SUB CODE: BCOMGE 301-18

HARDEEP KAUR
[Link]
SCHOOL OF MANAGEMENT
 MICRO, SMALL AND
MEDIUM ENTERPRISES
(MSMES)
 LEARNING OUTCOMES
 ABOUT MSMES
 CHARACTERSTICS AND TYPES OF MSMES
 HIGHLIGHTS FROM BUDGET 2021
 ROLE OF MSMES IN ECONOMIC DEVELOPMENT OF INDIA
 PROBLEMS FACED BY MSMES
 SUGGESTIONS FOR IMPROVEMENT IN MSMES
 COTTAGE INDUSTRIES-ROLE AND PROBLEMS
INTRODUCTION TO
MSMES
• The term Micro Small and Medium Enterprise (MSME) was launched in 2006 to
become an integral part of the supply chain for products and services; moreover, a
creator of large-scale employment opportunities in rural India. MSMEs contribute
to approximately 8% of India’s GDP, employ over 60 million people, have an
enormous share of 40% in the exports market and 45% in the manufacturing
sector. The number of MSMEs in India increased the Compound Annual Growth
Rate (CAGR) by 18.5% from 2019 to 2020. The budget allocation for the financial
year 2022 has doubled to Rs. 15,700 crore as compared to Rs. 7,572 crore in the
financial year 2021.
• It won’t be wrong to refer them as the ‘Backbone of the country.’
• In 1961, with the merger of the Ministry of Small Scale Industries
and the Ministry of Agro and Rural Industries; the Ministry of
Micro, Small, and Medium Enterprises (M/o MSME) was formed.
• MSMEs produce and manufacture a wide variety of products for
domestic, as well as international markets. MSMEs help in the
promotion of growth and development of Khadi, Village, and Coir
Industries, in co-operation with concerned ministries, state
governments, and stakeholders.
 WHAT IS MSMES
• MSME stands for Micro, Small, and Medium Enterprise that was introduced by the
Government of India in agreement with the Micro, Small & Medium Enterprises
Development (MSMED) Act, 2006. MSME is initiated and managed under the
Ministry of MSME (MoMSME) are entities engaged in the production, manufacturing,
processing or preservation of goods and commodities.
• MSME sector is considered the backbone of the Indian economy that has contributed
substantially to the socio-economic development of the nation. It generates
employment opportunities and works in the development of backward and rural
areas.
• As per the official data as of 31st Aug 2021, there are presently approximately 6.3
crore MSMEs in India.
Highlights of new MSMEs
• ‘Atma Nirbhar Bharat Abhiyan’ or the Self-Reliant India Scheme of 2020 by the
Government of India has given a new definition for MSMEs.
• Following are a few highlighting features of new MSMEs –
1. A provision of Collateral Free Loans to MSMEs
2. An arrangement of loans to MSMEs worth of Rs. 3 lac crores
3. An offer for MSMEs to get a Moratorium period of 12 months
4. Consideration of Manufacturing and Service MSMEs as the same entities
5. MSM is a granted a repayment Tenure of 48 months
6. MSMEs are assured a 100% Credit Guarantee
7. Reclassification of MSMEs will benefit approximately 45 Lac units.
 Highlights Of The Budget For Small Businesses
The highlights of the budget that impact mass entrepreneurs, included as MSMEs, are as follows-
• The main announcement of the budget pertaining to MSMEs is the doubling of the amount earmarked for the micro, small
and medium enterprises to ₹15,700 crores for the financial year 2021-22, which is almost double the capital expenditure
proposed last year for 2020-2021, which was ₹7,572 crore. This will enable more fund transfers to the different schemes
administered or launched by the MSME ministry.
• Under the Standup India scheme, the margin money requirements have been relaxed from 25 per cent to 15 per cent. Also,
the agri allied activities have been now considered eligible for funding under the Standup India scheme. Additionally, the
Standup India scheme has been extended up to 2025.
• For OPC (One Person Company) formations, relaxations were announced, where previously in order to form an OPC the sole
member or the nominee had to be a resident in India in the previous calendar year for 182 days. This has now been relaxed
to 120 days. This move will enable NRIs to float OPCs in India. Also, the requirement of mandatory conversion of OPC into a
private company after exceeding certain thresholds has been done away with, enabling the free growth of OPCs in India.
• There is also a revision in the definition of a Small Company. Currently for a company to be reckoned as a Small Company its
paid-up share capital should not be more than Rs 50 Lakhs and turnover should not be more than Rs 2 crores. Now, these
limits have been raised where the paid-up share capital threshold has been raised from Rs 50 Lakh to 2 crores and the
turnover from Rs 2 Crores to 20 crores.
• The budget has also proposed to allocate ₹300 crores towards the establishment of new technology centres for MSME
units.
• The budget also announced the creation of a special framework for MSMEs for debt resolution. Additionally, in order to
resolve the debt resolution cases faster, the National Company Law Tribunal (NCLT) framework has also been strengthened
including the implementation of the e-Courts system.
Features of MSMEs
• Following are some of the essential elements of MSMEs –
1. MSMEs work for the welfare of the workers and artisans. They help them by giving
employment and by providing loans and other services.
2. MSMEs provide credit limit or funding support to banks.
3. They promote the development of entrepreneurship as well as up-gradation of skills by
launching specialized training centers for the same.
4. They support the up-grading of developmental technology, infrastructure development,
and the modernization of the sector as a whole
5. MSMEs are known to provide reasonable assistance for improved access to the domestic
as well as export markets.
6. They also offer modern testing facilities and quality certification services.
7. Following the recent trends, MSMEs now support product development, design
innovation, intervention, and packaging.
CLASSIFICATION OF MSMES

MANUFACTURING SERVICE ENTERPRISES

ENTERPRISES
ROLE OF MSMES IN ECONOMIC
DEVELOPMENT OF INDIA

EMPLOYMENT EXPORT INNOVATION AND

PRODUCTION
GENERATION CONTRIBUTION DEVELOPMENT

EFFICIENT DEVELOPING
FEEDER TO LARGE
UTILISTAION OF ENTREPRENEURIAL INCREASES GDP
INDUSTRIES
RESOURCES CAPACITY

INCREASE LESS PRESSURE OF EQUITABLE

OPPORTUNITY FOR
STANDARD OF POPULATION ON DITRIBUTION OF
ARTISANS
LIVING AGRICULTURE INCOME
PROBLEMS FACED BY MSME

PROBLEMS OF PROCUREMENT OF LACK OF TECHNOLOGICAL DEPENDENCY ON

FINANCIAL CREDIT RAW MATERIAL INFRASTRUCTURE ISSUES MIDDLEMAN

LACK OF SICKNESS OF SSI

ENTREPRENEURIAL SECTORS
SKILLS
SUGGESTIONS FOR
IMPROVEMENT IN MSMES
• SUPPLY OF TECHNOLGIES
• INVLOVEMENT OF STAKEHOLDERS
• CAMAIGN TO INCREASE MSME AWARENESS OF GOVERNMENT
INITIATIVES
• COMPETITIVENESS ASSESSMENT OF MSME SECTOR
• CONDUCTION OF SURVEY FOR ASSESSMENT OF TECHNOLOGICAL NEEDS
• CONSTITUTION OF A PANEL OF CONSULTANTS
COTTAGE INDUSTRIES

• The cottage industry plays a vital role in the rural economy of India.
• Majority of the population of India lives in rural areas; it is where the real India
resides. Apart from agriculture, the cottage industry is the primary source of
livelihood in rural India.
• Cottage industry are those where the business is carried on at home with small
numbers of workforce or labours. the members may be of the same family, religious
groups or the community.
• Most of the workers are the traditional artisans who have inherited their work as art
from their ancestors.
DEFINITION
• ACCORDING TO FISCAL COMMISSION (1949-50):-
“ COTTAGE INDUSTRY IS AN INDUSTRY WHICH RUN EITHER
AS WHOLE TIME OR PART TIME OCCUPATION WITH FULL OR
PARTIAL HELP OF MEMBERS OF THE FAMILY ”.
Characteristics of Cottage Industry

• Cottage industries are not defined by the investment criteria as in the case of small or
large scale industry. However, the cottage industries are characterised by certain
features like the following.
• These are organised by individual people with private resources.
• Normally uses family labour and locally available talent.
• The equipment used in the cottage industry is simple.
• Capital investment is small.
• Produces simple product, normally in their own premises.
• Production of goods takes place using indigenous technology.
ROLE OF COTTAGE INDUSTRIES

EQUAL
PROPER ELIMNATES
DISTRIBUTION OF
UTILISATION OF EMPLOYMENT
NATIONAL
LOCAL RESOURCES AND POVERTY
INCOME

REMOVAL OF FRIENDLY
PROFITABLE
REGIONAL WORKING
BUSINESS
DIFFERENCES ATMOSPHERE
 PROBLEM OF FINANCE
PROBLEM
S OF PROBLEM OF RAW MATERIAL

COTTAGE LACK OF MARETING FACILITY

INDUSTRI LACK OF TRANSPORTATION

ES OLD TECHNIQUES OF PRODUCTION
 CREDIT FACILITIES

REMEDIES FOR FORMATION OF RURAL PROJECTS

COTTAGE FORMATION PF GOVERNMENT AGENCIES

INDUSTRIES ESTABLISHMENT OF DIC’S

THANK YOU