MSME – Why It is Important for Economic Growth

MSME – Why It is Important for Economic Growth

Indian Economy, News, SME / MSME 0 Comments

To make a conventional growth in the economic sector the government should put emphasis upon. The various possibilities are hidden in different enterprises. Among this social focus should be on a sector like MSME (micro small and medium enterprises), as even though they are small scale investment based their contribution to the Indian economy is huge.

Understanding MSME

According to small and medium enterprises development act 2006, MSME is defined on various factors like

1. The main processing unit and investment on it like manufacturing, production, machinery processing, and preservation. This all is the capital investment until the product finishing in the plant.

2. Investment in the equipment required enterprise engagement and renewing services.

3. The amount for investment is not significant with more input on less business finance. Let us see the limit set up by the government of India:

a) For micro enterprises
Not exceeding Rs.25.00 Lakhs for the main unit
Not exceeding Rs.10.00 Lakhs for service based expenditure

b) Small
More than Rs.25.00 lakhs but does not exceed Rs.500.00 lakhs for investment in plant and not
More than Rs.10.00 lakhs but does not exceed Rs.200.00 lakhs for investment in equipment

c) Medium
More than Rs.500.00 lakhs but does not exceed Rs.1000.00 lakhs for product finishing
More than Rs.200.00 lakhs but does not exceed Rs.500.00 lakhs for the rendering of a product

Role in Indian economy

Micro small and small enterprises occupy special strategical importance in any developing economy with India being no acceptation. According to the planning commission in 2012, the base output through MSME was of 45% whereas export was of 40% of total export. In terms of employment, MSME provides bread and butter to 69 million people.

In countries like India where there is large labor to capital misbalance, low capital output hampers the employment objective of the country.

Increased employment

Since 1960 the average MSME sector has grown tremendously, with an average annual growth of 4.4%. Not only they provide high employment as per capita, but they also help in checking urban-rural disbalance and providing a sustainable source of income in the scarce geographical area also

Increase exports

MSME rules the export market with 95% share majority to which are small plastic parts, readymade garment, as most of the products are eco-friendly and handcrafted this can increase the dimension of export expansion of MSME.

For sustainable inter-sector growth

Large industries are sometimes totally dependent on the products delivered through the micro small or medium sector, for example, a large enterprise for car manufacturing could be dependent on MSME in some small village to provide small engine part for the car. Hence inter-sector dependency is always there which need to be fulfilled by ancillary industries like MSME.

For inclusive growth

As we have discussed this sector touches the lives of many people who are most venerable and have limited source of livelihood. This can be used to empower such people and break the poverty cycle.

Hence the entire focus of the Indian government is to focus on various MSME policies and guidelines to ensure the health and competitive sector that runs on less business finance and more benefit to the economic ecosystem.


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