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Problems and Prospects of Micro, Small & Medium

Enterprises (MSMEs) in India


ISSN 2319-9725
Dr. Sultan Singh Jaswal
Associate Professor
Department Of Commerce, Govt. College Dhaliara
Kangra (H.P.)

Abstract: The Micro, Small and Medium Enterprises (MSMEs) play a vital role in the economic and social
development of the country, often acting as a nursery of entrepreneurship and innovation. They also play a
key role in the development of the economy with their effective, efficient, flexible and innovative
entrepreneurial spirit. The MSME sector contributes significantly to the countrys manufacturing output,
employment and exports and is credited with generating the highest employment growth as well as accounting
for a major share of industrial production and exports. MSMEs have been globally considered as an engine of
economic growth and as key instruments for promoting equitable development. The MSME sector in India is
highly heterogeneous in terms of the size of the enterprises, variety of products, services and levels of
technology. The sector not only plays a critical role in providing employment opportunities at comparatively
lower capital cost than large industries but also helps in industrialization of rural and backward areas,
reducing regional imbalances and assuring more equitable distribution of national income and wealth.
MSMEs complement large industries. Micro, Small and Medium Enterprises (MSME) contribute nearly 22
percent of the countrys GDP, 45 percent of the manufacturing output and 40 percent of the exports. They
provide the largest share of employment after agriculture. They are widely dispersed across the country and
produce a diverse range of products and services to meet the needs of the local markets, the global market
and the national and international value chains. The major advantage of the sector is its employment
potential at low capital cost. It is well known that the MSME sector constitutes the spine of the nation, small
Industry has been one of the major pillars of Indias economic development strategy since Independence.
India accorded high priority to Small and Medium Enterprises (SMEs) from the very beginning and pursued
support policies to make these enterprises viable, vibrant and over time, these have become major
contributors to the GDP. Moreover, the MSME sector has weathered and overcome stiff competition in the
post liberalization period in the domestic and International arena. In nutshell, the micro, Small and Medium
enterprises (MSMEs) play a leading role in propelling economic growth sustaining livelihood and in
promoting equitable regional development.
Keywords: MSME, Economic Growth, GDP, SME, Liberalization, Global market.

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1. Introduction:
MSEs have been regarded as the engine of economic growth and development all over the
world. Today, MSEs are constituting nearly about 90% of the total enterprises in most of the
economies (especially in developing economies) which creates marvelous employment
opportunities and is accounting major share of exports & industrial production. In India, MSE
is generally referred to as MSME i.e. Micro, Small and Medium Enterprises. Multinational
companies have played a pivotal role in the emergence of Indian MSMEs as world leaders in
specific products. This sector plays an important role in the growth of GDP in the economy
as it creates employment opportunities at low capital cost.
1.1. Definitions of Micro, Small & Medium Enterprises:
In accordance with the provision of Micro, Small & Medium Enterprises Development
(MSMED) Act, 2006 the Micro, Small and Medium Enterprises (MSME) are classified in
two Classes:
1.1.1. Manufacturing Enterprises:
The enterprises engaged in the manufacture or production of goods pertaining to any industry
specified in the first schedule to the industries (Development and regulation) Act, 1951) or
employing plant and machinery in the process of value addition to the final product having a
distinct name or character or use. The Manufacturing Enterprise are defined in terms of
investment in Plant & Machinery.
1.1.2. Service Enterprises:
The enterprises engaged in providing or rendering of services and are defined in terms of
investment in equipment.
The limit for investment in plant and machinery / equipment for manufacturing / service
enterprises, as notified, vide S.O. 1642(E) dtd.29-09-2006 are as under:

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Figure 1
Micro, Small and Medium Enterprises Development Act, 2006The Micro, Small and Medium
Enterprises Development (MSMED) Act, 2006 seeks to facilitate the development of these
enterprises as also enhance their competitiveness. It provides the first-ever legal framework
for recognition of the concept of enterprise which comprises both manufacturing and
service entities. It defines medium enterprises for the first time and seeks to integrate the
three tiers of these enterprises, namely, micro, small and medium. The Act also provides for a
statutory consultative mechanism at the national level with balanced representation of all
sections of stakeholders, particularly the three classes of enterprises; and with a wide range of
advisory functions. Establishment of specific Funds for the promotion, development and
enhancing competitiveness of these enterprises, notification of schemes/ programmes for this
purpose, progressive credit policies and practices, preference in Government procurement to
products and services of the micro and small enterprises, more effective mechanisms for
mitigating the problems of delayed payments to micro and small enterprises and assurance of
a scheme for easing the closure of business by these enterprises are some of the other features
of the Act.

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2. Development And Administration Of MSMEs:


The President under Notification dated 9th May 2007 has amended the Government of India
(Allocation of Business) Rules, 1961. Pursuant to this amendment, Ministry of Agro and
Rural Industries (Krishi Evam Gramin Udyog Mantralaya) and Ministry of Small Scale
Industries (Laghu Udyog Mantralaya) have been merged into a single Ministry, namely,
MINISTRY OF MICRO, SMALL AND MEDIUM ENTERPRISES (SUKSHMA LAGHU
AUR MADHYAM UDYAM MANTRALAYA) .The administration of the MSME sector
falls under the jurisdiction of the Ministry of Micro, Small and Medium Enterprises (
Sukshma Laghu Aur Madhyam Udyam Mantralaya), of the Government of India.It designs
and implements policies and programmes through its field organisations and attached offices
for promotion and growth of MSME sector. The Office of Development Commissioner
(Micro, Small and Medium Enterprises) functions as the nodal Development Agency under
the Ministry of Micro,Small and Medium Enterprises(MSME). It is the apex body to advise,
coordinate and formulate policies and programmes for the development and promotion of the
MSME Sector. The office also maintains liaison with Central Ministries and other
Central/State Government agencies/organisations financial institutions.

3. Literature Review:
The comprehensive literature demonstrates that MSMEs are necessary for sustained
economic growth and development of any economy including India. To justify the need of
present study, following literature has been reviewed:
i.

UNIDO (1969) in a study based on evidence from a number of developing countries


indicated that small enterprises with a lower level of investment per worker tend to
achieve a higher productivity of capital than do the larger, more capital intensive
enterprises.

ii.

Mali (1998) observed that small and medium enterprises (SMEs) and micro
enterprises have to face increasing competition in the present scenario of
globalization, they have to specifically improve themselves in the fields of
management, marketing, product diversification, infrastructural development,
technological up gradation. Moreover, new small and medium enterprises may have
to move from slow growth area to the high growth area and they have to form

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strategic alliance with entrepreneurs of neighboring countries. Data bank on industries


to guide the prospective entrepreneurs including investors from abroad is also needed.
iii.

Bala Subrahmanya (2004) highlighted the impact of globalization and domestic


reforms on small-scale industries sector. The study stated that small industry had
suffered in terms of growth of units, employment, output and exports. The Researcher
highlighted that the policy changes had also thrown open new opportunities and
markets for the small-scale industries sector. He suggested that the focus must be
turned to technology development and strengthening of financial infrastructure in
order to make Indian small industry internationally competitive and contribute to
national income and employment.

iv.

Bargal et al. (2009) examined the causal relationship among the three variables GDP,
SSI output and SSI exports and also have compared the performance parameters of
SSIs in the pre and post liberalization era. The study found that the annual average
growth rate of different parameters of SSIs have declined in the period of nineties vis-vis the pre-reform years. There is an absence of any lead-lag causal relationship
between exports and production in small-scale sector and GDP of Indian economy.

v.

Dixit and Pandey (2011) applied co integration analysis to examine the causal
relationship between SMEs output, exports, employment, number of SMEs and their
fixed investment and Indias GDP, total exports and employment (public and private)
for the period 1973-74 to 2006-07. Their study revealed the positive causality
between SMEs output and Indias GDP.

vi.

Singh et al. (2012) analyzed the performance of Small scale industry in India and
focused on policy changes which have opened new opportunities for this sector. Their
study concluded that SSI sector has made good progress in terms of number of SSI
units, production & employment levels. The study recommended the emergence of
technology development and strengthening of financial infrastructure to boost SSI and
to achieve growth target.

vii.

Venkatesh and Muthiah (2012) found that the role of small & medium enterprises
(SMEs) in the industrial sector is growing rapidly and they have become a thrust area
for future growth. They emphasized that nurturing SME sector is essential for the
economic well-being of the nation.

The above literature highlights the various

aspects viz. performance, growth & problems of MSMEs in Indian economy and
induces for continuous research in this field.

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4. Need Of Study:
The micro, small and medium enterprises (MSMEs) has been accepted as the engine of
economic growth and promoting equitable development. In this position researcher made an
attempt study to the contribution made by micro, small and medium enterprises for the Indian
economic growth.

5. Objectives:
The main objectives of the present study are:
i. To examine the growth and performance MSMEs,
ii. To reveal the contribution of MSMEs to the growth of the GDP and
iii. To analyse the problems of MSMEs.

6. Data Collection:
The present study is exclusively based on secondary data which has been collected from the
various issues of Annual Reports on MSMEs and Handbook of Statistics on the Indian
Economy published by Ministry of MSMEs and Reserve Bank of India (RBI), Newspapers,
Magazines, Books, Economic journals and Internet etc.

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Figure 2
Small and Medium Enterprises (SMEs) are rightly tagged as the engine of the modern Indian
economy. As per the experts, the small and medium enterprises in India must be encouraged
to achieve the stable Gross Domestic Project growth trajectory. The SME sector in India is
definitely growing at an exceptional rate. Still, there are some important things that need to
be focused upon so that best out of these enterprises can be obtained. Here is a brief analysis
of the Indian SME sector.
There are over 8000 products ranging from traditional to high-tech items, which are being
manufactured by the MSME sector in addition to provide wide range of services. The leading
industries with their respective shares are as depicted below:

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Figure 3
It is well known that the MSME provide the maximum opportunities for both selfemployment and jobs after agriculture sector. (Annual Report 2012-2013 M/o MSME)

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Table 1
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Figure 4: Charts Showing Statistics of the MSME sector (Annual Report 2012-2013 M/o
MSME)

Figure 5: Fixed Investment in MSME Sector

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Figure 6: Employment in MSME Sector


6.1. Distribution Of Working Enterprises By Area Of Registered Sector:
Urban area with 8.57 lakh of working enterprises accounted for 54.77% of the total working
enterprises in Registered MSME sector whereas rural area located 7.07 lakh working
enterprises (45.23% of the working enterprises).

Figure 7
6.1.1. Nature Of Activity:
67.10% of the enterprises in the Registered MSME sector were engaged in manufacturing,
whereas 32.90% of the enterprises were engaged in the services activities.

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Figure 8
6.2. Distribution Of Working Enterprises By Area Of Unregistered Sector:
Rural area with 193.12 lakh of working enterprises accounted for 55.79% of the total working
enterprises in Unregistered MSME sector whereas urban areas located 153 lakh working
enterprises(44.21% of the working enterprises).

Figure 9
6.2.1. Nature Of Activity:
69.80% of the enterprises in the Unregistered MSME sector were engaged in services,
whereas 30.20% of the enterprises were engaged in the manufacturing activities.

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Figure 10

7. Summary Results Of Fourth All India Census Of Micro, Small And Medium
Enterprise Sector:
Sl. No.
Characteristics
Registered Unregistered Total

1.
2.
3.
5.

6.

7.

8.

9.

Sector
Total number of working enterprises 15.64
Manufacturing
10.5
Services
5.14
Number of rural enterprises
7.07
Number of urban enterprises
8.57
Number of women enterprises
2.15
Number of enterprises running
15.14
perennially
Employment
93.09
Manufacturing
80.84
Services
12.26
Employment
93.09
Male
74.05
Female
19.04
Enterprises by type of social category15.64
SC
1.19
ST
0.45
OBC
5.99
Others
8.01
Not Responded
0
Enterprises by type of organization 15.64
Proprietary
14.09
Partnership
0.63
Private Company
0.43
Co-operatives
0.05
Others
0.44
Not Recorded
0
Enterprises by main Source of power 15.64
No Power needed
3.79

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Sector
346.12
104.51
241.61
193.12
153
24.46
189.13

361.76
115.01
246.75
200.19
161.574
26.6
204.27

712.14
239.23
472.91
712.14
610.62
101.52
346.12
27.15
20.4
145.74
149.55
3.27
346.12
327.45
3.65
0.06
1.16
7.65
6.15
346.12
194.39

805.24
320.07
485.17
805.24
684.68
120.56
361.76
28.34
20.84
151.73
157.57
3.27
361.76
341.54
4.28
0.49
1.21
8.09
6. 15
361.76
198.18
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10.

Coal
Oil
LPG/CNG
Electricity
Non-Conventional Energy
Traditional Energy/Firewood
Others
Not Recorded

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0.25
0.53
0.07
10.49
0.03
0.23
0.25
0

6.23
13.86
3.97
106.52
0.85
7.15
10.19
2.95

6.48
14.39
4.04
117.01
0.88
7.39
10.44
2.95

Table 2

*For activities excluded in Sample Survey of fourth All India Census of MSME,
Unregistered sector (Retail / Wholesale Trade Establishment, General Merchandized Stores,
Sale Outlets for industrial components, Legal Services, Educational Services, Social Services,
Hotels & Restaurants ,Transport , Storage & Warehousing (except Cold Storage) ) data were
taken from Economic Census-2005, Central Statistics Office of Ministry of Statistics and
Programme Implementation. (Annual Report 2012-2013 M/o MSME)
2013-14
Division

2012-13

2014-15

2015-16

2016-17

2012-17

(Proposed)
DC-MSME

870.00

2,204.37

2,422.59

2,624.31

2,762.73

10,884.00

SME

265.00

333.00

304.00

324.00

309.00

1,535.00

ARI

1,700.00

2,726.22

2,426.26

2,426.26

2,426.26

11,705.00

2,835.00

5,263.59

5,152.85

5,374.57

5,497.99

24,124.00

TOTAL (M/o
MSME)

Table 3: Plan Allocation for M/o MSME XII Plan (2012-13 to 2016-17)

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With their share of India's exports having declined from 46.2 per cent in 2009-10 to 43 per
cent in 2012-13, India's micro, small and medium enterprises (MSMEs) appear to be losing
their edge in world markets."While the dip in exports is chiefly attributed to the continuing
contraction of global markets, Indian industry is aware that inadequate market development,
limited R&D and innovation, and physical infrastructure bottlenecks have also contributed to
the slowdown ,"Over the years Indian MSME manufacturers of items like readymade
garments, leather goods, processed foods, engineering items, and sports goods have captured
a sizeable share of global markets, but a lot more needs to be done, he noted.

Table 4
The main markets for the 20 most-exported product groups, accounting for more than 90 per
cent of MSME exports between 2009 and 2012, include the US, EU, UAE, Turkey,
Singapore, Hong Kong, Israel and Saudi Arabia. Industry believes that Indian MSMEs need
to diversify their export destinations and gain a larger share of emerging markets as well.

8. Importance Of MSME Sector In India:


Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and
dynamic sector of the Indian economy over the last five decades. MSMEs not only play
crucial role in providing large employment opportunities at comparatively lower capital cost
than large industries but also help in industrialization of rural & backward areas, thereby,
reducing regional imbalances, assuring more equitable distribution of national income and
wealth. MSMEs are complementary to large industries as ancillary units and this sector
contributes enormously to the socio-economic development of the country.

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The development of the micro, small and medium enterprises (SME) sector is on the priority
of Government Agenda. As per the Results-Framework Document (RFD) for Ministry of
Micro, Small and Medium Enterprises (2012-2013), the Mission of the government is to
Promote growth and development of globally competitive Micro, small and Medium
Enterprises, including Khadi, Village and Coir industries, in cooperation with concerned
Ministries / Departments, State Governments and other stakeholders by providing support to
existing enterprises and encouraging creation of new enterprises. To endeavor to achieve a
cumulative growth of 40%- 50% in the number of registered enterprises by the end of 12th
Plan and enhance this sector's contribution to GDP from the present 8% to 10% by the end of
12th Plan.
The role of micro, small and medium enterprises (MSMEs) in the economic and social
development of the country is well established. As per the Report of the Working Group on
Micro, Small and Medium Enterprises (MSMEs) Growth for 12th Five Year Plan (20122017), the sector accounts 45% of the manufacturing output and 40% of total exports of the
country. The sector provides employment to about 69 million persons through 26 million
enterprises throughout the country. Over 8000 products ranging from traditional to high-tech
items are being manufactured by the MSMEs in the country. The labour to capital ratio in
MSMEs and the overall growth in the sector is much higher than in the large industries. The
geographic distribution of the MSMEs is also more even. Thus, MSMEs are important for the
national objectives of growth with equity and inclusion.
Over the years, the small scale sector in India has progressed from the production of simple
consumer goods to the manufacture of many sophisticated and precision products like
electronics control systems, micro wave components, electro medical equipments, etc. The
process of economic liberalization and market reforms has further exposed these enterprises
to increasing levels of domestic and global competition.
The MSME sector in India is highly heterogeneous in terms of the size of the enterprises,
variety of products and services produced and the levels of technology employed. While one
end of the MSME spectrum contains highly innovative and high growth enterprises, more
than 94% of MSMEs are unregistered, with a large number established in the informal or
unorganized sector. The sector has a high growth potential and performs a critical role in the
manufacturing and value chains. Micro, small and medium enterprises (MSME) sector is

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characterized by low investment requirement, operational flexibility and location wise


mobility.
As per the quick estimates of 4th All-India Census of MSMEs, the number of enterprises is
estimated to be about 26 million and these provide employment to an estimated 60 million
persons. Of the 26 million MSMEs, only 1.5 million are in the registered segment while the
remaining 24.5 million (94%) are in the unregistered segment.
The State-wise distribution of MSMEs show that more than 55% of these enterprises are in 6
States, namely, Uttar Pradesh, Maharashtra, Tamil Nadu, West Bengal, Andhra Pradesh and
Karnataka. Further, about 7% of MSMEs are owned by women and more than 94% of the
MSMEs are proprietorships or partnerships.
MSMEs in the country manufacture over 8,000 products. Some of the major subsectors in
terms of manufacturing output are food products (18.97%), textiles and readymade garments
(14.05%), basic metal (8.81%), chemical and chemical products (7.55%), metal products
(7.52%), machinery and equipments (6.35%), transport equipments (4.5%), rubber and plastic
products (3.9%), furniture (2.62%), paper and paper products (2.03%) and leather and leather
products (1.98%).
The importance and contribution of the SME sector to the economic growth and prosperity is
well established. Towards this, Government's policy initiatives like enactment of the Micro
Small and Medium Enterprises Development (MSMED) Act, 2006, pruning of reserved SSI
list, advising Financial Institutions to increase their flow of credit to the SME sector, are all
initiatives towards boosting entrepreneurship, investment and growth. Reservation of items
for exclusive manufacture in MSME sector statutorily provided for in the Industries
(Development and Regulation) Act, 1951, has been one of the important policy measures for
promoting this sector.

9. Major Issues Concerning The MSME Sector:


The MSMEs continue to face several problems in their day-to-day operations, that is, in
production and marketing of their products. They find it difficult to sell their output at
remunerative prices and cannot spend much on advertising, marketing research, etc. They
also face stiff competition from large firms. Inadequate infrastructural facilities and access to
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credit are other major problems. MSMEs are often unable to procure adequate financial
resources for the purchase of machinery, equipment and raw materials as well as for meeting
day-to-day expenses. Further, they find it difficult to recruit and motivate skilled managerial
and technical personnel. They are mainly reluctant to adopt modern methods of organisation
and management.
As per the Report of the Subgroup on Unorganized Sector (of the Working Group on MSMEs
Growth during 12thPlan), although Indian MSMEs are a diverse and heterogeneous group,
they face some common problems, which are briefly indicated below:
i.

Lack of availability of adequate and timely credit;

ii.

High cost of credit;

iii.

Collateral requirements;

iv.

Limited access to equity capital;

v.

Problems in supply to government departments and agencies;

vi.

Procurement of raw materials at a competitive cost;

vii.

Problems of storage, designing, packaging and product display;

viii.

Lack of access to global markets;

ix.

Inadequate infrastructure facilities, including power, water, roads, tc.;

x.

Low technology levels and lack of access to modern technology;

xi.

Lack of skilled manpower for manufacturing, services, marketing, etc.;

xii.

Multiplicity of labour laws and complicated procedures associated with compliance of


such laws;

xiii.

Absence of a suitable mechanism which enables the quick revival of viable sick
enterprises and allows unviable entities to close down speedily; and Issues relating to
taxation, both direct and indirect, and procedures thereof

xiv.

Lack of Social Security

A prominent drawback of the MSME sector is that a predominant number (94%) of the
enterprises are in the unorganized sector. Due to this, there is lack of reliable and updated
database and it hampers monitoring of development initiatives and formulation of appropriate
schemes to meet the differential needs of the heterogeneous profile of the enterprises. One of
the major problems facing these enterprises is the access to equity and credit. Most of the
time, the equity is coming from savings and loans from friends and relatives rather than
through banking systems. Very often, the credit is coming from operations or domestic
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savings rather than established systems of cheap banking credit for working capital. This
sector also has poor paying capacity and therefore faces shortage of skilled manpower
resulting in absence of managerial capabilities, marketing channels and brand building
capacity.
Despite its commendable contribution to the Nation's economy, SME Sector does not get the
required support from the concerned Government Departments, Banks, Financial Institutions
and Corporate, which is a handicap in becoming more competitive in the National and
International Markets.
SMEs face a number of problems - absence of adequate and timely banking finance, limited
capital and knowledge, non-availability of suitable technology, low production capacity,
ineffective marketing strategy, identification of new markets, constraints on modernisation &
expansions, non availability of highly skilled labour at affordable cost, follow up with various
government agencies to resolve problems etc.
9.1. Key Challenges:
i. Access to finance
ii. Access to markets
iii. Access to infrastructure
iv. Access to people
v. Access to technology & environmental constraints
vi. Issues regarding regulatory facilitation
Despite the various challenges it has been facing, the MSME sector has shown admirable
innovation, adaptability and resilience to survive the recent economic downturn and recession
9.2. Government Panel To Look Into Problems Of MSMEs:
The Micro, Small and Medium Enterprises (MSMEs) constitute an important segment of the
Indian economy in terms of their contribution to countrys industrial production, exports,
employment and creation of entrepreneurship base. The primary responsibility for promotion
and development of MSMEs lies with State Government. However, the government of India
has always taken active interest in supplementing the efforts of the State Governments. The
future of MSMEs is of major policy concern given their strategic importance in any
discussion of reshaping the industrial sector .This is more so in case of India, which has one
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of the longest histories of government support to the sector since independence compared to
most developing countries. The government has formed a committee to look into the
problems affecting the country's micro, small and medium enterprises (MSMEs). This has
been done in view of the decision that all government entities must source 20 per cent of their
requirements from small-scale units from next year.
"The government has formed a committee under the secretary MSME, which will review all
the problems being faced by small-scale units and give its recommendations," Mr. Jasbir
Singh, general manager of the state-run National Small Industries Corp (NSIC) said here
today at a Federation of Indian Chambers of Commerce and Industry (FICCI)-organised
seminar on MSMEs.
"From 1 April 2015 it will be mandatory for all government departments to implement the
public procurement policy by which 20 per cent of all government and public sector unit
procurements have to be from SSI (small scale industry) units," he added.
Currently, though every ministry except Defense is required to procure a minimum of 20 per
cent of annual value of goods and services from micro and small enterprises, many ministries
are yet to come up with procurement plans.
The government has thus started a review of the public procurement policy both at the
national and state levels. Mr. Singh said there are 350 items reserved under the government's
procurement policy by which it can only source these items from small units. Speaking
earlier, president of FICCI's MSME cell Mr. Sanjay Bhatia said the chamber would provide
members cost-effective, quality MSME insurance services
9.3. Suggestion For Improvement:
i. Involvement of Stakeholders:
ii. Awareness creation:
iii. Information dissemination:
iv. Provide special incentives for encouraging larger flow of capital:

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10. Conclusion:
In nutshell we can say that Micro, Small and Medium Enterprises (MSMEs) have emerged as
an engine of growth in Indian economy. They have emerged as a vibrant and dynamic
component of the economy by virtue of their significant contribution to GDP, industrial
production and exports. However, the most important contribution of this sector is towards
employment generation which is second only to agriculture in India. The experiences of
recent years shows that employment in agriculture sector has been declining as well as large
industries are also experiencing jobless growth. In such a situation, the main responsibility
for job creation rests with unorganized sector including small and medium enterprises and the
service sector. To face the competition in the long run and to be economically viable, the
MSME sector needs to improve its productivity and quality, reduce costs (given the higher
qualities) and innovate. Government policy should promote MSMEs by helping them to
increase their efficiency and competitiveness within a market driven economy. For this it is
essential that these enterprises no longer follows a protectionary stance, as that has already
been shown to be harmful to the sector. In order to prevent the major sickness in MSME
sector, new approaches like the cluster approach or harnessing the power of industry
associations should be encouraged. Undoubtedly the MSME sector has enormous potential,
and is a crucial aspect of the Indian economy. However it is essential on the part of the
government to take careful decisions and honest policy implementation to overcome the
problems of MSME sector. A technologically vibrant, internationally competitive small and
medium industry should be encouraged to emerge, to make a sustainable contribution to
national income, employment and exports. It is imperative to take care of MSME sector to
enable it to take care of the Indian economy. MSMEs need to be completely aware of the
various initiatives by the Government and correctly utilize these to their benefits. One of the
key constraining factors becomes awareness and therefore lack of knowledge to utilize these
effectively. Further, the Government schemes must be monitored and effectively modified to
suit the needs to the MSME industry To empower the MSME sector to take its rightful place
as the growth engine of Indian economy, it is necessary to support the MSMEs educate and
empower them to make optimum utilization of the resources, both human and economic, to
achieve success. Under the changing economic scenario the MSMEs have both the
opportunities and challenges before them.

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