With a sustained growth rate of over 10 percent in the past few years, the MSME sector has come to represent the ability of the Indian entrepreneur to innovate and create solutions despite the logistics, social, and resource challenges across the country.
In India, there are 55.8 million enterprises in various industries, employing close to 124 million people. Of these, nearly 14% are women-led enterprises, and close to 59.5% are based in rural areas. In all, the MSME sector accounts for 31 percent of India’s GDP and 45 percent of exports.
Union Minister of Micro, Small and Medium Enterprises (MSMEs) Shri Nitin Gadkari just a few days ago said that so far the sector had created 11 crore jobs and the target was to generate an additional 5 crore employment opportunities by 2024. “Presently 29% growth is coming from MSME and 49% of the export of the country is coming from MSME. 11 crore jobs up till now have been created by MSME,” he said in the Rajya Sabha.
Despite the importance of the MSME sector in the Indian economy, the sector faces numerous challenges in terms of getting support from the government in order to grow further. Lack of adequate and timely access to finance continues to remain the biggest challenge for the sector and has constrained its growth.
Further, the sector cannot access the new technology or acquire new skills due to a lack of funds which precludes the sector from the global competition. Few other challenges which the sector faces are enumerated as below:
- MSME`S are facing stiff competition from the international manufacturing companies who are proving quality goods at cheaper price;
- Due to poor infrastructure, unavailability of raw material, inaccessibility of advanced technology and other inputs, the production capacity is low.
The Hon’ble Finance Minister Ms. Nirmala Sitharaman, in her budget announcements for the FY 2019-20 laid clear emphasis on MSMEs providing various benefits to the sector. With a view to encourage the MSME sector in order to boost the economy at large, the government has been launching various schemes from time to time.
Further, with a view to deterring unwarranted delays in payments by companies that purchase goods and services from MSMEs, the Ministry of Corporate Affairs has mandated all such companies to file half yearly return stating the amounts outstanding to MSMEs and reasons for the delay. But a lot more is needed.
In the present situation of slowdown and tightening job situation it is imperative we understand the importance of the MSME sector in the Indian economy and provide a further boost to this labor intensified sector.
Given that MSMEs essentially rely on traditional or inherited skills and use of local resources, particularly in rural and industrially underdeveloped areas, the sector has the ability to empower traditionally resource-poor communities and markets to mobilize products and services, both nationally and globally.
Timely solving the problems of the MSMEs will be a big fillip to the sector as well as to the Indian economy.
Written by CA Sanchit Vijay, Manager-Deals and Value Creation, Corporate Professionals
