For someone like today’s youth, for whom Ministry would mean the big highlighted departments like Home Ministry, Finance, Defense and upto some extent Human Resources, something like the MSME ministry would be a new world in itself. So, to know the contributions of MSME sector one must first understand what it actually is.
MSME is a branch of the Government of India responsible for the formulation and administration of the rules, regulations, and laws regarding the micro, small, and medium enterprises in India. Since 31 May, 2019, the MSME minister has been Mr. Nitin Gadkari and the Minister of State has been MR. Pratap Chandra Sarangi.
MSME latest Classification (as of July 1st,2020) as per Investment in Plant and Machinery/ Equipment and annual turnover:
| Classification | Micro | Macro | Medium |
| Manufacturing Enterprises and Enterprises rendering services | Investment < INR 1 Cr and annual turnover < INR 5 Cr | Investment < INR 10 Cr and annual turnover < INR 50 Cr | Investment < 50 Cr and annual turnover < INR 250 Cr |
MSMEs are well known for generating huge employment opportunities at comparatively lower capital costs than large scale industries. They have also helped in industrialization of rural and backward areas, thus improving their conditions and at the same time assuring more equitable distribution of national income and wealth.
The Government of India has worked hard to implement benefit schemes and ensure that MSMEs can avail the benefits with ease.
For availing the government scheme benefits, MSMEs need to have an Udyam registration certificate and the unique number provided during registration. The idea of Udyam registration is to make the registration procedure that was hectic, time consuming, and involved a lot of paperwork, hassle free.
In recent times, under the Atmanirbhar Bharat Scheme, various additional benefits have been included that the MSMEs can avail, such as:
Now that a brief idea has been provided about MSME, the focus shifts to
The MSME sector in terms of Mr. Nitin Gadkari, is the backbone of the national economic structure and has acted as a strong force in shaping India’s economic success over the years.
Currently, MSMEs contribute around 30% to the overall GDP of India which the government intends to take upto 50% in the next 5 years.
The MSME sector contributes around:
This sector is also responsible for providing employment to around 120 million personnel and also providing contributions of around 48% of the total exports from India.
It has been observed under the Prime Minister’s Employment Generation scheme that the employment generation in this sector has shown a steady growth over the years. In the year 2014-15 it was around 3.5 lakhs, in 2017-18, it was around 4.08 lakhs and by 2019 around 5.8 lakhs.
Apart from direct and visible contributions to the GDP, the indirect contribution of the MSME sector could be that it provides a safe space for gender roles, sociological balance and also an environment-conscious livelihood.
The MSME sector has a great potential to further strengthen their economic contributions and thus grow by acting as top quality suppliers as well as customers to large companies in various sectors.
For achieving such a scenario where the MSME sector’s contribution to the GDP increases in manifolds, the most basic and primary condition is that MSMEs don’t shut down and run efficiently. For working efficiently by meeting their working capital or investment requirements, like every small scale or large scale company they too require money in the form of loans.
| Loan Amount | Repayment Tenure | Part- payment Charges | Loan Cancellation Charges |
| There is no minimum limit but max is upto 1 Cr. | 12 months to 5 years | 0-4 % | Varies from bank to bank |
A term loan is a monetary loan that has to be repaid in regular payments with a specified period of time which generally ranges from 1 year to as high as 30 years. It is often used by companies to purchase fixed assets, which could be some machinery or building. There are 3 types of term loans, namely short-term loan (runs for 18 months ) for the companies that don’t qualify for a line of credit, intermediate-term loan which runs for 1 to 3 years and the long term loan that runs from 3 to 25 years.
The Pradhan Mantri Mudra Yojana is a scheme launched on 8th April, 2015 by Prime Minister Narendra Modi for providing loans upto INR 10 lakhs to the non- corporate, non-farm micro, small and medium enterprises. These loans are provided by the commercial banks, small finance banks, MFIs and NBFCs. MSMEs can either approach these banks directly for the loan or can apply online through www.udyamimitra.in.
The Prime Minister’s Employment Generation Programme is credit linked subsidy scheme for the MSME sector initiated by the Govt. of India. Under this scheme MSME schemes can take a loan of INR 9.5 to 23.75 lakhs for a tenure of 3 to 7 years for their project. The maximum project cost is INR 25 lakhs for the manufacturing sector and INR 10 lakhs for the service sector. Any person above the age of 18 years can apply for this loan
This is the loan that a company takes to finance its day to day operations. They aren’t meant to buy assets or for an investment but are to provide money for the company’s short-term operational needs. Whether it is a large company or an MSME, everyone requires a working capital loan to run their businesses smoothly.
The MSME sector in India today is on the verge of competing with MSME sectors of developed countries in terms of contribution towards the GDP. It is just that the government has to take care of this sector like a prodigal son with proper nourishment and time to time investments as a strong potential to improve India’s economy and take it to uncharted territories in the near future.
Factors like export promotion, tooling and technology, manpower training, technological and managerial skills have given enormous opportunities for the growth of MSMEs in recent times and one can hope that it continues in the long run.
Thus, if the Government ensures that proper care is taken of this sector then Indian economy is certain to reach new heights of economic prosperity.
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