of MSMEs 8-13

4 MSMEs of past, present and future scenarios 14-15

5 Export potential of MSMEs 16-17

6 Issues and challenges faced by 17-19

MSMEs

7 A new wave MSMEs 20-21

8 Conclusion 22

9 References 23
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 INTRODUCTION

India is expected to emerge as one of the leading economies in the world over the next decade in
the light of a positive political and economic scenario. The Micro, Small & Medium Enterprises
(MSME) segment is expected to play a significant role in the emergence of the Indian economy.
The development of this segment is extremely critical to meet the national imperatives of financial
inclusion and generation of significant levels of employment across urban, urban and rural areas
across the country. Further, it can nurture and support development of new age entrepreneurs who
have the potential to create globally competitive businesses from India.

MSME can be the backbone for the existing and future high growth businesses with both domestic
and foreign companies investing in the ‘Make in India’ initiative and make significant impact in the
area of indigenisation. ‘Make in India with zero defect and zero effect’, is a significant opportunity.
The new wave MSME should enable the development of a business eco system that enables and
continuously support business that are gearing to deliver the right product, the right quality, the right
solution and the right service at a competitive price, both in domestic and international markets. The
‘Digital India’ revolution also provides a great opportunity to promote MSME participation in the
Information, Communication and Telecommunication (ICT) sector, in line with the government
vision.

It is equally important that the MSME segment develops in all areas of agriculture, manufacturing
and services sectors because each of these sectors will continue to be very relevant to the overall
GDP growth as well as employment generation. The MSME sector will act as a catalyst to bring
about this socio-economic transformation.

India’s GDP is expected to touch 8.5 per cent, with the country likely to be a USD 5 trillion economy
by 2025. The MSME segment has the potential to emerge as a backbone for this economy and act
as an engine for growth, given the right set of support and enabling framework. The MSME
opportunity is to develop entrepreneurship and support growth led by innovation over the next
decade by:

Significantly increasing the share of MSME contribution to GDP from the current 8 per cent to
15 per cent by 2020
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 • Generate employment levels to the extent of 50% of the overall employment, more than
doubling the current MSME workforce of 106 million across agricultural, manufacturing
and services sectors3 ; and

• Increasing the share of MSME contribution across key public and private industry sectors
fulfilling increasing domestic demand, growth in exports, indigenisation and import
substitution.

The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006, governs the
coverage and investment ceiling of MSMEs in India.

According to the Act, there are two categories of MSMEs in the country – manufacturing and
services.

For the manufacturing sector, the definition of an MSME is based on a company’s capital
investment in plant and machinery. The threshold limits are:

• Micro: when investment does not exceed Rs 2.5 million (US$34,040);

• Small: when investment is more than Rs 2.5 million (US$34,040) but does not exceed Rs
50 million (US$680,875); and
• Medium: when investment is more than Rs 50 million (US$680,875) but does not exceed
Rs 100 million (US$1.3 million).

For the services sector, the definition of an MSME is based on a company’s investments in
equipment. The threshold limits are:

• Micro: When investment does not exceed Rs 1 million (US$13,617);

• Small: When investment is more than Rs 1 million (US$13,617) but limited to Rs 20

million (US$272,350); and
• Medium: When investment is more than Rs 20 million (US$272,350) but less than Rs 50
million (US$680,875).

Earlier this year, the union cabinet of India approved the changes in the classification of MSMEs.
According to the revisions
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Micro: a unit where the annual turnover does not exceed Rs 50 million (US$680,875).

Small: a unit where the annual turnover is more than Rs 50 million

(US$680,875) but does not exceed Rs 750 million (US$10.1 million); and
Medium: a unit where the annual turnover is more than Rs 750 million
(US$10.1 million); rupees but does not exceed Rs 2.5 billion (US$33.8 million).

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MICRO, SMALL AND MEDIUM ENTERPRISES IN INDIA
There are approximately 46 million Micro, Small and Medium Enterprise sector enterprises across
various industries, employing 106 million people. Overall, the MSME sector accounts for 45
percent of Indian industrial output and 40 percent of exports. While most of the sector is un-
organised (approximately 94 per cent) , informal and un-registered, initiatives to have more
enterprises registered are well underway.
The contribution of the MSME sector to India’s GDP currently stands at ~8 per cent for 2011-12,
and is growing at a rate higher than the projected GDP growth rate. The contribution of MSME
segment to the GDP in some of the global economies is in the 25-60 per cent range. MSME in India
has the potential to increase the share of contribution to GDP from the current 8 per cent to about
15 per cent by the year 2020.
Globally the MSME segment development has shown mixed results depending on various policies
and initiatives undertaken by developing and developed economies during their critical economic
lifecycle. Many developed and developing economies have demonstrated that the MSME segment
constitutes the backbone for maintaining growth rates as well employment generation rate and
provides stability during economic downturns. It is therefore very crucial that as India embarks on
a new wave economy, it adopts an MSME opportunity framework that will provide the necessary
impetus to seize the opportunities created by:
• Emergence of domestic demand led by significant increases in spending and consumerism;

• Increase in spending in infrastructure and defence sectors;

• Increase in foreign direct investments in existing and emerging businesses in

India;
• Foreign companies investing in India for their global market requirements
(Make in India); and

• The double digit growth expected in numerous business sectors.

In order to be globally competitive it will be essential for India’s entrepreneurial skills to be global
in their outlook and adopt innovation, develop world class technologies and to skill the nation’s
favorable age profile of human resources. India will have to develop stronger support in providing
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an enabling business environment. The business environment should aim to enable greater number
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of companies to sustain from a startup stage to the next level of growth and maturity and should
nurture these businesses into billion dollar plus enterprises over the next decade
This can be made possible with a new wave opportunity framework for the new wave India MSME.
Any new framework will have to consider domestic imperatives, evolution in key business sectors
of the economy and evaluate global MSME policies across developing and developed economies.
Further the framework will have to shift from regulatory compliance approach for stakeholders, to
a performance incentive-based approach. This could channelise and reward growth and
performance in relevant areas, support innovation and enhance higher productivity.
A catalyst for socio-economic transformation of the country, the sector is critical in meeting the
national objectives of generating employment and discouraging rural-urban migration. Of the many
challenges impeding the growth and development of MSMEs, limited access to financial resources,
lack of infrastructure support and inadequate linkages to domestic and global markets, etc. are few
of the bottlenecks that make these enterprises vulnerable, particularly in the period of economic
downturn.
In India, MSME are very large in numbers, diverse in type of business and are spread across
remote geographies of a vast country. A large portion of the MSMEs are informal and not
registered with the formal eco system of MSME. It will require significant changes in philosophy
and approach to be able to develop and deliver a new wave eco system which facilitates their
development and seize the emerging domestic and global opportunities. At a minimum, any
hindrances and hurdles in doing business are to be removed. This will help unleash a young and
dynamic entrepreneurial talent in India who will be willing to make self-entrepreneurship the first
career choice and develop growth companies Seizing the emerging opportunities to develop a
robust MSME sector as a strong backbone for a growing economy will require efforts by the
government to bring the various stakeholders i.e. equity funds, banks and financial institutions,
industry sector majors and MNCs, regulators across various Ministries at the centre and state
level and trade associations and global economies having trade flows with India and others
stakeholders, etc., together and create a forward looking framework and eco system. Further, a
holistic approach can be considered in developing new wave MSME in view of the emerging
opportunity areas in the India economy. Such an approach will be necessary to deliver the
potential. Further, speedy utilisation of the INR10,000 cr fund for MSME and the INR 200 cr
fund for technology upgradation announced in the recent Union budget can provide an excellent
immediate impetus to the development of MSME. A policy framework can be developed for a
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seed fund which can contribute to 25% of the venture and special purpose private equity funds
ranging from INR 100 – 500 Cr and focusing specific areas - adopting innovation and technology,
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digital India, global competitiveness and so on. Relevant authorities and stakeholders can work
together to channelize the funds

GROWTH OF MSME’s

Micro, Small and Medium Enterprises (MSMEs) in India keep humming, generating jobs,
absorbing fresh dropouts from farm labour, diversifying the economic structure. Its contribution
is visible in exports as one third part of India’s national exports comes from this sector as well as
40 percent of the national output is generated from the manufacturing sector. The numbers of
enterprises established are also massive. This can be depicted from the number of registered and
unregistered units which stood 5.30 lakh in 1980-81 and to
32.25 lakh in 1999-2000, which increased to 361.76 lakh in 2006-07 (Annual Report, Ministry of
MSMEs, 2013-14). The significant role of the sector has also been observed through high
absorption of manpower resource. The sector employed 238.73 lakh people in the year 2000-01
which rose to 695.38 lakh people in the year 2009-10, a significant 191 percent growth in
employment generation (Srivastaw & Sadhukhan, 2013). It has constantly achieved a higher growth
rate than the overall industrial growth rate. According to the data released by ‘Centre for Industrial
& Economic Research (CIER)’, the overall industrial growth rate was 5.70 percent in 2002-03 and
8.56 percent in 2008-09 while in the MSME sector, the growth rate was 8.68 percent in 2002-03
and 13.56 percent in 2008-09. Moreover, the ample varieties of products manufactured by this
sector, makes it an essential part in driving the Indian economy and fulfilling the diversified needs
of the large masses. The production of the necessary items like garments, footwear, matches, paper,
etc. to the most sophisticated items like electronics, cosmetics, engineering products, etc. make
available to every section of society.

PERFORMANCE OF MSME SECTOR IN INDIA

In India 40% workforce is employed by MSMEs. It makes up for 45% of total industrial
production in India and also contributes to 40% of total exports.
MSMEs are involved in the manufacturing of more than 6,000 products which includes
traditional as well as high tech items. Many of the MSMEs also pose as ancillary units to larger
industrial units. Thus MSMEs play a key role in the development of Indian economy but continue
to face problems of poor financial management, inefficient operations. If MSMEs improve
11

themselves in their shortcomings, they have a huge array of opportunities both in the domestic
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and foreign market.

MSMEs outperform GDP and IIP growth rates. MSMEs have outperformed IIP and GDP growth
rates in the past five years. The domestic MSME sector has outpaced industrial and GDP growth.
During FY12, total production of MSMEs was projected to grow at 11.48% compared to industrial
and GDP growth of
8.2% and 8.4% respectively.

In FY11, total production of MSMEs was equivalent to about 14.28% of India’s

GDP (at current market prices). The total production of MSMEs for FY11 was ‘ 10,957.6 billion
(at 2001-02 prices).Between FY07 and FY11, the sector’s total production grew at a CAGR of
11.5%, clearly indicating the substantial contribution of MSMEs to the Indian Economy

Table below shows the number of MSME units’ established since 2000-01. The growth trend of
units established in the sector depicted that the trend is nearly constant, except the year 2006-07,
where growth rate was much higher i.e.
193.12 percent as compare to other years, which stood nearly at 4 percent. This

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is due to the enactment of Micro, Small and Medium Enterprises Development (MSMED)
Act, 2006, in which the definition and coverage of small scale sector was broadened and two
new sectors were included under this sector i.e. medium sector and service sector.

TABLE-Number of micro, small and medium enterprises in India

Year Number of total MSMEs % increase(+)/ decrease (-) over

(in lakh) previous years#

2000-01 101.1 -

2001-02 105.21 4.07

2002-03 109.49 4.07

2003-04 113.95 4.07

2004-05 118.59 4.07

2005-06 123.42 4.07

2006-07 361.76 193.12

2007-08* 377.36 4.32

2008-09 * 393.70 4.33

2009-10 * 410.80 4.34

2010-11 * 428.73 4.36

2011-12* 447.66 4.42

2012-13* 467.56 4.44

Source: Annual Report of Ministry of MSME for the year 2013-14
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EMPLOYMENT OPPORTUNITIES OF MSMEs IN INDIA
With the increase in MSME contribution to the GDP, there is a potential to increase its
contribution to employment to over 50 per cent over the next decade. It is also vital for the
informal MSMEs who are currently not registered need to be made part of the formal
MSMEs eco system. Growth incentives in the form of privileges and direct benefits for the
MSMEs will encourage registration and participation in the growth opportunity. Typically,
MSME sector can provide comparatively larger employment opportunities at comparatively
lower capital cost especially in the rural and remote areas, by becoming part of the industrial
ecosystem and act as ancillary units for large enterprises to support the system in growth.

Table 3.2
EMPLOYMENT GENERATION IN MSMEs IN INDIA

Year Employment (Lakh % increase(+)/ decrease (-) over

persons) previous years

2000-01 238.73 -

2001-02 249.33 4.44

2002-03 260.21 4.36

2003-04 271.42 4.31

2004-05 282.57 4.11

2005-06 294.91 4.37

2006-07 805.23 173.04

2007-08* 842.00 4.57

2008-09* 880.84 4.62

2009-10* 921.79 4.65

2010-11* 965.15 4.70

2011-12* 1011.80 4.83

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2012-13* 1061.52 4.91

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Source: Annual Report of Ministry of MSME for the year 2013-14

Employment generated by MSME as a percentage of overall employment globally

MSME sector has been recognized as one of the key sector for employment generation and
often termed as ‘labour intensive industries’. MSMEs have the potential to provide
employment to both self employment as well as wage employment. MSMEs employed
238.73 lakh people in the year 2000- 01 which rose to 1061.52 lakh people in the year 2012-
13, a significant growth in employment. If we analyse the growth rate of employment since
2000-01, then we can say that it was somewhat stagnant at 4-5 percent except the year
200607, where it was 173.04 percent which mainly attributed due to inclusion of medium
and service sector under MSME Act. It is also evident by the graph that the growth trend of
employment is higher than the growth trend of MSMEs over the years.

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INVESTMENT TREND OF MSMEs IN INDIA:

Year by year the investment in MSME sector has increased from Rs 146845 crore in 2000-
01 to Rs 1269338.02 crore in 2012-13. But the growth rate of investments throughout these
years was fluctuating. The highest increase in the investment can be seen in the year 2006-
07, i.e. of about 361.72 percent which is due to the inclusion of service and medium sector.
The table shows that the compound annual growth rate of investment in the last ten years
was 18.05 percent per year. Before the year 2006-07, the investment was low around 4-5
percent but after that it increased to around 6-7 percent growth of investment each year.
After analysing the trend of MSMEs in India on the basis of employment, investment and
units established from 2000-01 to 2012-2013 from the tables (3.1, 3.2, and 3.3) and figures
(3.1 and 3.2), we can clearly say that the growth trend is approximately the same except for
the year 2006-07, which shows huge increase in growth percentage. The core reason behind
this is that the MSME Act was formed in the year 2006, in which two major sectors, service
sector and medium sector were included, which expanded the ambit of small scale industries.

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TREND OF INVESTMENT IN MSMEs IN INDIA

Year Fixed Investment % increase(+)/ decrease (-) over

(Rs. Crores) previous years

2000-01 146845 -

2001-02 154389 5.14

2002-03 162317 5.14

2003-04 170219 4.87

2004-05 178699 4.98

2005-06 188113 5.27

2006-07 868543.79 361.72

2007-08* 920459.84 5.98

2008-09* 977114.72 6.16

2009-10* 1038546.08 6.28

2010-11* 1105934.09 6.48

2011-12* 1183332.00 7.00

2012-13* 1269338.02 7.26

CAGR 18.05%
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MSMES OF PAST, PRESENT AND FUTURE SCENARIO

Past Scenario

Small industry in India has been confronted with an increasingly competitive environment
due to:
(1) Liberalization of the investment regime in the 1990s, favoring foreign direct
investment (FDI);

(2) The formation of the World Trade Organization (WTO) in 1995, forcing its member
countries (including India) to drastically scale down quantitative and non-quantitative
restrictions on imports,

(3) Domestic economic reforms. The cumulative impact of all these developments is a
remarkable transformation of the economic environment in which small industry
operates, implying that the sector has no option but to ‘compete or perish.

Present Scenario

SME sector of India is considered as the backbone of economy contributing to 45% of the
industrial output, 40% of India’s exports, employing 60 million people, create 1.3 million
jobs every year and produce more than 8000 quality products for the Indian and international
markets. With approximately 30 million SMEs in India, 12 million people expected to join
the workforce in next 3 years and the sector growing at a rate of 8% per year, Government
of India is taking different measures so as to increase their competitiveness in the
international market. The Indian market is growing rapidly and Indian industry is making
remarkable progress in various Industries like Manufacturing,
Precision Engineering, Food Processing, Pharmaceuticals, Textile & Garments, Retail, IT,
Agro and Service sectors. SMEs are finding increasing opportunities to enhance their
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business activities in core sectors.

Following are some of the current figures related to the SME sector in India:
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• The contribution of the SME sector to the entire output of the country is 40%.

• Currently, there are over 11 million SME units in India that produces more than 8000
products.

• 90% of the Industrial Units in India belong to the SME sector.

• These SME units contribute 35% to the Indian Industrial Export. Following are some
of the factors that have contributed to the growth of SME sector in India.

• SME units in India are being funded by foreign and local fund providers the
advancement in technology has also contributed highly to the SME sector.

• There are numerous business directories and trade portals available online that
contains a rich database of manufacturers, sellers and buyers.

• To start and maintain these units, minimal investment is required.

• These SME units are now being funded by many government and private banks.

The SME sector is one of the greatest contributors of domestic production as well as the
export earnings. Many major mergers have taken place recently.

Future Scenario

Government of India is taking different measures so as to increase their competitiveness in

the international market. There are several factors that have contributed towards the growth
of Indian SMEs. Few of these include;
• Funding of SMEs by local and foreign investors,

• The new technology that is used in the market is assisting SMEs add considerable
value to their business,

• Various trade directories and trade portals help facilitate trade between buyer and
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supplier and thus reducing the barrier to trade.

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EXPORT POTENTIAL OF MSMEs

The contribution of the services, manufacturing and agricultural to the overall exports from
India is fairly skewed. While export of services led by IT and ITeS sectors have grown
significantly in the last decade, the contribution to exports from manufacturing output has
been largely stagnant. India’s share of services exports in world exports of services was 3.3
per cent in 2011 and has been increasing faster than the share of Indian merchandise exports
in world exports. During 2012-13, Indian merchandise exports showed a slight negative
growth rate of around 2 per cent as compared to a positive growth of 21.9 per cent during
the financial year 2011-12
The share of MSMEs in India’s total exports was estimated to be around 40 percent in 2011-
1223. The share of the top four commodities account for about 60 per cent of total MSME
exports. While globalisation presented a number of challenges for the manufacturing
MSMEs, it also opened up ample opportunities to shore up the growth of the manufacturing
sector. India can seize the opportunities provided by the dynamics of globalisation which
has resulted in a dramatic shift of manufacturing to developing countries over the last decade.
India can significantly diversify its export portfolio, both in terms of products and goods
exported as well as regional coverage.
Product wise share of exports for MSME sector -

A quick look at the share of key products exported indicates that there is considerable scope
to diversify current portfolio. There is immense potential for export of goods such as fine
chemicals, engineered products, plastic, processed / packaged food etc. where MSME can
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play a crucial role. Even in terms of regions, geographies like Latin America, Eastern Europe
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and Africa are largely untapped, especially in the MSME sector. These regions typically
comprise of emerging economies and offer significant consumer base which can be milked.

Issues and Challenges faced by MSMEs

Despite the pivotal role and strategic importance in the context of industrial development
and economic growth of the country, the MSME sector experiences several constraints and
challenges. Several key issues remain to be addressed properly and measures yet to be taken
in the interest of sustainable industrial development. The Committee on financial
architecture of MSME sector in their Report submitted in the February, 2015 have identified
some key issues. These include; i)Equity as a source of financing is underutilized and the
prevalence of investment by venture capital and angel investors is low, ii) MSMEs face the
problem of delayed payments from their buyers which adversely impacts their working
capital as well as their next cycle of production, iii) MSMEs lack adequate information about
various schemes and benefits available by the government, iv) Financial institutions/Banks
face challenges in credit risk assessment of MSMEs, v) The utilization of the available credit
guarantee and insurance schemes by banks has been low
Some of the major challenges confronted by these enterprises include; lack of adequate credit
and capital, poor and inadequate infrastructural facilities, inadequate access and marketing
linkages, technological obsolescence and inadequate application of new technology, lack of
skilled human resources,dilatory and cumbersome regulatory practices for clearance and
poor adaptability to emerging international trends. This calls for the need for strategic
intervention to improve coordination and linkages between various stakeholders including
the Government, industries and other agencies/associations working in this field
i. Lack of Adequate Capital and Credit :

One of the greatest challenges which constrain the growth of MSMEs in our country relates
to inadequate capital and credit facilities. Easy and timely access to credit is crucial factor
to development and growth of enterprises. The Report of the Working Group on
Rehabilitation of sick MSMEs by the Reserve Bank of India has identified this situation as
a crucial reason for industrial sickness of this sector. Complex collaterals instead by the
banks, cumbersome sanction procedures and delay in disbursement and high rate of interest
on term loans further worsen the situation ii. Poor and Inadequate Infrastructural
Facilities:
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Deficiencies in the infrastructure and poor support facilities marked by inadequate

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access to basic facilities like water, power supply, road/rail connectivity etc. adversely
affect this sector and contribute to enhance their operational cost by rendering the
MSMEs less competitive in the challenging market situations. iii. Inadequate Access
and Marketing Linkages:
Poor marketing linkages characterized by inadequate Government support and patronage,
lack of adequate marketing infrastructure/ network facilities continue to be a greater
challenge for marketing and sale of MSME products. In a noncluster situation, these
enterprises get segregated and are unable to ensure reduction in procurement cost from big
companies and fail to streamline the output-supply chain.
iv. Lack of Skilled Human Resources:

Non-availability of skilled workforce and better managerial/entrepreneurial expertise at

affordable cost near the location of enterprises is another such big challenge for the MSMEs
in our country. Lack of managerial competence, absence of proper training on resource
planning and capital management etc. hinders the growth of enterprises.
v. Lack of Access to New Technology:

Most of the industries today require application of advanced technology in their operations
whereas in the Indian context continuance of low technology base results in low
productivity by making these enterprises uncompetitive in the ever-widening market
contexts. Apart from enhancing productivity and quality, new technology should be adopted
for an overall transformation and competitive edge. vi. Dilatory and Cumbersome
Regulatory Practices :
Cumbersome and dilatory regulatory clearances relating to sanction and disbursement of
loans from commercial banks, collateral securities/guarantees, for construction permits,
resolving insolvency and taxation etc. continue to be the constraining factors for many
MSMEs. Absence of a common regulatory body and inadequate provisions for start-ups
affect the growth of such enterprises. Nonadherence to RBI guidelines regarding
revival/rehabilitation of seek enterprises by the Banks is another such constraint that needs
to be addressed.
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 A NEW WAVE MSME
Promoting a culture of innovation and entrepreneurship

As an emerging investment destination of foreign capital, technology and products, there is

a strong need for an innovation strategy to give a competitive edge to the domestic industries
and help them compete in the global marketplace. Also, with the rising inequality in Indian
society due to skewed availability of opportunities and resources, promoting innovation will
help complement the inclusive growth fundamental.
From the perspective of employment generation as well, creating a suitable business
environment to nurture and promote entrepreneurship is critical for large scale employment
creation. Typically, entrepreneurship tends to be innovation-driven and can also help
generate solutions to India’s myriad social and economic problems such as skill
development, affordable health care, energy dependence, urbanisation, waste management,
and financial inclusion.
Entrepreneurship-led economic growth is more robust and inclusive

Skills development: MSME largely comprise first-generation entrepreneurs and the

managerial competence require mentoring and support mechanism.
Business environment to support and nurture startups: India needs an entrepreneurial
ecosystem that encourages innovative startups. Risk taking should be encouraged and
entrepreneurs should be supported to overcome roadblocks
Global competitiveness and access to technology: India should create an environment for
MSME joint ventures to enable Indian MSMEs to partner with their global businesses and
evolve to global levels on innovation, adapting to new technologies and attention to quality.

Women entrepreneurship
Women entrepreneurs make a significant contribution to the Indian economy and should be
encouraged to participate in the MSME growth story. There are nearly three million
MSME’s with full or partial female ownership. Collectively, these women-owned
enterprises contribute 3.09 percent of industrial output and employ over 8 million people.
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Approximately, 78 percent of women enterprises belong to the services sector. Women

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entrepreneurship is largely skewed towards smaller sized firms, as almost 98 percent of

womenowned businesses are currently micro-enterprises
Focus on Technology
Technology is increasingly seen as business enabler and a vital tool for bringing in process
efficiencies and higher degree of standardisation. In order for MSMEs to develop a
competitive advantage to operate in the global market, a strong focus on implementing new
age technology, developing indigenous technology as well as technology collaboration with
global partners is likely to play a crucial role. Technology plays a pivotal role for MSME to
help them stand up to the stiff competition from large enterprises and imports. A strong
technology-enabled sector levels the playing field, to a great extent, between MSMEs and
their established counterparts globally.
With respect to developing indigenous technology, across sectors like IT, Electronics,
Manufacturing, Pharmaceuticals and Biotechnology, various industry stakeholders, industry
bodies and associations, academia, government and large enterprises – need to come together
to help pull MSME one notch up in the value chain and lead them to focus on innovation
and automation.

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 CONCLUSION

MSMEs over the years have assumed greater significance in our burgeoning national
economy by contributing to employment generation and rural industrialization. This sector
possesses enough potential and possibilities to push-button accelerated industrial growth in
our developing economy and well poised to support national programme like ‘Make in
India’. This sector has exhibited enough resilience to sustain itself on the strength of our
traditional skills and expertise and by infusion of new technologies, capital and innovative
marketing strategies. Appropriate strategies should be evolved for creation of an enabling
ecosystem where these enterprises are able to access the benefits meant for themselves under
a formal and friendly ecosystem and are further capable of meeting the emerging challenges
of a globally competitive order.

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 REFERENCES
Enterprises with UdyogAadhaar Number. (n.d.). Retrieved December 22,

2015, from http://udyogaadhaar.gov.in/UA/ Reports/StateBasedReport_R3.aspx.

MSME Overview: (n.d.). Retrieved December 22, 2015, from

http://dcmsme.gov.in/ssiindia/MSME_OVERVIEW09.pdf.

MSME: Govt. of India Development Commissioner (MSME) Ministry of Micro, Small

& Medium Enterprises. (n.d.). Retrieved December 22, 2015, from
http://www.dcmsme.gov.in/ howtosetup/getstart.htm.

MSME: Ministry of Micro, Small & Medium Enterprises (AN ISO

9001:2008 CERTIFIED ORGANISATION). (n.d.). Retrieved December 22,

2015, from http://msme.gov.in/mob/home.aspx

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