Siddharth Roy(siddharth01. roy@gmail. com) Today in India, industrialization and urbanization have become interconnected and synonymous phenomena.
With the changing times, important steps have been taken to mechanise and automation of the agricultural, industrial and service sectors in India. Technologies have improved productivity as well as the progress of the Indian population in the technology and innovation sphere. Keeping in mind the demography of India, there has been a major failure of the Indian economy and that is a lack of job creation.
Post-independence under the leadership of Pt Jawaharlal Nehru, India launched an ambitious industrialization programme where the focus was on heavy machinery and engineering goods. Gandhiji was against this mechanized means of production. The economic philosophy of Gandhiji was always inclined towards a model that gave maximum benefit to the common man.
The machinery was secondary and the employment generation was primary for the labour force according to Gandhiji. The Place of Machinery should be in the Indian economy only when the labour force cannot meet the demand on its own. Gandhiji's dream was to keep the economy in a decentralized structure, where the villagers would exist as self-sufficient republics.
So he gave immense support to cottage industries and household enterprises. Charkha and khadi weren't just symbols but they represented an economic philosophy of self-reliance and antyodaya, which managed to unite the whole of India in the freedom struggle. Gandhiji's Ideals also found a place in the constitution of independent India where the promotion of village enterprises is included in the Directive Principles of State Policy.
Today these enterprises are known as MSMEs i. e. Micro Small and Medium Enterprises which have become the backbone of the Indian economy and social transformation.
At the time of Independence, when the Indian government didn't have many investable funds, the MSME units were the only hope in the private sector to promote the Indian economy. MSMEs are a classification of economic entities based on investment and turnover and have been defined in the 2006 MSME development act. As per the recent amendments, such enterprises in which investment is Rs 1 crore or less and turnover of Rs 5 crore or less are termed as micro-enterprises.
Enterprises in which investment is Rs 10cr and turnover of Rs 50 crore are termed as small enterprises. And lastly, enterprises in which investment is Rs 50 crore and turnover of Rs 250 crore are termed medium enterprises. According to the data of the 73rd round of the National Sample Survey, there are about 6.
33 crore MSMEs in India. Most of the MSMEs are in Uttar Pradesh and West Bengal. 93% of MSMEs are of the micro category and only 1% belong to the medium category enterprises.
Most of the big giant manufacturers of automobiles also get their parts made from MSMEs. E. g.
Maruti Suzuki procures electronic parts and pistons used in their cars from MSMEs. Since the MSMEs are lean organizations with a simple structure they can minimize their production cost and can meet the changing needs. MSMEs make unmatched contributions to the Indian economy.
Not only this but there is also a valuable contribution of MSMEs in ensuring socio-economic justice. Because of this MSMEs are called the backbone of the Indian economy. MSMEs contribute 37.
5% to the GDP of India. These small enterprises together generate an output of about 1. 3 trillion dollars.
There are 6. 33 crore units of MSMEs in India, of which 51% are located in rural areas. Apart from this, the units located in urban areas also contribute a lot towards economic development which is set up mostly in tier 2, tier 3, and other smaller cities.
The contribution of MSMEs to the rural economy and their contribution to rural development makes them a separate place in the Indian economy as almost two third of the population of India still reside in rural areas. The performance of MSMEs is crucial to maintaining rural demand. One of the most important economic issues in India is the imbalance of economic growth across India and these MSMEs which are mostly found in small cities and rural regions help in balancing the growing imbalance in those regions.
The MSME sector employs around 11. 10 crore people. As per the Directorate General of Commercial Intelligence and Statistics, MSMEs contribute 49-50% of the total exports of India thus keeping our Forex reserves afloat.
One of the most important goals of the Make in India initiative is to bring manufacturing up to its full potential, which can lead to more balanced economic growth and a better employment situation. 38% of registered MSME units are in the manufacturing sector thus contributing to the Make in India goal. Not only in the economic sphere but these MSMEs play a very important role in ensuring social justice and empowerment of the weaker sections.
20% of the MSMEs are owned by women thus bolstering women's empowerment. In terms of ownership of the MSMEs, the backward classes and castes are also way ahead. 12.
4% of the MSMEs belong to Scheduled Caste, 4. 1% to Scheduled Tribe and 49. 7% of MSMEs are owned by OBC community people.
So, around 2/3rd of total MSMEs in India are owned by individuals from backward communities. Not only do the MSMEs help in economic and social transformation but they also play a significant role in the preservation and promotion of our culture and heritage. The khadi industries and authentic local handicraft manufacturing industries are helping in doing so.
Moreover, Micro Food Processing Enterprises (MFPE) offer to address the issues of profitability of agriculture and food security in the country. These Micro Food Processing Enterprises help in creating a market for agricultural products thus increasing the profits of farmers. Also, they help in creating large-scale off-farm rural employment which addresses a big issue of unemployment in our country.
In the present times, MSMEs in India has also emerged as a leader in the field of technology. MSMEs like Agrahyah Technologies which provides voice technology-based solutions have been awarded in the category of India's top innovative MSMEs. Although the MSMEs have been a huge success and have contributed immensely to our Indian economy, still there are a lot of issues that the Indian MSME ecosystem is facing.
The most important issue is the lack of economy of scale. It becomes tough for the MSME units to compete with global companies due to their small scale of operations. Moreover due to a byproduct of globalization i.
e. Imports, especially from China which are very cheap and of low quality have flooded Indian markets which poses a huge challenge for the MSME manufacturers specifically in the Indian toy sector to compete with them. Cheap and hazardous Chinese toys have flooded the market.
Health concerns among children, plastic waste management and the disappearance of Indian culture and heritage have become major problems for India and the MSMEs. Moreover, more than half of the MSME units are located in rural areas and a major part of the remaining units are located in small towns. Thus the MSMEs face lack of access to a 24/7 power supply, a digital divide, a lack of proper road infrastructure and other infrastructural constraints.
The lack of financial services is also a major problem for MSMEs due to the low presence of the banking industry in rural areas. Economic Survey revealed that the Indian Economy is dominated by 'Dwarf' MSMEs who do not want to come out of the MSME tag due to a lack of ease of doing business and lack of incentives in the corporate sector. The Government has taken many important steps about helping the MSME sector.
In 2007, a separate Ministry of MSME was formed by the Central Government to deal with the issues whose mandate is to design policies, programmes, projects and schemes for the sector and to implement and monitor it also. Recently, MSME's definition has been revised through an amendment in the MSME development act. In a recent change to the definition of MSMEs, the distinction between manufacturing and service MSMEs was removed.
Moreover, the government of India has simplified the registration process of MSMEs as well. In 2020, the MSME industry has launched Udyam Registration Portal for online registration of these companies. A simple one-page registration form named 'Udyog Aadhaar Memorandum' has also been launched.
The ease of the process is visible from the point that only the Aadhaar number, industry name and address, bank account details, and some more general information are sought. The government has made the public procurement policy a powerful weapon to increase market access for micro and small unit products. The government has also taken a decision that every Central Ministry /Department / PSU shall set an annual target for procurement of 25% of their requirement from the MSME Sector.
Also, no global tender can be floated for procurement up to Rs 200 crore. ICT-based Champions portal was also launched by the Indian Government to assist Indian MSMEs to march into the big league as national and global champions. Also, more than 7 lakh jobs have been created in the micro-enterprise between 2020 and 21 through the Prime Minister's Employment Generation Program.
The Central government has also launched the Credit Guarantee Fund Trust for Micro and Small Enterprises or CGTMSE, through which collateral-free credit is given to micro and small enterprises. The MSMEs are essential to maintaining India's unique position in the globalised world. They maintain domestic capacity and demand and ensure that India remains insulated from global economic shocks.
The Indian government should keep its prime focus on the MSME sector and keep trying to remove the shackles restraining its growth as this is the most important sector which will help India move towards the 4th Industrial Revolution. .
