The MSME segment provides for 95% of industrial units and approximately 50% of exports. Furthermore, the sector employs nearly 100 million people, making it the second largest source of workforce after agriculture. Thus, the development of this sector is critical to inclusive growth and to India's future.
The food and agriculture sectors employ the majority of Micro and Small Enterprises. Medium-sized businesses primarily serve the automotive, pharmaceutical, textile, and chemical industries. Entrepreneur India concentrate on the 5000 medium-sized businesses that employ approximately 2 lakh people and how these mid-sized businesses can grow into large-scale businesses in the future.
There is no definitive definition of what constitutes a large firm. However, for our purposes, let us assume that large-scale companies are defined as those with annual revenues exceeding $500 million and employing more than 1000 people. According to Capital IQ data, India has approximately 800 such firms, including both individuals and enterprises. Not only are these firms more productive (about 11 times that of a typical firm), but they are also the backbone of our economy, accounting for nearly 40% of all exports and contributing revenues equal to 48% of nominal GDP.
The Financial Stability of MSME Sector
There are approximately 6.3 crore MSMEs in India. According to the MSME Ministry, as of May 16, 2021, the Udyam Registration portal had registered 30, 00,822 MSMEs, replacing the previous process of filing. The number of registered micro-enterprises was 28 lakh (93 percent), followed by 1.78 lakh (6 percent) small enterprises and 24,657 midsized enterprises (1 percent). Through national and international trade, the Indian MSMEs sector contributes approximately 29 percent to the GDP.
The SME (small and medium enterprises) platform is expected to see more than 60 SMEs entering the industry in one year (2021-22) to raise equity funds for their business needs. In 2020, 16 SMEs entered the market via the initial public offering (IPO) route, raising Rs. 100 crore (US$ 13.74 million).
MSMEs are encouraged to market their products on e-commerce sites, particularly the Government e-Marketplace (GeM), which is owned and operated by the government.
Until September 2020, the platform has recorded transactions worth Rs. 55,048 crore (US$ 7.5 billion).Domestic business requires a strong financial stimulus from the government and financial institutions in the form of concessional working capital loans to ensure adequate liquidity in business operations.
Government Policies Helping In Growing the Sectors
The Government of India has devised a number of policies to promote the growth of MSMEs in the country.
• The budget allocation for MSMEs more than doubled in FY22 to Rs. 15,700 crore (US$ 2.14 billion) from Rs. 7,572 crore (US$ 1.03 billion) in FY21.
• The government also announced collateral-free automatic loans for businesses worth Rs. 3 lakh crore (US$ 40.85 billion).
• The government announced funds worth Rs. 10,000 crore (US$ 1.36 billion) in the Union Budget 2021 for the ‘Guarantee Emergency Credit Line' (GECL) facility to eligible MSME borrowers, providing a significant boost to the sector.
Benefits For MSMEs
MSMEs are eligible for direct benefits on their electricity and other eligible utility bills. Various Central and state government policies, such as the Defense Procurement Policy and the Uttar Pradesh Procurement Policy, provide numerous benefits to MSMEs in public procurement, such as a 25% preference for MSMEs.
MSMEs can receive interest rate reductions on overdraft facilities from banks as well as through the Credit Guarantee Trust Fund Scheme. Schemes for assisting in the establishment of business incubators, start-up promotion programs, technology center networks, mentoring and fundraising facilitation, and so on.
The Credit Linked Capital Subsidy Scheme (CLCSS) for technology upgradation provides capital subsidy to eligible MSMEs for upgrading their technology. Payment of MSME dues to be cleared by public sector undertakings (PSUs) within 45 days and failure to do so will result in PSUs paying interest to MSME suppliers.
Initiatives that allow MSMEs to avail credit facilities without providing collaterals and at much lower interest rates than regular loans. Enterprises registered as MSMEs are given up to 50% subsidy for registering their patents.
Entrepreneur India not only advises on and executes complex and strategic initiatives, assisting organizations in overcoming obstacles but also helps in breaking new ground in their respective industries. Entrepreneur India's business professionals provides exceptional project leadership to turn strategies and solutions into long-term outcomes.
Whether it's a problem or a "destination," we'll work with you to overcome obstacles, achieve your objectives, and maintain performance. We turn your vision or challenge into a workable plan and provide dedicated leadership to see it through. We collaborate with you to foster cross-functional collaboration, manage stakeholder relationships, and implement the processes and tools required to realize the full potential of your organization.