abinash phulkonwar

2024-04-03

MSME:

Micro, small, medium, enterprise

The MSME is largely used to describe a small business in the private sector.

Enterprise:

manufacturing unit produce goods.

service sector, where items not manufacture, only service provides.

some entity provide service and manufacture goods.

any of these can be called enterprise.

importance:

  • 90% of the industrial units are MSME.
  • 40% of the manufacturing units (industrial output)
  • 11 crore employment opportunities
  • annual growth of 10%
  • employment with low capital and technology in the rural
  • 40% share in exports

Definition:

under MSME act 2006 (2018 amendment)

Micro:

  • under 2006
  • investment in manufacturing -> 25 lakh
  • investment in service -> 10 lakh
  • under 2018 -> annual turnover -> all -> 5 crore

Small:

  • under 2006
  • investment in manufacturing -> 25 lakh to 5 crores
  • investment in service -> 10 lakh to 2 crores
  • under 2018 -> annual turnover -> all -> 5 to 75 crores.

Medium:

  • under 2006
  • investment in manufacturing -> 5 to 10 crores
  • investment in service -> 2 to 5 crores
  • under 2018 -> annual turnover -> all ->75 to 250 crores.

Features:

  • Limited Investment:In MSMEs, particularly micro and small enterprises, capital is supplied by an individual or a small group of individuals. As per a census of small scale units in India, micro and small business enterprises are run mostly as sole- proprietorship or partnership model. 
  • Personal Character/Owner-Management:A micro and small businesses are identified with its owners; who themselves act as managers. Managers as such have maximum motivation to work; as they themselves happen to be the owners also. 
  • Labour-Intensive:Micro and small enterprises are fairly labour intensive with comparatively smaller capital investment than the larger units. With any given investment, employment possibilities would be greater in comparison with the corresponding factory system. 
  • Unorganized Labour:Micro and small business enterprises employ less number of workers as compared to big business enterprises. Workers of these units do not form labour unions and remain unprotected. 
  • Local Area of Operations:The area of operations of micro and small enterprises is generally local as they have less capital and less marketing facilities at their disposal. There is a local touch between employer and employees and between employer and customers. These days products of some small scale enterprises are also exported to many countries of the world. 
  • Flexibility: MSMEs are more adaptable to the changing business environment. So in case of amendments or unexpected developments, they are flexible enough to adapt and carry on, unlike large industries. 
  • Use of Local Resources: Micro and small business units use indigenous resource. As a result they can be located anywhere subject to the availability of these resources like raw materials, labour etc.
  • Gestation Period: Compared to large units, a micro industrial unit has a lesser gestation period, i.e. the period after which the return on investment starts.
  • Sustainable Development Goals (SDGs): MSMEs are best suited as compared to large enterprises for achieving the SDGs such as creation of employment to lift people out of poverty

Challenges:

  • investment -> not enough funding to all of the MSME.
  • MSME lacks the collateral.
  • Non-Access to share market
  • competition: competition with big business
  • not have enough funds -> as MSME are depends on market for manufacturing new goods, as they can only produce new goods as they get money from the market from the products. whereas big business has enough money in their hands that they can started producing new goods without waiting for the money to comes back from the market that they invest to produce goods that are currently in the market. this continuity of production is a big challenge for MSME's.
  • Not have access to the skill manpower, as big business has them.
  • lack of infrastructure: not having the necessary infrastructure to produce or provide business services or goods. whereas big business has the infrastructure that required for the business to run in smooth manner.
  • lack of technology: not having the access to top tier technology and not have much innovation.
  • MSME -> more sensitive towards society and market. market and social structure and environment have more impact on them compared to big business. for instance, in lockdown, there are high changes that a MSME will need to stop business sooner compared to a big business. not have enough social security (business and employees)
  • Backward and forward linkage issue: not able to link the raw materials to market. means input component or element are not synchronized with the output of the enterprise.

Government efforts to improve MSME:

  • Ministry
  • act, 2006
  • Priority sector loans, (RBI regulation -> small is better -> 40% should be given to priority sector -> 18% agriculture, 10% weaker section, 12% MSME)
  • Mudra scheme
  • Credit guarantee fund.
  • PM employment generation program
  • 25% of procurement by the PSU's, central ministry, departments are reserved for the Micro and small enterprise.
  • National SC/ST hub -> government support/promote to MSME; government will procure from them (4% of 25%)
  • women -> own by women (3% of 25%)
  • zero effect and zero defect -> eco and bio friendly (MSME ministry promoting this type of MSME)
  • if annual turnover less then 2 crore -> only pay 1.5% GST -> GST Composition Scheme
  • Input tax credit -> government return the GST a enterprise paided to acquire the raw materials, when the enterprise pays the GST earn on selling goods or service to customers.
  • ASPIRE -> A Scheme for Promotion of Innovation, Rural Industries and Entrepreneurship -> ASPIRE center provides training on innovation (in the field of the concern industries of the participants), provides loans and grants and promote rural industries and entrepreneurship.
  • SFURTI -> Scheme of Fund for Regeneration of Traditional Industries -> promote traditional industries. It also makes cluster of many people who do traditional jobs -> it provides support and services to clusters.

Reference:

“UNIT 16 MICRO, SMALL AND MEDIUM ENTERPRISES.” eGyanKosh, https://egyankosh.ac.in/bitstream/123456789/84872/3/Unit-16.pdf. Accessed 8 April 2024.