Development of MSME sector is critical for the Indian economy to grow
Published on : Tuesday 02-11-2021
Vinamra Mishra, Director (Tech & Project), Ministry of MSME, Government of India.
The statistics regarding MSMEs are well known and the numbers overwhelming. Are there any statistics regarding MSMEs in manufacturing?
In India, the MSME sector has gained prominence due to its contribution to the Gross Domestic Product (GDP) of the country and exports. The sector has also contributed immensely with respect to entrepreneurship development. With respect to statistics regarding MSMEs in manufacturing sector, it becomes imperative to understand that the definition of Micro, Small and Medium Enterprises (MSMEs) has been revised vide notification dated 26th June, 2020 issued by Ministry of MSME wherein apart from the old criteria of categorisation of MSMEs on the basis of investment in Plant and Machinery/Equipment, an additional criterion of turnover has been included. Moreover, the difference between manufacturing and services sector has been removed and now both are at the same level of treatment.
Further, the Ministry of MSME launched a unified portal called Udyam Registration Portal (https://udyamregistration.gov.in) on 1st July, 2020 for registration of MSMEs which is free of cost, paperless and digital. Up to October 9, 2021, 52.7 lakh are registered as MSMEs on the Udyam portal (94% - Micro; 5.4% - Small; 0.6% - Medium). Out of total MSMEs registered on the Udyam Registration portal, 36% are from the Manufacturing sector and 64% of MSMEs belong to the Service sector.
There are various reform schemes and initiatives for MSMEs. Is there any mechanism to ensure these reach all the MSMEs and then follow-up, in a pyramidal structure?
The Ministry of Micro, Small and Medium Enterprises (MSME) implements various programmes/schemes for the development and promotion of MSMEs across the country and has been really proactive in ensuring that all the benefits of these schemes reach out to the MSMEs in time. The Ministry of MSME has a vast network in the form of its attached organisations such as MSME-Development Institutes, Khadi Village Industries Commission (KVIC), Coir Board, National Small Industries Corporation Limited (NSIC), National Institute for Micro, Small and Medium Enterprises (NIMSME), etc., through which it promotes and propagates its various schemes and initiatives and facilitates the MSMEs to avail the benefits under different schemes of Ministry of MSME depending on the specific needs of the MSME. To facilitate the MSMEs to take benefits of various schemes, the Office of Development Commissioner (MSME) has also launched a web-based application module, namely, MyMSME (https://my.msme.gov.in/MyMsme/Reg/Home.aspx), which can also be accessed through mobile app. Entrepreneurs can make their applications and track it as well on their mobile itself. Further, for every scheme there is a separate reviewing, monitoring mechanism as well as third party evaluation for tracking the performance and reach of the scheme.
Are the PSUs following the government mandate on procurement from the MSMEs? Also those stipulated for the GeM portal?
As per the Government’s mandate, every Central Ministry/Department/PSU has to set an annual goal for procurement from the MSE sector at the beginning of the year, with the objective of achieving an overall procurement goal of minimum 25% of the total annual purchases from the products or services produced or rendered by MSEs. Out of the 25% target of annual procurement 4% is exclusively reserved for MSEs owned by SC/ST and 3% for MSEs owned by Women entrepreneurs. For compliance of this mandate, Ministry of MSME has a portal called “MSME SAMBANDH” which helps in monitoring the procurement by Central Government Ministries, Departments and Central Public Sector enterprises (CPSEs) and also enables them to share the list of required products/services from MSEs. There is a dashboard available on the portal displaying the summary of procurement. The portal can be accessed at https://sambandh.msme.gov.in/PPP_Index.aspx.
Also, one of the key announcements made by our Prime Minister in the support and outreach programme for MSMEs on 2nd November, 2018 for strengthening the MSME sector states that CPSEs to be compulsorily be part of Public Procurement Portal GeM, i.e., Government e-Marketplace and CPSEs to get their vendors registered on GeM portal. A total of 726,889 MSE sellers and service providers are registered on GeM portal and 56.50% of orders value on GeM portal is from MSMEs as per the data available on GeM portal as on 08.10.2021. Further, the Ministry of MSME has also commenced API integration of Udyam Registration portal with GeM so that MSEs can participate in Government procurement easily.
Lack of finance, more appropriately lack of financial literacy, is at the root of many MSME woes. Can the banks be more proactive on this front?
MSMEs in India face various challenges and lack of finance has been related to this sector for a long time. Access to finance and lack of financial literacy may be identified as a critical barrier to growth for MSMEs in emerging economies like India. However, the Government of India has been continuously making efforts to address these issues faced by the MSMEs. Inability to obtain outside financing, insufficient working capital, limited money management, insufficient profit, meeting financial obligations, etc., are some of the financial obstacles faced by the entrepreneurs of our country. This is because of the lack of basic understanding of financial products and services, banking procedures and risk-return framework which in turn impedes the progress of MSME units. Therefore, financial literacy is the most effective means of addressing these issues of MSMEs, which will provide them the basic knowledge, skills and confidence and enable them to make financial decisions and take actions as appropriate. Although GoI and RBI have undertaken several measures to this effect, Financial Institutions including banks can also certainly be more proactive on this front and can partner with the Ministry and MSME Associations to create a knowledge sharing platform and networking opportunities for MSMEs. Banks can come up with targeted financial literacy/awareness programs and strategies for the MSMEs which will ultimately help the banks also in making better decisions in serving MSMEs.
Additionally the Champions Grievance Redressal Portal launched by our Prime Minister in the month of May '2020 is a step in handholding all such grievances and handholding the MSMEs to secure access to credit.
Another major constraint is access to skills and technology where they are at a distinct disadvantage vis-à-vis their larger counterparts. How does the government help in this?
As rightly identified, amongst the various challenges faced by the MSMEs, lack of skilled manpower and technological obsolescence are the major constraints, which are hampering the growth and expansion of MSMEs. Taking note of this, the Ministry of MSME has developed a robust eco-system to meet the demands of skilled workforce in the various emerging and traditional sectors in different segments of enterprises. The Ministry has been organising a number of skill development programmes for the existing and potential entrepreneurs in order to build their capacity. These programmes are as per the demands of the industry, technological needs, and present trends so as to create a pathway to fill up the gap of requirement of skilled manpower in the sector in consonance with the changing landscape of the MSME eco-system and its present challenges in India. These skill training programmes are conducted by a network of institutions under the Ministry, i.e., KVIC, Coir Board, NSIC, NI-MSME and MSME Technology Centres. The Ministry has taken initiatives to align its training courses with National Skill Qualification Framework (NSQF), Ministry of Skill Development & Entrepreneurship.
The 18 Tool Rooms, 15 new Technology Centres in collaboration with the World Bank under the TCSP Scheme and 20 Technology Centres with 100 Extension Centres in hub and spoke model under the TCEC Scheme will ensure access to advanced manufacturing technology and common facilitation centres. This will help mitigate the constraints in access to skill and technology for the entire MSME ecosystem.
What would be your message to MSME entrepreneurs who have the ideas but lack the resources?
Development of the Micro, Small & Medium Enterprises (MSME) sector is critical for the Indian economy to grow. For India to be established as a developed nation and economic dynamo, MSME sector and the budding entrepreneurs of the country, having innovative ideas will be an important cog in the wheel on this journey. It is a well understood fact that in this fast paced world, continuous innovation is required to be sustainable in the long run.
Atmanirbhar Bharat Abhiyan being the present focus of Government of India, the MSME sector has become even more significant to India’s economic and financial growth strategy. In order to ensure that the MSME sector continues to pave the way towards economic growth of the country, the Ministry of MSME, Government of India has from time to time come up with various schemes to support the growth and development of this sector. One such initiative is the “Support for Entrepreneurial and Managerial Development of SMEs through Incubators”. This is a scheme which facilitates the capturing of the potential ideas of the individuals and converting them into a new product and a new business opportunity. Apart from providing the adequate infrastructural support, the scheme also supports engagement with Enablers who will advise such MSMEs in expanding the business by supporting them in design, strategy and execution. With the continued efforts of the Ministry of MSME, more and more technical institutes like IISc, IITs, NITs, NIDs, R&D Centres, Engineering Colleges and Technology Developing Centres are coming forward as Business Incubators.
Through this medium, I would like to welcome all such prospective entrepreneurs who have the innovative ideas to come on board, be a part of this programme and play a pivotal role in building a self-reliant nation.
Vinamra Mishra, CEng, MIMechE, is Director (Technical & Projects), Ministry of Micro Small and Medium Enterprises. An officer belonging to the Indian Railway Services of Mechanical Engineering (IRSME), Government of India, Mr Mishra has been anchoring all the Externally Aided Programmes (EAPs) of the Ministry with multilateral organisations like World Bank, ADB, KfW, AIIB, NDB, UNIDO, GIZ, etc., for over 8000 million USD. These are aimed at improving competitiveness of MSMEs and institutional architecture of MoMSME. He has extensive hands-on experience in improvement of maintenance practices and design aspects of rolling stocks plying over Indian Railways.