All you need to know about Government Scheme Launched for MSME in India

Micro, Small, and Medium Enterprises (MSMEs) are crucial for the economic growth of India as they contribute significantly to the country’s GDP and employment generation. According to the Ministry of MSME, there are around 63.4 million MSMEs in India that employ more than 111 million people. However, these enterprises face several challenges in terms of financing, marketing, and technology adoption. To address these issues, the government of India has launched several schemes and initiatives to support and promote MSMEs in the country. In this article, we will discuss about the Government Scheme Launched for MSME in India.

Meaning of MSME

The MSME sector in India includes micro, small, and medium-sized enterprises that are engaged in manufacturing, production, processing, or preservation of goods and services. As per the latest definition by the Ministry of MSME, micro-enterprises are those having investment up to Rs. 1 crore and turnover up to Rs. 5 crore; small enterprises are those having investment up to Rs. 10 crore and turnover up to Rs. 50 crore, and medium-sized enterprises are those having investment up to Rs. 50 crore and turnover up to Rs. 250 crore.

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Importance of MSME in India

MSMEs play a vital role in the Indian economy as they contribute significantly to GDP, exports, and employment generation. According to the Ministry of Micro, Small, and Medium Enterprises, the sector accounts for around 45% of the country’s industrial output, 30% of its exports, and employs over 110 million people. Furthermore, MSMEs promote entrepreneurship, innovation, and inclusive growth, and contribute to regional development by creating employment opportunities in rural and remote areas.

• Employment Generation: MSMEs are the largest employers in the country, providing employment to over 110 million people. They offer job opportunities to people living in rural areas, contributing to the development of the country’s economy.
• Industrial Output: MSMEs contribute significantly to the country’s industrial output, accounting for almost 30% of the GDP. They manufacture a wide range of products, including textiles, leather goods, food products, and engineering items, to name a few.
• Balanced Regional Development: MSMEs are widely distributed throughout the country, leading to balanced regional development. These enterprises provide opportunities for people living in remote areas to earn a livelihood and contribute to the country’s development.
• Entrepreneurial Development: MSMEs are an excellent platform for young entrepreneurs to start their businesses. These enterprises require low investment and provide an opportunity for people to start their businesses and become self-reliant.

Benefits of MSMEs

MSMEs receive several benefits from the Indian government, which helps them sustain and grow their businesses. Some of these benefits include:

• Easy Access to Credit: MSMEs face challenges in accessing credit due to their limited collateral and lack of financial records. To address this issue, the government has introduced various schemes, such as the Credit Guarantee Fund Trust for Micro and Small Enterprises, to provide collateral-free credit to MSMEs.

• Financial Assistance and Subsidies: The government provides various financial assistance and subsidies to MSMEs to support their growth and development. Some of these schemes include the Prime Minister’s Employment Generation Programme, the Micro and Small Enterprises Cluster Development Programme, and the Technology Up gradation Fund Scheme.

• Reservation Policy: The government has reserved certain products for exclusive manufacturing by MSMEs to promote their growth and development. This reservation policy ensures a continuous demand for MSME products, thereby increasing their profitability.

• Reduced Compliance Burden: MSMEs face numerous compliance requirements, which can be burdensome and time-consuming. To ease this burden, the government has introduced various measures, such as the Udyam Registration Portal, to simplify and streamline the compliance process.

Challenges faced by MSME in India

Micro, Small, and Medium Enterprises (MSMEs) in India have been playing a vital role in the country’s economic growth. They contribute significantly to the Gross Domestic Product (GDP) and employment generation, especially in rural areas. MSMEs play a crucial role in promoting entrepreneurship, innovation, and creating a competitive market. However, despite their significant contribution to the economy, MSMEs face numerous challenges, affecting their growth and development.

• Access to Finance: One of the most significant challenges that MSMEs face in India is access to finance. MSMEs face several difficulties in obtaining credit, primarily due to a lack of credit history, insufficient collateral, and higher interest rates. Even when loans are available, they are often provided for short tenures, which put undue pressure on MSMEs to pay back the loan quickly. The lack of access to finance is one of the most significant factors that hinder MSMEs’ growth and sustainability.

• Lack of Skilled Labor: Another challenge that MSMEs face in India is a lack of skilled labor. There is a significant mismatch between the skills required by MSMEs and the skills possessed by the labor force. This leads to a lack of productivity, quality, and efficiency in MSMEs, making them uncompetitive in the market. MSMEs also face difficulties in attracting and retaining skilled workers due to low wages and lack of job security.

• Inefficient Regulatory Framework: The regulatory framework for MSMEs in India is complex and bureaucratic. MSMEs face several regulatory hurdles, such as obtaining licenses and permits, complying with labor laws, and tax regulations. The cumbersome regulatory framework adds to the cost of doing business, making MSMEs less competitive.

• Inadequate Infrastructure: MSMEs face significant challenges in accessing adequate infrastructure, such as roads, power, and water supply. The lack of adequate infrastructure affects the efficiency and productivity of MSMEs, making them less competitive in the market. MSMEs in rural areas face more significant infrastructure challenges than those in urban areas.

• Limited Market Access: MSMEs in India face difficulties in accessing markets, especially for exports. The lack of market access limits their growth opportunities and makes them vulnerable to market fluctuations. MSMEs also face challenges in reaching customers due to the dominance of large corporations and lack of marketing skills.

Government Scheme Launched for MSME in India

According to the Ministry of MSME, there are around 63.4 million MSMEs in India that employ more than 111 million people. However, these enterprises face several challenges in terms of financing, marketing, and technology adoption. To address these issues, the government of India has launched several schemes and initiatives to support and promote MSMEs in the country. Some of the Government Scheme Launched for MSME in India is:

• Prime Minister’s Employment Generation Programme (PMEGP): The Prime Minister’s Employment Generation Programme (PMEGP) is a credit-linked subsidy scheme that aims to promote self-employment opportunities through the establishment of micro-enterprises in the non-farm sector. The scheme provides financial assistance for the establishment of new micro-enterprises and for the expansion of existing micro-enterprises. The scheme is implemented by the Ministry of MSME in collaboration with the Khadi and Village Industries Commission (KVIC) and the District Industries Centre (DIC).

• Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) is a scheme that provides collateral-free credit to MSMEs. The scheme provides a credit guarantee cover for loans up to Rs. 2 crore extended to MSMEs. The guarantee cover is up to 75% of the credit facility sanctioned.

• Technology Up gradation and Quality Certification (TEQUP) Scheme: The Technology Up gradation and Quality Certification (TEQUP) Scheme aims to facilitate the technological upgradation of MSMEs and promote the adoption of quality standards. The scheme provides financial assistance for the acquisition of plant and machinery and for the implementation of quality certification.

• National Small Industries Corporation Subsidy for Technology Up gradation (NSIC-STU): The National Small Industries Corporation Subsidy for Technology Up gradation (NSIC-STU) scheme provides financial assistance for the adoption of modern technology by MSMEs. The scheme provides a subsidy of 15% on the cost of eligible plant and machinery, subject to a maximum of Rs. 15 lakh.

• Micro and Small Enterprises Cluster Development Programme (MSE-CDP): The Micro and Small Enterprises Cluster Development Programme (MSE-CDP) aims to enhance the productivity and competitiveness of MSMEs by promoting cluster development. The scheme provides financial assistance for the formation of clusters, capacity building of stakeholders, infrastructure development, and the adoption of modern technology.

• National Manufacturing Competitiveness Programme (NMCP): The National Manufacturing Competitiveness Programme (NMCP) is a scheme that aims to enhance the competitiveness of the manufacturing sector, including MSMEs. The scheme provides financial assistance for technology upgradation, marketing, research and development, and energy efficiency.

• Bank Credit Facilitation Scheme: The Bank Credit Facilitation Scheme was launched to facilitate easy and timely availability of credit to MSMEs. Under this scheme, banks are required to give priority to MSMEs while sanctioning loans and setting up of a separate desk for MSMEs.

• Entrepreneurship Development Programme (EDP): The EDP scheme was launched to promote entrepreneurship among the youth in the country. The scheme provides training and counseling to potential entrepreneurs to help them set up and run their own businesses.

• Technology Up gradation Fund Scheme (TUFS): The TUFS scheme was launched to facilitate technology upgradation in the textile and jute industries. The scheme provides a subsidy of 15% on the capital investment made for technology upgradation in the textile and jute industries.

• National Small Industries Corporation Subsidy (NSIC): The NSIC subsidy scheme was launched to support MSMEs in the purchase of machinery and equipment. The scheme provides a subsidy of up to 15% of the purchase price of machinery and equipment to MSMEs.

• Credit Linked Capital Subsidy Scheme (CLCSS): The CLCSS scheme was launched to provide financial assistance for technology upgradation of MSMEs. The scheme provides a subsidy of up to 15% of the investment made in plant and machinery for technology upgradation.

Takeaway

The MSME sector is one of the critical drivers of India’s economic growth and development. The government has launched several schemes to support the growth of the MSME sector, including financial assistance, technology upgradation, and infrastructure development. These schemes have helped in creating employment opportunities and increasing the competitiveness of MSMEs in the global market. The government’s continued support and investment in the MSME sector will undoubtedly help in achieving India’s goal of becoming a $5 trillion economy by 2025.