BIMS International Journal of Social Science Research ISSN 2455-4839

GROWTH OF MICRO, SMALL AND MEDIUM ENTERPRISES

(MSMEs) IN INDIA

Dr.S.KISHORE
Associate Professor, Dept. of Management Studies
Siddharth Institute of Engineering and Technology, Andhra Pradesh.
kishore.somalaraju@gmail.com

Abstract
The concept of Micro, Small and Medium Enterprises (MSMEs), including khadi and
village/rural enterprises, credited with generating the highest rates of employment
growth, account for a major share of industrial production and exports. They also play a
key role in the development of economies with their effective, efficient, flexible and
innovative entrepreneurial spirit. The socio-economic policies adopted by India since the
Industries (Development and Regulation) Act, 1951 have laid stress on MSMEs as a
means to improve the country’s economic conditions. In this paper a detailed analysis
made to covers the performance and growth of MSMEs in India.

Key Words: Growth of MSMEs, Performance of MSMEs

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BIMS International Journal of Social Science Research
INTRODUCTION
The Micro, Small and Medium
Enterprises (MSMEs) have been accepted as
the engine of economic growth and for
promoting equitable development. The
major advantage of the sector is its
employment potential at low capital cost.
The labour intensity of the MSME sector is
much higher than that of the large
enterprises. The MSMEs constitute over
90% of total enterprises in most of the
economies and are credited with generating
the highest rates of employment growth and
account for a major share of industrial
production and exports. In India too, the
MSMEs play a pivotal role in the overall
industrial economy of the country. In recent
years the MSME sector has consistently
registered higher growth rate compared to
the overall industrial sector. With its agility
and dynamism, the sector has shown
admirable innovativeness and adaptability to
survive the recent economic downturn and
recession.
As per available statistics (4th Census
of MSME Sector), this sector employs an
estimated 59.7 million persons spread over
26.1 million enterprises. It is estimated that
in terms of value, MSME sector accounts for
about 45% of the manufacturing output and
around 40% of the total export of the
country (Fourth All India Census of
MSMEs, 2006-2007, Govt. of India, New
Delhi).
The micro, small and medium
enterprises (MSME) sector contributes
significantly to the manufacturing output,
employment and exports of the country. It is
ISSN 2455-4839
estimated that in terms of value, the sector
accounts for about 45 per cent of the
manufacturing output and 40 per cent of the
total exports of the country. The sector is
estimated to employ about 59 million
persons in over 26 million units throughout
the country. Further, this sector has
consistently registered a higher growth rate
than the rest of the industrial sector. There
are over 6000 products ranging from
traditional to high-tech items, which are
being manufactured by the MSMEs in India.
It is well known that the MSME sector
provide the maximum opportunities for both
self-employment and jobs after agriculture
sector.
Growth Pattern of MSMEs in INDIA
MSMEs are often said to grow faster than
large firms. However, empirically it is
observed that though they have high growth
rates, they as a group have a high death rate,
that is, many firms do not last very long.
This means that the total effect on the
economy may not be much greater than that
of relatively larger firms. The performance
of the MSMEs at national level, which was
evaluated in terms of parameters like
number of units (both registered and
unregistered), production, employment, and
exports, helped to understand the role of
economic development.
Growth rate of MSME Sector in
comparison with the Overall Industrial
Sector
The table No.1 gives the details of
the growth rate of MSME sector when
compared with the overall industrial sector.
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BIMS International Journal of Social Science Research ISSN 2455-4839

The MSME sector has consistently Source: Annual Reports of Ministry of

registered a higher growth rate than the MSME for the year 2005-06 to 2010-11
overall growth of industrial sector as can be
seen from the table no. given below: It could be inferred from the table
no.1 that, the MSMEs have registered rapid
Table No. 1 growth over the years. The growth rate of
Comparative Growth rate of MSME overall industrial sector was recorded as 4.1
sector to Overall Industrial Sector during percent during the year 1998 – 1999. In the
1998-2010 case of total industrial sector, growth rate in
India was 4.1 percent during 1998-1999, but
Growth rate
Growth Rate it was increased to 11.60 during 2006-2007.
of overall
Year of MSME The growth rate of MSMEs was 8.50
Industrial
sector (%) percent during 2007– 2008, but rapidly
Sector (%) increased to 13.00 percent during 2007 -
1998- 2008.
7.8 4.1
1999
1999- It has been observed that the growth
7.1 6.7
2000 of total industrial sector was 7.8 percent
2000- during 1998 to 1999 and stood at 10.40 per
8.0 5.0
2001 cent in the latest year 2009-2010. At the
2001- same time, the MSME sector has also shown
6.1 2.7
2002 good growth 13.00 per cent in the year
2002- 8.68 5.70 2007-2008. To conclude, in recent years the
2003 MSME sector has consistently registered
2003- 9.64 7.00 higher growth rate compared to the overall
2004 industrial sector.
2004- 10.88 8.40
Contribution of MSMEs in the Gross
2005
Domestic Product (GDP)
2005- 12.32 8.20
2006 The below table No.2 exhibits the
2006- 12.60 11.60 contribution of MSMEs in the Gross
2007 Domestic Product (GDP) during 1999 to
2007- 13.00 8.50 2009.
2008
2008- NA 2.80
2009
2009- NA 10.40
2010
Note : The data for the period up to 2005-
2006 is small scale industries (SSI).

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 BIMS International Journal of Social Science Research ISSN 2455-4839

Table No.2 contribution of the SSIs/MSMEs from 2000

Contribution of MSMEs in the Gross to 2006 at 38.56 per cent. And it has raised
Domestic Product (GDP) During 1999- during 2006-2007 to 45.62 per cent and
2009 again a decreasing trend is noticed in the
years of 2007-08 at 45.24 per cent and again
Contribution of MSMEs (%) at in 2008-09 at 44.86 per cent. This sector’s
1999-2000 prices in contribution to the Gross Domestic
Year Total Production was 5.86 per cent in the year
Gross Domestic
Industrial 1999-2000 and it decreased to 5.83 per cent
Product ( GDP)
Production in the year 2005-2006. Again it increased to
1999- 7.20 per cent in the year 2006-2007 and
39.74 5.86
2000 stood at 8.72 per cent in the year 2008-2009.
2000- It indicates ups and downs in the
39.71 6.04
2001 contribution of the SSI to the GDP between
2001- the years 1999-2000 and 2008-2009. The
39.12 5.77
2002 LGR and CGR are not significant in case of
2002- both total industrial production and gross
38.89 5.91
2003 domestic product (GDP).
2003- Growth of MSMEs in India
38.74 5.79
2004
2004- The table no. 3 gives the details of
38.62 5.84 growth of SSI/MSMEs units in India. The
2005
2005- Table No.3 depicts the growth of
38.56 5.83 SSIs/MSMEs registered in the year 1992-
2006
2006- 1993 as 73.51 lakh units. And it has
45.62 7.20 increased and stood at 261.01 lakh units in
2007
2007- the year 2006-07 and the increasing trend is
45.24 8.00 seen at 298.08 lakh units in the year 2009-
2008
2010. And, in terms of value, production in
2008-
44.86 8.72 1992-1993 aggregated to Rs.84413 crores
2009
and increased to Rs.790759 crore in the year
LGR 1.721 4.331
2007-2008. The export performance of
CGR 1.676 4.093 MSMEs during 1992-1993 was Rs. 17784
The data for the period up to 2005-2006 is crores. The MSMEs are an important source
small scale industries (SSI). of employment in many developing nations,
Source : MSME Annual Report, 2010-11, often employing a sizable share of the labor
Govt. of India. force. However, it is often suggested that
As the table no. 2 shows, the share of small firms are more labor intensive, and,
MSMEs in the total industrial production therefore, should be encouraged as a way of
was 39.74 per cent in the year 1999-2000. A generating employment.
decreasing trend is noticed in the

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BIMS International Journal of Social Science Research ISSN 2455-4839

Table No. 3
Performance of MSMEs in India: Units, Investment, Production, Employment &
Exports, 1992-2010
Sl. No Year Total Fixed Production Employment Exports
MSMEs Investment (Rs. in crore) (lakh person) (Rs. crore)
(in lakh.) (Rs. in crore)
1 1992-93 73.51 109623 84413 174.84 17784
(4.05) (9.24) (4.71) (5.33) (28.10)
2 1993-94 76.49 115795 98796 182.64 25307
(4.19) (5.63) (17.04) (4.46) (42.30)
3 1994-95 79.60 123790 122154 191.40 29068
(5.17) (6.9) (23.64) (4.79) (14.86)
4 1995-96 82.84 125750 147712 197.93 36470
(6.02) (1.58) (20.92) (3.42) (25.46)
5 1996-97 86.21 130560 167805 205.86 392.48
(6.27) (3.82) (13.60) (4.00) (7.62)
6 1997-98 89.71 133242 187217 213.16 44442
(7.07) (2.05) (11.57) (3.55) (13.23)
7 1998-99 93.36 135482 210454 220.55 48979
(7.87) (1.68) (12.41) (3.46) (10.21)
8 1999-00 97.15 139982 233760 229.10 54200
(4.07) (3.32) (11.07) (3.88) (10.66)
9 2000-01 101.1 146845 261297 238.73 69797
(4.07) (4.90) (11.78) (4.21) (28.78)
10 2001-02 105.21 154349 282270 249.33 71244
(4.07) (5.11) (8.03) (4.44) (2.07)
11 2002-03 109.49 162317 314850 260.21 86013
(4.07) (5.16) (11.54) (4.36) (20.73)
12 2003-04 113.95 170219 364547 271.42 97644
(4.07) (4.87) (15.78) (4.31) (13.52)
13 2004-05 118.59 178699 429796 282.57 124417
(4.07) (4.98) (17.90) (4.11) (27.42)
14 2005-06 123.42 188113 497842 294.91 150242
(4.07) (5.27) (15.83) (4.37) (20.76)
15 2006-07 261.01 500758 709398 594.61 182538
(111.48) (166.20) (42.49) (101.62) (21.50)
16 2007-08 272.79 558190 790759 626.34 202017
(4.51) (11.47) (11.47) (5.34) (10.67)
17** 2008-09 285.16 621753 880805 659.35 N.A.
(4.53) (11.39) (11.39) (5.35)
18** 2009-10 298.08 693835 982919 695.38 N.A.
(4.53) (11.59) (11.59) (5.47)
LGR 9.109 12.010 13.061 8.878 14.989
CGR 8.466 10.681 14.998 8.260 21.879
** Projected (Source: S&D Division – Office of the DC (MSME))
Source : MSME Annual Report, 2010-11, Govt. of India.

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The figures in brackets show the percentage The compound growth rate of
growth over the previous year. exports 21.879 was substantially higher and
(Note : The data for the period up to this provided momentum to the growth of
2005-06 is of Small-Scale Industries (SSI). employment, production and investment of
subsequent to 2005-06, data with reference MSMEs. Investments also grow at a
to Micro, Small and Medium Enterprises compound rate of 10.681 per cent and also
(MSMEs) are being compiled.) the employment rose at the rate of 8.260.
Therefore, the number of enterprises in
The total number of employees in the MSMEs registered a growth rate of 8.466
MSMEs in India during 1992-1993 was per cent.
174.84 lakhs. During 2007 - 2008, it
increased to Rs. 626.34 lakhs. Pearson product movement
correlation has been computed to analyse the
growth of MSMEs in India and the results
are presented table no. 4.
Table No. 4
Results of Correlation for the growth of MSMEs in India: Units, Investment,
Production, Employment & Exports, 1992-2010

Fixed
Investment Production Employment Exports
(Rs. In (Rs. Crore) (Lakh person) (Rs. Crore)
crore)
Total MSMEs (in Pearson Correlation 0.993(**) 0.970(**) 1.000(**) 0.883(**)
Lakh ) p-value 0.000 0.000 0.000 0.000
Fixed Investment Pearson Correlation 1 0.958(**) 0.994(**) 0.847(**)
(Rs. In crore) p-value .000 0.000 0.000
Production (Rs. Pearson Correlation 1 0.973(**) 0.978(**)
Crore) p-value 0.000 0.000
Employment Pearson Correlation 1 0.889(**)
(Lakh person) p-value 0.000
** Correlation is significant at the 0.01 level (2-tailed).

The above results show that there
exists the highest positive correlation
between total MSMEs and fixed investment
at 0.993 followed by total MSMEs and
production at 0.970, total MSMEs and
employment at 1 and total MSMEs and
exports at 0.883. Similarly, highest positive
correlation at 0.994 is observed between
fixed investment and employment followed
by fixed investment and exports at 0.847.
Moreover, the correlation is the highest
between production and exports at 0.978 and

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BIMS International Journal of Social Science Research
production and employment at 0.973. The
results also show that there is high positive
correlation observed between employment
and exports at 0.889.
SUMMARY AND SUGGESTIONS
The summary of the study helped to
conclude that the MSME sector plays a
unique role in the socio-economic
development of any country. A comparison
of the growth rate of the MSME sector with
that of the overall industrial sector in India
indicates that MSMEs have registered a high
growth rate which increased from 7.8 to
13.0 per cent during the period 1998-2008.
Similarly growth rate of overall industrial
sector also increased from 4.1 to 8.50 per
cent.
The study found that the share of
MSMEs in the total industrial production
was 39.74 per cent in the year 1999-2000
and it has increased during 2006-2007 to
45.62 per cent and stood at 44.86 per cent in
the year 2008-2009. It is also observed that
the contribution of MSMEs in the GDP
increased from 5.86 to 8.72 per cent. Hence,
there is a significant contribution of MSMEs
sector in the nation economy.
The analysis of the growth of the
MSMEs in India in terms of number of
units, fixed investment, production,
employment and exports indicates that these
units’ compound growth rate of exports is at
21.88 which is substantially higher this
provided a momentum to the growth of
employment, production and investment of
MSMEs. Also it grew at a compound rate of
10.68 per cent in the fixed investments and
ISSN 2455-4839
the employment rose at the compound
growth rate of 8.26 per cent.
Therefore, the number of enterprises
in MSMEs registered a high growth rate of
8.47 per cent. In the present empirical study
the growth in MSMEs observed from 1992
to 2010, and it is interesting to note that the
growth upto 2006 was very low. Thereafter
the growth rate is high due to bringing of all
categories of SSIs under the umbrella of
MSMEs.
The study of the growth of the
MSMEs in India in terms of units, fixed
investment, production and exports revealed
that highest positive correlation observed
among total MSMEs with fixed investment
stood at 0.993, production stood at 0.970,
employment perfectly stands at 1 and
exports stood at 0.883.
Similarly highest positive correlation
is observed in the case of fixed investment
and employment which stood at 0.994,
exports stood at 0.847. Moreover, the
correlation is highest between production
and exports and stands at 0.978 which
correlation between production and
employment stands at 0.973. It is also
observed from the statistical analysis that a
positive growth in production, investment
and employment could be seen.
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REFERENCES Fourth all India Census of MSMEs, 2006-

2007, Govt. of India, New Delhi
APO Report (2007). Entrepreneurship http://awakeindia.org.in/
Development for Competitive SMEs, http://www.aleap.org/
p.25. http://www.cwei.org/aboutus.html
APSFC, Annual Report, 2010-11 Small Industry, August 2007
APSFC, Annual Report, 2010-11, p.6
APSFC, Annual Report, 2010-11, p.13
http://smallindustryindia.com http://apind.gov.com
http://smallindustryindia.com and Andhra
Pradesh State Focus Paper 2006-07, p.45.

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