Mains Article

MSME sector in India [Mains Article]

There are about 63.05 million micro industries, 0.33 million smalls, and about 5,000 medium enterprises in the country.
By IT's Mains Articles Team
October 17, 2020

Contents

  • Introduction
  • Stats in India
  • Qualification of an MSME in India
  • Measures to help MSMEs
  • Opportunity areas for MSMEs in India
  • What are the benefits available?
  • Market Development Assistance Scheme
  • Conclusion

MSME sector in India

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Introduction:

India’s Micro, Small, and Medium Enterprises (MSMEs) base is the largest in the world after China. The sector provides a wide range of services and is engaged in the manufacturing of over 6,000 products – ranging from traditional to hi-tech items. The spread of COVID-19 in India and consequent lockdown has stressed national economic growth and put financial pressure on businesses of MSMEs.

Stats in India:

  • The Indian MSMEs sector is poised for rapid growth and integration with major global value chains due to the government of India’s ‘Make in India’ push, along with a push to attract greater Foreign Direct Investment.
  • There are about 63.05 million micro industries, 0.33 million smalls, and about 5,000 medium enterprises in the country.
  • Uttar Pradesh has the largest number of estimated MSMEs with a share of 14.20 percent of the total MSMEs in the country.
  • West Bengal comes as close second with a share of 14 percent, followed by Tamil Nadu and Maharashtra at eight percent.

Qualification of an MSME in India:

  • The government has announced changes to the way it will categorize MSMEs.
  • The definition of who qualifies as a micro, small, and medium-sized enterprise (MSME) in India has changed based on investment and turnover and will apply to both manufacturing and services MSMEs in India.

Revision to definition announced on May 13, 2020 (Atma Nirbhar Bharat Abhiyan package):

  • Enterprises with investment up to INR 10 million (US$132,521), turnover up to INR 50 million (US$662,715) are defined as micro units.
  • Enterprises with investment up to INR 100 million (US$1.3 million), turnover up to INR 500 million (US$6.62 million) are defined as small units.
  • Enterprises with investment up to INR 200 million (US$2.6 million), turnover up to INR 1 billion (US$13.24 million) are defined as medium-sized units.

Govt. Measures to help MSMEs:

  • Collateral free loan of INR 3 trillion (US$39.84 billion) for MSMEs with a turnover up to INR 1 billion (US$13.24 million). This will benefit 4.5 million units so that they can resume work and save jobs. This scheme can be availed till October 31, 2020.
  • For stressed MSMEs, subordinate debt provision of INR 200 billion (US$2.65 billion) has been announced for 200,000 MSMEs.
  • Equity infusion worth INR 500 billion (US$6.6 billion) through special fund for MSMES that have viable operations but need handholding due to COVID-19.
  • A fund of funds with corpus of INR 100 billion (US$1.3 billion) will be set aside to assist the capacity expansion of these units.
  • Global tenders not allowed for government procurement of up to INR 2 billion (US$26.5 million).
  • A reduction of 25 percent on the Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) from May 14, 2020 to March 31, 2021.
  • Vivaad se Vishwas scheme, addressing disputes on indirect tax payments, has been extended till December 31, 2020.
  • All pending refunds to charitable trusts and non-corporate businesses and professions, including proprietorship, partnership, LLP and co-operatives to be issued immediately.
  • Statutory provident fund contributions for all private sector organizations and their employees covered by the EPFO will be reduced to 10 percent from 12 percent.

Opportunity areas for MSMEs in India

1. Telecommunications:

  • Domestic manufacturing of low-cost mobile phones, handsets, and devices.
  • Manufacturing of telecom networking equipment, including routers and switches.
  • Manufacture of base transceiver station equipment.
  • Mobile customer data analyticsservices oriented toward analytical solutions.
  • Development of value-added services.

2. Healthcare:

  • Manufacturing of personal protective equipment (PPE) and face masks, as the COVID-19 pandemic has fundamentally changed social behaviour, public health and hospital needs, and created new demand.
  • Manufacturing of low-cost medical devices, and medical accessories such as surgical gloves, scrubs, and syringes.
  • Low-cost surgical procedures to reduce the cost of healthcare.
  • Telemedicine and Diagnostic labs.

3. Electronics:

  • Domestic manufacturing of low-cost consumer electronics, consumer durables.
  • Nano-electronics and microelectronics.
  • Electronic Systems Design and Manufacturing including semiconductor design, electronic components design and hi-tech manufacturing under India’s National Electronics Mission.
  • Strategic electronics, as the government is keen on encouraging the domestic manufacturing of products needed by the security forces.
  • Information technology, pharmaceutical, chemical, automotive, renewables, gems and jewellery, textile, and food and agriculture.

What are the benefits available?

  • The federal government of India has initiated various schemes and measures to allow MSMEs easier access to funds, to modernize the sector, and make it more competitive in the global market.
  • These include schemes ensuring the quality of products, especially those meant for exports, technology up-gradation, incubation, credit-linked capital subsidy, and UID linked schemes which facilitate ease of receiving a subsidy.

Some of the other concessions available to the MSMEs are listed below:

  • Collateral free loans from banks.
  • 50 percent subsidy on patent registration.
  • 1 percent exemption on the interest rate on overdraft.
  • Concession on power utility bills.
  • Eligible for industrial promotion subsidy.
  • Protection against delayed payments.
  • Reimbursement of ISO certification charges.

Market Development Assistance Scheme:

  • A Market Development Assistance Scheme is operated by the Ministry of Commerce.
  • It aims to encourage exporters (including MSME exporters) to access and develop overseas markets.
  • The scheme offers funding for participation in international fairs, study tours abroad, trade delegations, publicity, etc.
  • The Export Promotion Council (EPCs) are also assisted to undertake export promotion activities for their product(s) and commodities.
  • Direct assistance under MDA for small- scale units is given for individual sales-cum-study tours, participation in fairs/exhibitions and publicity.
  • SIDBI operates a scheme of direct assistance for financing activities relating to marketing of MSME products.
  • The scheme shall be implemented by the Export Promotion and Marketing Division of the Office of DC (MSME).

Conclusion:

MSMEs are the growth drivers of the Indian economy. The recent measures by the government are aimed to ensure that they continue to lead the country towards economic growth. A well-directed initiative for MSMES will help in making India a competitive destination for manufacturing and give a boost to nation’s Atma Nirbhar Bharat drive.

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