There are various sources of economic growth in a country but the Micro, Small, and Medium Enterprises (MSME) sector leads the list as it provides a great share of industrial production, generates higher employment opportunities, and comes with a mammoth of export potential. This sector dominates all others by contributing a total of 29.7% of Gross domestic product (GDP) and a share of 49.6% of exports. MSME works as a crucial part of large-scale innovation and supply chains by manufacturing a huge array of products, from simple industrial components to precision-engineered tools and advanced consumer goods.
As per IMF’s World Economic Outlook- IMF, the global economy growth rate for the year 2022-23 is predicted to be 4.4%. There are a large number of strong economies, all of which bore the brunt of a global financial crisis, especially after the outbreak of Coronavirus. However, the GDP of India continues to outpace even major economies of the world, as shown in FICCI Economic Outlook Survey, where it is expected to grow 7.4%. This is a clear sign that SMEs are crucial drivers behind India’s growth story.
Small Businesses: The Engine of Growth In India
MSME is one of the dynamic sectors in India that is contributing to the economy by producing a large assortment of products, for not solely Indian but also International markets. This sector, including Infrastructure, Packaging, Food & Beverage, Electronic, Manufacturing, Chemical, IT, and Service Industries, has come into light as the engine of the Indian economy in the last few years with the presence of private co-operatives, self-capitalized proprietary firms, private self-funded groups, and many more, that are taking industrialization to another level by creating industry and consumer-specific products and providing employment opportunities, especially to people belonging to the lower economic background. Playing a major role in upbringing the rural areas, this sector has been working in collaboration with state governments and promoting the growth of labor-intensive industries like coir and khadi.
Over the years, the small-scale industry has been maintaining a growth rate of 10% while also creating bulk of job opportunities for rural people. The amount of contributions made by this sector in the form of not only employment numbers and GDP but also entrepreneurship and innovation, has led the Indian Government to initiate benefitting schemes. Before we delve further into the statistics and Government initiatives, let’s go over the updated definition of MSMEs (w.e.f. 1st July 2020).
As per the MINISTRY OF MICRO, SMALL, AND MEDIUM ENTERPRISES, a business that classifies itself as:
- Micro: Must make an investment of not more than Rs. 1 Crore and does not exceed the limit of Rs. 5 Crore turnover.
- Small: Investment should not exceed Rs. 10 Crore and turnover must be under Rs. 50 Crore.
- Medium: Investment slab ends at Rs. 50 Crore and turnover limits to Rs. 250 Crore.
Statistics About MSMEs in India
- Total SMEs in India: As per the annual report presented by MSME Ministry 2020-21, a total of 6.33 Crore MSMEs are registered in India. Over 99% share is held by micro companies, 0.52% share by small companies, and 0.01% share by medium-scale companies. This shows that there are a total of 6.30 Crore micro companies, 3.31 Lakh small companies, and 0.05 Lakh medium companies.
- Employment figure: As per the data given by MoS MSME during the recent Parliament Budget Session, a total of 43,37,444 people were working in FY20. This figure increased to more than double in FY21. In the current Financial Year, there are 93,94,957 people employed under MSME.
- Section-wise contribution: The manufacturing sector contributes a great share of 6.11%, the service sector contributes 24.63% and the total manufacturing output contributes 33.4% to the GDP.
Government Policies and Initiatives For Supporting MSMEs
The growth of MSMEs is crucial for the Indian Government considering its large share to the country’s socio-economic development. It is the result of the same that the Government has designed a set of policies and taken good initiatives to support the development of MSMEs in the nation.
- Launched Special Credit Linked Capital Subsidy Scheme (SCLCSS) in November 2021 to support MSME services sector
- Started a national awareness programme under the same SAMBHAV to promote domestic manufacturing and entrepreneurship
- Began IndiaXports 2021 Portal and India Export Initiative to grow small-scale export business in the coming years
- Khadi and Village Industries Commission (KVIC) founded Silk Yarn Production Centre in September 2021 to grow the local silk industry of India
- Mr. Narayan Rane, Union Minister, MSME, established Rohtak Technology Centre in September 2021, especially for training more than eight thousand students on an annual basis
- Factoring Regulation (Amendment) passed from Lok Sabha to speed up easy payments from banks, private funding organizations, and digital or electronic equipment
- Budget for MSME increased twofold to Rs. 15,700 in the FY22
- Collateral-free loans for MSMEs with a budget of a total of Rs. 3 Lakh Crores
- Benefit to eligible MSMEs to borrow funds under the facility of GECL- Guarantee Emergency Credit Line, where the Government has secured funds worth Rs. 10,000 Crore.
Also, Read - The Importance of Logistics in the Expansion of Indian SMEs
New Beginning for MSMEs
COVID-19 hit the Indian MSME sector badly with thousands of people losing their jobs and businesses completely shutting down. The Honourable Indian Prime Minister, Mr. Narendra Modi, immediately after the spread of Coronavirus, acted towards supporting this sector and building a new, independent nation, by launching CHAMPIONS, an online platform for MSMEs to support and encourage their business. This technology system- Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength or CHAMPIONS, aims at the following:
- Supporting MSMEs to tackle financial problems, issues related to sourcing of raw materials, and taking regulatory permission for the introduction of products.
- Giving a new ray of hope to budding entrepreneurs to establish a business, especially in the field of producing life-saving accessories and medium equipment like PPE kits, masks, and ventilators.
- Encouraging micro, small and medium-scale companies to adapt to the market changes and become champions on a global level by producing and exporting goods.
MSMEs Are Here To Stay and Succeed
Nearly 3.66 Crore Indian people graduate every year, out of which 15 Lakh (Approx.) engineers pass out every year in India but only 2.5 Lakh people are able to make it to field-specific jobs. There is no strong economy that can bear such a large number of fresh talent in a year but the Indian MSME sector is a blessing for fresh talent that provides great employment opportunities to graduates. MSME is one such sector that creates employment opportunities for all unskilled and underemployed people to perform manufacturing and services-related work. It is the result of the same that MSME with respect to entrepreneurship, is pushing economic growth in both semi-urban and rural areas.
Entrepreneurship in India
In today’s world, a lot of modern people are gaining inspiration from big names in the industry, taking a great leap of courage, and beginning their own businesses. Starting a new mortar-and-brick or e-commerce based business sounds exciting and overwhelming but knowing the happenings and insights of the small business world brings a great deal of knowledge to prepare beforehand for any risks as well as opportunities that may come in the way. So, whether you already own a business or are thinking of establishing a new one in the coming months, statistics on small business will assist you what to expect and eventually, influence your business along with providing details of the great impact that is made by small scale businesses in the economy.
Why is Entrepreneurship Booming in India?
Technological advancements and developments have made India, one of the fastest economically growing nations of the world. Now Indian goods hold the potential of selling themselves worldwide. Considering the growing need for quality-made Indian goods in the global marketplace, more and more Indian youth are setting up new businesses. Some are gaining experience from MNCs before establishing their business while others are relying on their high ambitions and business plans to become a part of the Indian entrepreneur success stories.
With the rising trend of entrepreneurship, increasing the need for digital products and research and development facilities. The Indian youth is employing the latest innovations to create a successful business setup and grabbing all the best opportunities in Indian and International markets. Needless to cite, business founders have become so attentive to the latest trends that they are attracting customers with unique ways of marketing. In addition to this, they are preparing themselves to overcome risks by paying attention to the challenges and success stories of start-ups like Big Basket, Zomato, Paytm Oyo, and Vedantu, which made path-breaking entries in the traditionally running Indian market.
Challenges For Indian Entrepreneurs
Funding: The most basic problem faced by almost every entrepreneur in India is funding. It takes days and months to get business loans from authorized financial institutions as they follow a systematic process of reviewing and approving business plans and proposals. There is a very minimal chance of getting instant loans or funding for business proposals in India.
Hiring Professionals: Politicians of different parties may fight on the subject of unemployment but finding professionals to perform specific work is very challenging. With that being said, a lot of professionals always switch over to MNCs and reputed organizations over start-ups out of fear of failing businesses and unstable income generation.
Cultural Difference: Promoting a product in a new location brings a lot of cultural differences and eventually, affects business growth. Start-ups without the support of reputed marketing companies fail to compete with already existing companies, which, thus leads to their survival problems.
Entrepreneurs, Start-ups, and Support of The Indian Government
The Government of India defines a startup as a registered private limited or partnership or limited liability partnership company that is contributing to meeting consumer needs, indulging in innovation, engaging in the development of industrial and consumer goods, and generating employment. An establishment is considered a start-up up to 10 years from its date of commencement. Reconstruction of a business or spilling of a firm, which has already been in existence, will not be considered a start-up organization.
The Indian Government started Startup India with focus on supporting the growth and development of new businesses through design and innovation. Since its launch on 16th January 2016, numerous programs have been featured on the online platform to transform the traditional Indian culture into a start-up culture while motivating and helping entrepreneurs to set up their businesses. Under this plan, new establishments are subject to capital gains tax exemption, easy funding, public procurement program, and more. Other important key benefits of this initiative include 80% rebate in the fees of patent registration and 50% rebate in filing of the trademark. For obtaining the aforementioned benefits, an organization must be authorized by the Department for Promotion of Industry and Internal Trade.
Today, more than 41,000 establishments are accepted by DPIIT. Of the total start-ups, 44% of at least one woman is leading as a director. All the Indian States as well as Union Territories have more than one start-up. These start-ups have created more than 4 Lakh job opportunities for people in India. A total of 54 sectors wherein 224 sub-sectors are made and spread in 590 Indian districts.
Top Entrepreneurial Successful Names in India
There are countless and multifarious inspirational stories of people who have attained success and made it huge by doing business. India’s most motivating entrepreneurs, who hail from small towns and make us believe the story of Rags To Riches, includes the names of Mr. Karsanbhai Patel (Washing Powder Nirma), Mrs. Kalpana Saroj (Kamani Tubes) and many more, who turned their ideas and dreams to reality and showed to the world, the power of a small start and made people believe that growth never comes with a limit.