Page 26 - Banking Finance December 2021

ARTICLE

behind this growth story. This sector, comprising of sector and paving the way for preference in Government
manufacturing, infrastructure, service industry, food procurement to products and services of the MSEs, address
processing, packaging, chemicals, and IT, has emerged as the issue of delayed payments, etc. However, in the changed
the most vibrant and dynamic engine of growth of Indian circumstances, it is imperative that the thrust of this
economy over the past few decades. MSMEs not only important legislation should be focused more on market
provide huge employment opportunities but also ensure facilitation and promoting ease of doing business for
regional balance development by taking industrialization to MSMEs.
rural and backward areas. As per CII about 20% of MSMEs
operate out of rural & backward areas. As per the MSMED Act, Government has notified
procurement policy wherein PSUs/ Government
The importance of MSME can be highlighted as Departments have to make 25% of their procurement from
under: MSEs. To further strengthen the procurement mechanism,
Y Number of MSMEs in India: The number is estimated the Government has also launched the GeM portal.
to be at 63.39 million, registered & unregistered
together. A staggering 95% of the total industrial units MSMEs provide employment opportunities at comparatively
in the country. lower capital cost and act as ancillary units for large
enterprises to support the system in growth. Below Chart
Y MSME & Employment opportunity: Employs about
depicts the growth rate of MSME sector in comparison with
110.90 million, 40% of India's workforce. Next only to
the overall industrial sector during last sixteen years. The
the agricultural sector.
MSME sector has in many years registered a higher growth
Y Products: produces more than 6000 products. rate than the overall growth of industrial sector.
Y GDP Contribution: Currently around 6.11% of the
manufacturing GDP and 24.63% of Service sector GDP.
Y MSME Output: 45% of the total Indian manufacturing
output.
Y MSME Exports: 40% of the total exports.
Y Bank Lending: Accounts for 16% of bank lending.
Y Fixed Assets: Current fixed assets at INR 1,471, 912.94
crore.
Y MSME Growth Rate: Has maintained an average
growth rate of over 10%.

But challenges before MSME are also enormous. MSMEs are
lacking technological advancement along with scarcity of
resources. Formal Institutional lenders are yet to reach the Source: Ministry of MSME
remote corners to handhold MSMEs in their difficult times.
The contribution of the MSME sector to India's GDP
Micro, Small and Medium Enterprise (MSME) sector has remained stagnant around 30% in recent years. GVA of
emerged as a very important sector of the Indian economy, MSMEs decelerated marginally during the same period.
contributing significantly to employment generation,
innovation, exports, and inclusive growth of the economy.
The MSMED Act, 2006, was enacted to provide enabling Incentive Schemes For MSME
policy environment for promotion and development of the Considering the above various incentive schemes have been
sector by way of defining MSMEs, putting in place a formulated by Govt of India/SIDBI/ State Govt to hand hold
framework for developing and enhancing competitiveness MSME and for their growth. Few of these are enumerated
of the MSME enterprises, ensuring flow of credit to the below.

26 | 2021 | DECEMBER | BANKING FINANCE