- The editorial discusses the recent expansion of investment and turnover limits for Micro, Small, and Medium Enterprises (MSMEs) in India.
- Highlights the need for deeper policy interventions and structural reforms to tackle persistent challenges faced by the MSME sector.
Key Points
Importance of MSMEs
- Employment Generation:
- MSMEs are the largest source of non-agricultural employment in India, employing nearly 7.5 crore people.
- They support inclusive growth, particularly for semi-skilled and unskilled workers.
- Contribution to GDP:
- MSMEs contribute about 30% of India’s total GDP.
- They account for 45% of manufacturing output.
- Boosting Exports:
- MSMEs play a crucial role in global trade, representing 45.73% of India’s total exports in 2023-24.
Recent Reforms
- Revised Classification:
- Investment limits raised to Rs 2.5 crore for micro, Rs 25 crore for small, and Rs 125 crore for medium enterprises.
- Government Initiatives:
- Programs like PM Vishwakarma Scheme, Mudra Yojana, and the Udyam portal have bolstered self-employment and formalization.
- Expansion of Digital MSME 2.0 to enhance technological integration.
Challenges Facing MSMEs
- Limited Access to Credit:
- Only 20% of MSMEs have access to formal credit.
- Delayed payments from larger corporations contribute to severe cash flow issues, totaling around ₹10.7 lakh crore in delayed payments.
- Regulatory Burden:
- Cumbersome regulatory processes and high compliance costs hinder MSME growth.
- The Economic Survey 2024-25 calls for urgent deregulation.
- Skilled Workforce Shortage:
- Only 6% of MSMEs use e-commerce platforms, indicating low digital adoption.
- Infrastructure Bottlenecks:
- Poor connectivity and high logistics costs impede competitiveness.
- Limited access to high-speed internet restricts technological leverage.
Measures for Revamping MSMEs
- Strengthening Credit Access:
- Expand collateral-free lending and establish an MSME Credit Monitoring Cell.
- Streamlining Regulations:
- Implement single-window clearance and self-declaration mechanisms for minor regulatory filings.
- Enhancing Market Access:
- Promote export-oriented MSMEs and improve e-commerce integration.
- Boosting Technological Adoption:
- Facilitate the adoption of AI and automation through tech hubs.
- Supporting Women Entrepreneurs:
- Increase credit guarantees for women-led MSMEs and enhance market access through government platforms.
Way Forward
- The MSME sector is vital for India’s economic growth, requiring targeted policy interventions and structural reforms.
- Emphasis on formalization, sustainability, and enhanced market access will unlock the sector’s full potential, contributing to long-term economic development.