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ROLE OF MICRO,SMALL �AND �MEDIUM ENTERPRISE SECTOR IN �INDIAN ECONOMY��BY GAUTAM KUMAR

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STRUCTURE OF THE ASSIGNMENT

Introduction Of the Topic

➢ Background of the story

➢ Why this is important

➢ objective of the study

Review of literature

➢ Review 1

➢ Review 2

DATA
Methodology & Result
Correlation analysis

➢ Correlation matrix

➢ Summary report

Conclusion
References

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ABSTRACT

Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy over the last five decades. MSMEs not only play crucial role in providing large employment opportunities at comparatively lower capital cost than large industries but also help in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth. MSMEs are complementary to large industries as ancillary units and this sector contributes enormously to the socio-economic development of the country. Recognizing the significant contribution of this sector in economic growth and also in employment generation in our country, Government of India has taken good number of initiatives to develop the sector such as erstwhile definition of ‘Small Scale Industries’ was enlarged by increasing investment ceiling in plants & machineries from Rupees One crore and trading activities have taken in the ambit of MSMEs by enactment of Micro, Small & Medium Enterprises Development (MSMED) Act from 2nd October 2006. MSME sector is the second largest employment provider in our country and it is good vehicle to achieve inclusive and distributed growth.

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WHY THIS IS IMPORTANT?

The Micro, Small and Medium Enterprises (MSME) sector is a very important piece of India’s legacy economic model and a part of the critical supply chain for products and services. This sector is considered as the job creator and plays a crucial role in providing large-scale employment and industrialization of rural and backward areas. As per the National Sample Survey (NSS) 73rd round, in 2015-2016, there were around 633.8 lakh unincorporated non-agriculture enterprises in the country which are dealing in different economic activities providing employment to 11.10 crore workers. In this assignment, we will focus on the Importance of MSME.

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OBJECTIVES OF THE STUDY

1. To find how MSMEs of contribute to the development of our country.
2. To study financial crunch and clusters in financing SMEs & startups and the prominent source of financing and problems faced by them and the enterprises which the entrepreneur are willing to start and activity which they want to peruse.
3. To study the nature of operations and type of organizations and industry.
4. To know the Schemes framed by the Government under the MSME Sector.

To know about the current scenario of MSME sector of India and functioning of ministry of MSME.
To understand the role of MSME sector in economic growth of India.
To study the importance of india in the development of MSME sector.
To analyze the contribution of MSME sector in Indian economy.

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DATA

Current study is based on secondary data. Several reports from authentic sources have been studied to know the current scenario of MSME sector. Other secondary data have been collected from various published sources which represents performance of MSME at state level and national level. Present research is mainly based on the statistics available on annual report (2018-19) of MSME published by Government of India, report published by Indian Brand Equity Foundation (IBEF) in December 2019 and report of expert committee on MSME published by Reserve Bank of India (RBI) in July 2019. Facts and figures given in these reports have been considered for analysis purpose.
Record Data analysis: Once the data are collected, the information will be coded and appropriate data analytic techniques will be used to obtain meaningful information from the collected data. It involves editing, coding and tabulating the collected data

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REVIEW OF LITERATURE

1.Kristin Hallberg,(2000)

Governments in both industrialized and developing countries provide a wide variety of programs to assist small- and medium-scale enterprises (SMEs). Despite the success of SME strategies in a few countries, the majority of developing countries have found that the impact of their SME development programs on enterprise performance has been less than satisfactory.

2.Krishna Kumar (2003)

He views that In India foreign collaborations have generally been to have the technological transfer which involves high cost. It is important to understand the MSME’s single handed cannot afford this cost, however if a group of MSME’s of similar nature of work come together the burden of the foreign collaborations can be shared effectively.

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REVIEW OF LITERATURE

3.Govt easing hurdles for SMEs: Anand Sharma(2012)

It's not very often that small and medium companies get their due in the broader economic spectrum. Acknowledging their contribution to the Indian economy , industry and commerce minister Anand Sharma says the government is working on to ensure that SMEs are given their pride of place and the government has taken measures like cutting down on red tape and invoking a provision for the first time to remove multiple-level approvals required.

4. Mehul Kapadia (2013)

Every bit of capital investment is crucial for an SME. Seasonal peaks are one of the greatest reasons for companies under-provisioning or over-provisioning. This can later result in a heavy loss and idle resources. All businesses undergo a transition at various points. Whether you run a fullfledged enterprise, a medium-sized business venture or even a smaller, relatively newer business, updating business IT processes is a critical step in your enterprise life cycle. In fact, some businesses even have to undergo multiple transformation phases. Large enterprises have the capability and the resources to execute such transformations smoothly, but SMEs face a significant challenge in doing so, given their limited resources and capital.

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METHODOLOGY �& �RESULT �

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INTRODUCTION

The Micro, Small and Medium Enterprises Development (MSMED) Act was notified in 2006 to address policy issues affecting MSMEs as well as the coverage and investment ceiling of the sector. The Act seeks to facilitate the development of these enterprises as also enhance their competitiveness. It provides the first-ever legal framework for recognition of the concept of “enterprise” which comprises both manufacturing and service entities. It defines medium enterprises for the first time and seeks to integrate the three tiers of these enterprises, namely, micro, small and medium.
The Act also provides for a statutory consultative mechanism at the national level with balanced representation of all sections of stakeholders, particularly the three classes of enterprises and with a wide range of advisory functions. Establishment of specific funds for the promotion, development and enhancing competitiveness of these enterprises, notification of schemes/programmers for this purpose, progressive credit policies and practices, preference in Government procurements to products and services of the micro and small enterprises, more effective mechanisms for mitigating the problems of delayed payments to micro and small enterprises and assurance of a scheme for easing the closure of business by these enterprises, are some of the other features of the Act.

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Micro, small and medium enterprises as per MSMED Act, 2006 are defined based on their investment in plant and machinery (for manufacturing enterprise) and on equipment for enterprises providing or rendering services.

Recognizing the contribution and potential of the sector, the definitions and coverage of the Small Scale Industry (SSI) sector were broadened significantly under the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 which recognized the concept of “enterprise” to include both manufacturing and services sector besides, defining the medium enterprises.

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DEFINITION OF MICRO, SMALL AND MEDIUM ENTERPRISES:

In accordance with the provision of Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified as below:
(i) a micro enterprise, where the investment in plant and machinery or equipment does not exceed one crore rupees and turnover does not exceed five crore rupees;
(ii) a small enterprise, where the investment in plant and machinery or equipment does not exceed ten crore rupees and turnover does not exceed fifty crore rupees; and
(iii) a medium enterprise, where the investment in plant and machinery or equipment does not exceed fifty crore rupees and turnover does not exceed two hundred and fifty crore rupees.

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1. Manufacturing enterprise

The enterprise engaged in the manufacture or production of goods pertaining to any industry specified in the first schedule to the industries (Development and regulation act,1951) or employing plant and machinery in the process of value addition to the final product having a distinct name or character or use. The manufacturing enterprise are defined in terms of investment in pant & machinery.

2. Service enterprises

The enterprises engaged in providing or rendering of services and are defined in terms of investment in equipment.

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REVISED DEFINITION OF MSME

The Government of India has introduced new MSME definition in accordance with Aatmanirbhar Bharat Package and it came into effect from 1stJuly, 2020.In revised guidelines, both manufacturing and service sector shall have the same limit of investment and turnover (which is newly introduced in the definition).

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Table No. 1: Revised Classification of MSMEs
Manufacturing and Service Sector
Types of Enterprises	Limit of Investment in Plant & Machinery or Equipments and Limit of Turnover
Micro Enterprises	Investment < 1 Crore and Turnover < 5 Crore
Small Enterprises	Investment < 10 Crore and Turnover < 50 Crore
Medium Enterprises	Investment < 50 Croreand Turnover < 250 Crore
Source:https://msme.gov.in/sites/default/files/MSME_gazette_of_india_0.pdf

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FUNCTIONING OF MSME SECTOR IN INDIA�

The Ministry of MSME runs various schemes aimed at financial assistance, Technology assistance and upgradation, skill development and training, infrastructure development, enhancing competitiveness and Market assistance of MSMEs. A number of statutory and nonstatutory bodies work under the aegis of the Ministry of MSME as mentioned below-
Khadi and Village Industries Commission (KVIC)
Khadi and Village Industries Commission (KVIC) is a statutory organization under the aegis of the Ministry of MSME with the role of promoting the production and sale of Khadi. With a vast network of 2632 institutions and over 4.95 Lakh people, KVIC also supports 80 percent of women artisans. The economic objective of KVIC includes producing saleable articles while social objective adds providing employment in rural areas. The wider objective of the organization is creating self-reliance amongst people and building up a strong rural community spirit.

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Coir Board
India, being the largest coir producer in the world, produces more than 80 % of the total world production of coir fibre. The coir sector in India involves households, cooperatives, NGOs, manufacturers and exporters. Beautiful artefacts, handicrafts and utility products from coconut husks are produced by this sector. The coir industry employs about 7.30 lakh persons belonging to the economically weaker sections of society and 80% of them are women.
National Institute for Micro, Small and Medium Enterprises, (NI-MSME)
The primary objective of NI-MSME was to be the trainer of trainers but now it has widened its extent of activities to consultancy, research, extension and information services. The institute has identified thrust areas like NGO Networking Quality Management Services

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The National Small Industries Corporation Limited (NSIC)
Under ministry of MSME, The National Small Industries Corporation Ltd. (NSIC) is an ISO 9001-2015 certified Government of India Enterprise and works for expansion of micro, small and medium units in the country. NSIC is a profit-making dividend paying company and works on the mission to promote and support MSME by providing integrated support services encompassing, Marketing, Finance, Technology and other Services.
Mahatma Gandhi Institute for Rural Industrialisation
The Jamnalal Bajaj Central Research Institute (JBCRI),
Wardha was revamped with the help of IIT, Delhi in October 2008 and called Mahatma Gandhi Institute for Rural Industrialization (MGIRI).The main objectives of the institute comprise acceleration of rural industrialization for sustainable village economy, innovation through pilot study/field trials, R&D for alternative technology using local resources, attract professionals and experts to Gram Swaraj and empower traditional artisans.

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CHARACTERISTICS OF MSME

MSME generally have a single ownership, which means it either has a sole proprietorship structure or a partnership.
The management of the MSME rests with the owners and therefore, the owner plays an active role in the day to day functions of the business.
MSME are very much labour intensive, hence there is limited use of technology.
MSME are flexible and adaptable to a changing business environment unlike the large industries.
MSME use resources that are local and readily available, which helps the economy fully utilize the natural resources and bear minimum wastage.

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OBJECTIVES OF MSME

To create job opportunities for the population.
To help in the development of the rural areas of the economy.
To play an active role in reducing the regional imbalances in the nation.
To help in improving the standard of living for people in rural areas.
To ensure there is equal distribution of wealth and income.

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ROLE OF MSME IN THE INDIAN ECONOMY

They are the major sources of employment for the people living in rural areas and therefore play a vital role in generating employment in an economy.
MSME account for almost 40% of the total goods and services in india, hence is a very important contributor to the economy.
MSME help in promoting the MAKE IN INDIA initiative which helps in increasing demand for local made products.
Majority of the exports materials are provided to the Indian companies from the msme. It is estimated that around 50% of all the material exported are produced from such industries.

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MSMES' CONTRIBUTION TO INDIAN ECONOMY

The MSME sector in india gave a major boost to the economy. Over 63 million MSMEs spread across the country contributed 30.5% to India's GDP in FY19 and 30% in FY20.
It also created many employment opportunities. Based on a study conducted by the Ministry of Statistics & PI between July 2015 and June 2016, the MSME sector employed 111 million workers.
Compared with large-scale companies, MSMEs aided in the industrialisation of rural areas at minimal capital cost. The sector has made significant contributions to the country's socio-economic growth and complemented major industries as well.
MSMEs account for approximately 40% of India's total exports, 6.11% of GDP from the manufacturing sector and 24.63% of GDP from the Service sector.

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CONTRIBUTION OF MSMES TO GDP�

As per the information received from Central Statistics Office, Ministry of Statistics & PI, Share of MSME Gross Value Added (GVA) in All India Gross Domestic Product at current prices (2011-12) for the year 2018-19 and 2019-20 were 30.5% and 30.0% respectively.
The MSME sector is an important sector of the Indian economy. As per the information received from Central Statistics Office, Ministry of Statistics & PI, share of MSME Gross Value Added (GVA) in All India Gross Domestic Product at current prices (2011-12) for the year 2018-19 and 2019-20 were 30.5% and 30.0% respectively. The share of the MSME manufacturing in All India manufacturing gross value output during the year 2018-19 and 2019-20 were 36.9% and 36.9% respectively. Further, as per the information received from Directorate General of Commercial Intelligence and Statistics, the share of export of specified MSME related products to All India exports during 2019-20 and 2020-21 was 49.8% and 49.5% respectively.

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As per 73rd Round of NSS Report on Unincorporated Non-Agricultural Enterprises' (July 2015- June 2016) conducted by Ministry of Statistics & PI, estimated number of workers in MSME sector was 11.10 crore.
Under the Prime Minister’s Employment Generation Programme (PMEGP), the estimated employment generated (number of persons) in micro enterprises during the year 2020-21 and 2021-22 (as on 01.07.2021) are 5.95 lakh and 1.19 lakh respectively.

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Chart no : 1

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Table no : 2 Share of Gross Value Added (GVA) of MSME in all India GDP

Source: Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation

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Figures in Rs. Crores adjusted for FISIM at current prices
Year	Total msme GVA	Growth (%)	Total GVA	Share of MSME in GVA (%)	All India GDP	Share of MSME in All India GDP (In %)
2015-16	4059660	10.97	12574499	32.28	13771874	29.48
2016-17	4502129	10.9	13965200	32.24	15391669	29.25
2017-18	5086493	12.98	15513122	32.79	17098304	29.75
2018-19	5741765	12.88	17139962	33.5	18971237	30.27

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Chart :- 2

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NUMBER OF UNITS

Total number of registered MSME has been increasing rapidly. As per the national sample survey (nss) 73 round, there (2015-16) are a total of 633.88 lakhs incorporated non – agriculture MSME in the country engaged in different economic activities.
According to development commissioner Chart no : 3

(MSME) ministry of micro, small & medium

enterprise

Its estimated that the total msme

comprise 633.88 lakhs.

About 51% of these units located in

rural india.

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Table no : 3 Estimated Number of MSMEs (Activity Wise)

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Activity Category	Estimated number of Enterprises in india (in lakh)			Share (%)
Activity Category	Rural	Urban	total	Share (%)
[1]	[2]	[3]	[4]	[5]
Manufacturing	114.14	82.5	196.65	31
Electricity	0.03	0.01	0.03	0
Trade	108.71	121.64	230.35	36
Other services	102	104.85	206.85	33
All	324.88	309	633.88	100

Chart no : 4

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STATE-WISE DISTRIBUTION OF ESTIMATED MSMES

Table no: 4

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S.no	state/UT	Estimate Number of MSMEs
S.no	state/UT	Number (in lakh	share (%)
1	uttar prades	89.99	14
2	West Bengal	88.67	14
3	Tamil nadu	49.48	8
4	Maharashtra	47.78	8
5	Karnataka	38.34	6
6	Bihar	34.46	5
7	Andhra Pradesh	33.87	5
8	Gujarat	33.16	5
9	Rajasthan	26.87	4
10	Madhya Pradesh	26.74	4
11	Total of above 10 states	469.36	74
12	Others state/Uts	164.52	26
13	All	633.88	100

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Chart :- 5

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EMPLOYMENT GENERATION

MSME industries are labour intensive and thus are generating a huge number of employment opportunities.

As per national sample survey 73^rd round msme sector create 11.10 crore jobs (360.41 lakh in Manufacturing, 0.07 lakh in Non-captive Electricity Generation and Transmission, 387.18 lakh in Trade and 362.82 lakh in Other Services) in the rural and the urban areas across the country.

Estimated Employment in the MSME Sector (Activity Wise)

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Table no : 5

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Board Activity category	Empoyment (in lakh)			Share(%)
Board Activity category	Rural	Urban	Total	Share(%)
[1]	[2]	[3]	[4]	[5]
Manufacturing	186.56	173.86	360.41	32
Electricity	0.06	0.02	0.07	0
Trade	160.64	226.54	387.18	35
Other Services	150.53	211.69	362.22	33
All	497.78	612.1	1109.89	100

Chart no : 6

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DISTRIBUTION OF EMPLOYMENT BY TYPE OF ENTERPRISES IN RURAL AND URBAN AREAS

Table no : 6

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				(Numbers in lakh)
Sector	Micro	Small	Medium	Total	Share(%)
Rural	489.3	7.88	0.6	497.78	45
Urban	586.88	24.06	1.16	612.1	55
All	1076.19	31.95	1.75	1109.89	100

Chart no : 7

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DISTRIBUTION OF WORKERS BY GENDER IN RURAL & URBAN AREAS

Table no : 7

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			(Numbers in lakh)
Sector	Female	Male	Total	Share(%)
Rural	137.5	360.15	497.78	45
Urban	127.42	484.54	612.1	55
Total	264.92	844.68	1109.89	100
Share(%)	24	76	100

Chart no : 8

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OUTPUT

Total production of the MSME has increased continuesly. In 1973-74 total production of MSME sector was only 7200 cr but currenty MSME sector produce more than goods & commodity 5 lakh crore .
Khadi Sector: Production & Sales
Table no :- 8

State shares in production has Maharashtra 14.53% , Uttar Pradesh 9.72%

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		(Rs. In crore)
Year	production	sales
2016-17	1520.83	2146.6
2017-18	1626.66	2510.21
2018-19	1963.3	3215.13
2019-20	2324.24	4211.26
2020-21	1344.69	1877.19

Chart no : 9

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Table no : 9 Village Industries : Production & Sales

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		(Rs. In crore)
Year	production	sales
2016-17	41110.26	49991.61
2017-18	46454.75	56672.22
2018-19	56167.04	7176.96
2019-20	65343.07	84664.28
2020-21	53705.04	70459.28

Chart no : 10

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CONTRIBUTION TO EXPORTS

The contribution of msme sectors towards export has been increasing at a faster rate. The value of exports of the products produced by small sector has increased from 393cr in 1973 – 74 to 150,242cr in 2005-06.
MSMEs have been contributing nearly 40% of overall India's exports, contributing to approx. 6.11% of the country's manufacturing GDP & 24.63% of the GDP from services sector.

MSME export data from 2010 – 17 by Annual reports of MSMEs.

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Table no : 10 Exports of Micro small and medium enterprises

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	Value in Rs. Crore
Year	India total export	Export by MSMEs	% share of MSME in export
2010-11	1142922	256834	22.47
2011-12	1465959	283847	19.36
2012-13	1634318	654750	40.06
2013-14	1905011	808200	42.42
2014-15	1896348	848900	44.76
2015-16	1716378	855874	49.86

Chart no : 11

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IMPACT OF DIGITALISATION

The MSME sector experienced massive growth over the past two decades, despite limited use of technology. It has potential to scale up via effective utilisation of technology and implementation of e-markets and digitalisation in manufacturing processes. Various steps taken by the government and MSMEs include:

The Ministry of MSME has decided to digitalise the entire system of administration to make it more transparent, time-bound and result-oriented.
The ministry invested Rs. 200 crores (US$ 26.5 million) to construct 20 technology centres and Rs. 20 crores (US$ 2.65 million) for 100 extension centres.
The sector recently witnessed growth due to increased internet penetration and customer's adaptation to digital payments, fuelled by B2C e-commerce players.
MSMEs are collaborating with FinTechs to obtain prompt collateral-free financing.
Digitalisation will provide transparency across the supply chain and allow MSMEs to scale up operations.

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POLICIES AND DEVELOPMENTS�

The MSME sector is governed under the Micro, Small and Medium Enterprises Development Act, 2006. This act came into effect to facilitate and promote the sector and enhance its competitiveness. Schemes launched by the government under this act are:
Prime Minister Employment Generation Program (PMEGP) – A bank-appraised and -financed programme to generate employment opportunities
Credit Guarantee Trust Fund for Micro & Small Enterprises (CGTMSE) – Jointly set by Ministry of MSME and Small Industry Development Bank of India (SIDBI) to catalyse the flow of credit to micro and small enterprises
Interest Subvention Scheme – Introduced by Reserve Bank of India (RBI) to provide relief of up to 2% of interest to legal MSMEs
Credit Linked Capital Subsidy Scheme – Providing upfront 15% subsidy to facilitate technology upgradation in MSMEs
Gram Udyog Vikas Yojna – One of the two components of Khadi Gramodyog Vikas Yojana, aimed at promoting village industries

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The Indian government announced various policies to promote MSMEs in India. Key policies include:
SAMBHAV, a national-level awareness programme to promote economic growth
Collateral-free automatic loans up to Rs. 3,00,000 crore (US$40.85 billion) for MSMEs to buy raw materials, meet operational liabilities and restart businesses
Revision of MSME's definition to provide maximum support to the sector
Creation of attractive opportunities for domestic firms by disallowing global tenders in procurements of up to Rs. 200 crores (US$26.5 million)
Commitment of the government and public sector units (PSUs) to clear MSME debts within 45 days

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CORRELATION ANALYSIS �

Correlation matrix
Table no – 2 used for analysis with same change like this :-

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Year	Total MSME GVA	All India GDP
2015-16	4059660	13771874
2016-17	4502129	15391669
2017-18	5086493	17098304
2018-19	5741765	18971237

	Total MSME GVA	All India GDP
Total MSME GVA	1
All India GDP	0.998521526	1

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Correlation = 0.998521526

Sign = high positive (+)
Magnitude = 0.99 which is high (magnitude should be always in between (-1 to 1))
So, we have concluded that there is a positive relationship between MSME GVA (production Goods & Commodity of MSMEs) and GDP of India. if MSMEs GVA rise (increases) then the GDP also increase because correlation is positive.

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CONCLUSION �

MSME sector of India is today at the gateway of global growth on the strength of competitive and quality product range. However, facilitation from the Government is required to minimize the transaction costs of technology up gradation, market penetration, modernization of infrastructure etc. In this paper we have looked at growth of Indian Micro Small and Medium Enterprise Sector over the last twenty five years. The MSME sector has often been termed the „engine of growth‟ for developing economies. We begin with an overview of this sector in India and look at some recent trends which highlight the development and significance of this sector vis-à-vis the Indian economy. We have analyzed the growth of MSMES in number of units, production performance, employment and export contribution.

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The MSME Development Act of 2006 is perhaps the most crucial of these recent policy changes. In the much talked SEZ Schemes the export oriented Small Scale Industries are also getting the priority and the incentives through the scheme to set up their units.

As per the National Knowledge Commission finding the small and medium enterprises are more innovative than the large firms. The huge potentiality of the Small and Medium industries with an enabling environment created through different policy measures will benefit this sector in archiving a higher growth including exports in the coming years.

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REFERENCES�

Annual Report of 2020 -21 on MSME by Ministry of Micro, Small and Medium Enterprises.
Agarwal, H. (2011). HR Issues in Micro, smalll and Medium Enterprises. Internationl Journal of Research in Finance & Marketing, 1(3), 232-246
Annual Reports, Ministry of Small Scale Industries, Government of India.

Websites :-

www.data.gov.in

http://laghu-udyog.gov.in/sido/SSIMDA.htm

https://msme.gov.in/

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THANK YOU

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