Micro, Small and Medium Enterprises, also known as MSME, refers to those establishments where the funding in the machinery and the plant does not exceed Rs. 50 crores and the annual turnover is below Rs. 250 crores.
These are the organizations involved in the production of goods. They are further categorized based on the investment in the plant and machinery and the annual turnover.
These enterprises provide services and are further classified based on the investment in equipment and annual turnover.
Investment in Plant and Machinery or Equipment: Not more than Rs.1 crore and Annual Turnover; not more than Rs. 5 crore
Investment in Plant and Machinery or Equipment: Not more than Rs.10 crore and Annual Turnover; not more than Rs. 50 crore
Investment in Plant and Machinery or Equipment: Not more than Rs.50 crore and Annual Turnover; not more than Rs. 250 crore
MSMEs are a critical component of India’s economy and plans to enhance its position in global supply chains as the country looks to take on China. However, the government’s efforts to improve the global competitiveness of its MSMEs are still falling short despite their best efforts.
Under the Micro, Small, and Medium Enterprises Development Act, 2006, the Government of India established The National Board for Micro, Small, and Medium Enterprises (NBMSME) to examine the factors affecting the promotion and development of MSME. This board also reviews the existing policies and suggests recommendations to the Government for the growth of the MSME sector. The term Micro Small and Medium Enterprise (MSME) was launched to become an integral part of the supply chain for products and services; moreover, a creator of large-scale employment opportunities in rural India.
Also, MSMEs face legacy issues such as information asymmetry, non-registration of firms, inadequate and untimely credit, delayed receivables, technological obsolescence, negligible market linkages, absence of exit policy, etc. There are challenges hindering the growth of MSMEs —poor infrastructure, low productivity, lack of innovation, financial economic issues, access to finance for small firms, lack of working premises, and lack of management and technical skill. Majority of enterprises remain micro in their life cycle and are plagued with a lack of efficiency and low productivity. Critical to solving this puzzle is helping India’s MSMEs become more efficient using technology. Due to their informal nature, many Indian MSMEs cannot avail the full benefits of India’s focus on digitization.
There are about 7.9 million MSMEs in India. They play a key role in developing the Indian economy, contributing more than 29 percent to GDP from their domestic and international trade. As the MSMEs contribute around 30 per cent to India’s GDP, employ about 11 crore people, constitute nearly 40 per cent of total exports, and more than half of them are located in rural India, the government is keen to rev up this sector to achieve inclusive growth thereby attaining self-reliance (Atmanirbhar Bharat). To lend a helping hand to this sector, the government has come up with several schemes. These are in the form of credit and financial assistance, skill development and training, infrastructure support and technology upgradation.
The micro and small enterprises, when they gain the status of medium enterprises, they do not get the benefit of micro and small enterprises. These medium enterprises have to compete with large corporate houses because the legal framework for medium and large is the same. And the growth of already the cash-strapped MSMEs deteriorates. Enterprises that had gained the new status from Micro / Small to Medium can be granted the same benefits, extended for a minimum of five years so that they can compete with others in the same segment.
The scaling up of MSMEs is the key to enhancing productivity and achieving inclusive growth. In many countries, enabling MSMEs to seize growth opportunities over time is a policy priority to address low productivity growth and widening wage and income gaps. MSMEs, in general, lack internal financial strength as much as easily accessible external sources of capital. Resource deficiency in the MSME sector at large is largely perceived to be the major responsible factor for this. One way of dealing with resource deficiency is to encourage ‘digitalization’ through the adoption of ICT tools to aid production and marketing. Improved access to finance is needed to boost the widespread technological transformation of MSMEs across the country. Also, acquiring and retaining adequately talented human resources is a challenge for MSMEs.
The world is moving towards a clean, green, and lean corporate regime to achieve the triple bottom line of Planet, People, and Profits. Since India has a comparative advantage in services sector, entrepreneurs of MSMEs may be re-oriented in this direction to enhance export of services by capitalizing on the revised definition. However, balanced growth of agriculture, manufacturing, and services may be maintained by leveraging demographic dividend.
Business has become global and there are so much more to learn from the global best practices. Turkey has introduced something termed as ‘TURQUALITY’, which is a state sponsored scale up programme meant for SMEs to transform themselves into global players. There are other such initiatives as ‘Growth Driver Programme’ of Business Development Bank of Canada to provide multi-disciplinary support system in terms of enterprise growth and job creation in SMEs.
Today technology has become the key to driving business growth. Business cannot be isolated from technology, and building the bridge between the two is the way forward. The challenge is choosing the right set of technology tools to set construct the bridge. There are a plethora of technology options and the question of where to start and what all to choose become the issue. Hence, a technology partner who can understand the business, and facilitate in adopting technologies growth of business.
The power of networking is where the big companies have become bigger and the startups are getting the much needed leverage through their network. MSMEs have been traditionally doing their business and not expanded their span of working with business network. The business groups collaborate to help each other in growing the business, just which they don’t have the right connection to network. Once the network is established and it starts to work its way into the bigger landscape of doing business.
