An MSME Perspective

Part 5

MSME Financing - Key Issues and Solutions

An MSME Perspective

The manifest capacity of Micro, Small and Medium Enterprises (MSMEs) around the world for driving economic growth and development at regional, national and global levels cannot be overemphasized. As India gears up to retrace the high growth path, the MSME sector assumes a pivotal role in driving the growth engine. The MSME sector in India continues to demonstrate remarkable resilience in the face of adverse global and domestic economic circumstances.

An MSME Perspective

The sector has sustained an annual growth rate of over 10% for the past few years. With its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive economic shocks, even of the gravest nature. The significance of MSMEs is attributable to their caliber for employment generation, low capital and technology requirement, promotion of industrial development in rural areas, use of traditional or inherited skill, use of local resources, mobilization of resources and exportability of products. According to the estimates of the Ministry of MSME, Government of India, the sector generates around 100 million jobs through over 46 million units situated throughout the geographical expanse of the country.

An MSME Perspective

With 38% contribution to the nation’s GDP and 40% and 45% share of the overall exports and manufacturing output, respectively, it is easy to comprehend the importance of the role they play in social and economic restructuring of India. Besides the wide range of services provided by the sector, the sector is engaged in the manufacturing of over 6,000 products ranging from traditional to hi-tech items. The Government has recently taken some concrete steps to address the issues faced on each of the parameters so as to improve the ‘ease of doing businesses’ in the country. The Government is targeting to move to the top 50 in the ‘Ease of Doing Business’ rankings.

Role of Make in India initiative towards “Ease of doing Business”- FOCUS OF MSME’s

The ‘Make in India’ initiative, launched by the honorable Prime Minister in September 2014, aims to facilitate investment, foster innovation, provide employment, enhance skill development and build manufacturing infrastructure in the country. The real objective of this strategy is to ease the investment caps and controls to open up India’s industrial sectors to global participation. This initiative also applies to MSMEs and relates to the various relevant departments which have been entrusted with the task of simplifying the rules for MSMEs. The ‘Make in India’ initiative invites global firms to set up manufacturing units in the country. This is expected to give a solid boost to the MSMEs especially in sectors such as automobiles, aviation, defense manufacturing, construction, chemicals and food processing among others.

Role of Make in India initiative towards “Ease of doing Business”- FOCUS OF MSME’s

The effort is to get global companies to manufacture goods for the Indian market as well as export them to third countries. India must become a manufacturing powerhouse in order to gainfully employ its demographic dividend. Its natural advantages like a big labor pool and a large domestic market are available enablers. In addition, China’s competitive advantage in terms of cost is fast eroding, being only marginally better than other developed countries. India has the opportunity to take some share of global manufacturing away from China. This would be possible only if the prevalent process inefficiencies are addressed through—improved infrastructure, ease of doing business, rationalized tax policies, reform labor laws, and enhanced skills, ease of land acquisition,implement Goods and Services Tax (GST) and fast track approvals.

Role of Make in India initiative towards “Ease of doing Business”- FOCUS OF MSME’s

The "Make in India" initiative, will act as a first reference point for guiding foreign investors on all aspects of regulatory and policy issues, as also assist them in obtaining regulatory clearances. The Centre has already allowed 100% Foreign Direct Investment (FDI) under the automatic route in construction, operation and maintenance in rail infrastructure projects and increased FDI in defense from 26 to 49 per cent.

State-wise Analysis

State-wise Analysis

Leaders: No states achieved this status. The ‘leaders’ group signifies states which have an overall implementation of 75 percent and above. Aspiring Leaders: Seven states are in this group. The ‘aspiring leaders’ group is for states that had an overall implementation of 50-75 percent. Acceleration required: Nine states are in this group. This group is for states with 25-50 percent overall implementation. Jump start needed: Sixteen states were placed in this group. This is for states with an overall implementation of 0-25 percent.

State-wise Analysis

The sector has sustained an annual growth rate of over 10% for the past few years. With its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive economic shocks, even of the gravest nature. The significance of MSMEs is attributable to their caliber for employment generation, low capital and technology requirement, promotion of industrial development in rural areas, use of traditional or inherited skill, use of local resources, mobilization of resources and exportability of products. According to the estimates of the Ministry of MSME, Government of India, the sector generates around 100 million jobs through over 46 million units situated throughout the geographical expanse of the country.

State-wise Analysis

The sector has sustained an annual growth rate of over 10% for the past few years. With its agility and dynamism, the sector has shown admirable innovativeness and adaptability to survive economic shocks, even of the gravest nature. The significance of MSMEs is attributable to their caliber for employment generation, low capital and technology requirement, promotion of industrial development in rural areas, use of traditional or inherited skill, use of local resources, mobilization of resources and exportability of products. According to the estimates of the Ministry of MSME, Government of India, the sector generates around 100 million jobs through over 46 million units situated throughout the geographical expanse of the country.

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