Problems and Prospects of MSMEs in

India
Presented BY
Ravi Agarwal
Vijaya Kumar Bharatha
 Introduction
It is estimated that in terms of value, the sector accounts for
about 45 per cent of the manufacturing output and 40 percent of
the total exports of the country.
The sector is estimated to employ about 42 million persons in
over 13 million units throughout the country.
There are over 6000 products ranging from traditional to high-
tech items, which are being manufactured by the MSMEs in India.
Despite numerous protection and policy measures for the past so
many years, MSMEs have remained mostly small, technologically
backward and lacking in competitiveness.
At the beginning, small scale enterprises found it difficult to
survive. In the last decade, the economic environment has changed
in favour of SMEs. In this context, it is important to re-look into the
basic issues of MSMEs, past, present and future prospects,
especially in the policy framework.
Definition of Micro, Small and Medium Enterprises:
 SME’S IN DIFFERENT SECTORS OF INDIAN
INDUSTRY:
• Food Processing
• Agricultural Inputs
• Chemicals & Pharmaceuticals
• Engineering; Electricals; Electronics
• Electro-medical equipment
• Textiles and Garments
• Leather and leather goods
• Meat products
• Bio-engineering
• Sports goods
• Plastics products
• Computer Software, etc.
 Importance of MSMEs:

• Boosting industrial growth

• Inspiring Consumption and Social Change
• Increased Employment Opportunities
• Fuelling the local economy
• Discourages migration to urban areas
• Transition from Agriculture Economy to Service-
oriented one
Statistical Data Regarding MSMEs
Year wise growth of MSMEs in India(In Lakhs)
Employment in MSMEs (in Lakhs):
Fixed Investment in MSMEs Sector (In Crores)
Production in MSMEs Sector (in Crores)
Comparison of Growth rates of MSMEs and
Overall Industrial Sector (in %)
 Problems the MSMEs encounter include
• MSMEs primarily need access to new technologies
• Lack of access to timely and adequate credit. The overall credit
availability for MSMEs during 1991-1996 amounts to only 13% of
the value of production (AIMA figures)
• Low levels of R&D
• Insufficient Infrastructure
• Poor adaptability to changing trade trends
• Non-availability of technically trained human resources
• Lack of management
• Lack of product innovation
• Environmental Issues
• The other problems faced by the sector are laws relating to
controls, taxes, red tapism and compli­cated procedures
 Impact of Economical Crisis on MSMEs
• Weak demand and tight credit are the chief pressures
• creation and maintenance of productive employment
opportunities is under threat
• Micro-business startups are likely to increase as laid-off workers
and returning migrant workers seek to make a living.
• Employers' organizations and trade unions have added their voices
to the debate about appropriate crisis management measures.
• The International Labour Organization's Five Point Crisis response :
i) rapid assesments to pinpoint the constraints felt by MSMEs
ii) advice through examples on managing credit
iii) advice to policymakers on public procurement
iv) advice and training on business development services, notably
entrepreneurship and enterprise management training
v) advice and training on supporting small business associations to
take an active advocacy and support role during the crisis.
 Empowering MSMEs (Govt. Initiatives)
• In order to encourage R&D towards upgradation of technology for
micro, small and medium enterprise units, the RBI group pro­poses
that Section 10 (21) of the Income Tax Act may be amended to
allow 150 per cent deduction for contribution made towards
funding of R&D work in engineering institutes.
• subsidy scheme for MSMEs along the pattern of Technology
Upgradation Fund Scheme for technology upgradation and for
setting up new units with latest technology.
• The government needs to help them by approving stamp duty
exemptions, enhancing their image globally through trade fairs,
seminars and development programmes.
• The enactment of the Micro, Small and Medium Enterprises
Development (MSMED) Act, 2006 was a landmark initiative.
• Small Industry Development Organisa­tion (SIDO) has launched
Small Industry Cluster Development Programmes.
 Conclusion
In order to solve these problems and develop
the MSME sector, major efforts have been
done in the eleventh plan. However these
efforts are not enough. For the development
of rural and farm group, different
departments should be formed.