MSME & its Role in The Growth of The Indian Economy
Published: June 23, 2022
MSMEs have played an essential role in the growth of the Indian economy, producing goods for both domestic and international markets. MSMEs also help facilitate the growth of different industries in the country. As a matter of fact, the MSME sector in India has helped to generate employment opportunities in rural areas. MSMEs have successfully introduced industrialization in rural areas at a cheaper cost. Hence, the role of MSME can’t be undermined in underprivileged areas.
A Brief about MSMEs
Micro, Small and Medium Enterprises (MSMEs) are divided into two segments as per the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006, the manufacturing enterprises and the service enterprises. The former is responsible for the production of goods and the latter is responsible for providing services. Here are some of the essential features of MSMEs:
1) MSMEs help to provide better access to national and international markets
2) MSMEs provide assistance in crucial stages of development, innovation and packaging of products.
3) MSMEs also generate employment opportunities.
In October 2019, Union Minister Nitin Gadkari said that the revised definition of MSMEs will assist in the centralization of information related to taxation, investments and revenue. The Union Cabinet minister had approved the amendment to change the definition from investment in plant and machinery to annual turnover. On 13th May 2020, Finance Minister Nirmala Sitaraman announced the change and said that the new definition will result in the expansion of MSMEs. Most recently, on 1st June 2022, our Hon’ble Prime Minister Narendra Modi revised the definition for MSMEs under the Atma Nirbhar Bharat Abhiyaan package.
Key announcements of Atma Nirbhar Bharat Abhiyaan:
1) Rs 3 lakh crore collateral-free automatic loans for MSMEs
2) Rs 50,000 crore equity infusion through MSME Fund of Funds
3) Rs 20 crore subordinate debt for MSMEs
5) Immediate pending refunds issuance to all non-charitable trusts
6) Extension of the due date for ITR for FY’19-20 to November 30, 2020
7) Old MSME definition based on investment, MSMED Act, 2006
MSMEs are responsible for creating 11 crore job opportunities in the country while also contributing 29% of the total GDP. This recent announcement regarding the revised definition for MSMEs will further accelerate the growth of MSMEs in India.
MSMEs loans and eligibility criteria
MSME loans are unsecured loans that can assist entrepreneurs with their financial requirements. As per the RBI guidelines, these loans are divided into three categories micro, small and medium. MSMEs can also acquire loans under several government schemes. Here is a list of government schemes for MSME loans for small businesses:
1) Credit Guarantee Fund Trust for Micro and Small Enterprises (CTGMSE).
2) Prime Minister Employment Generation Programme (PMEGP).
3) Micro Unit Development and Refinance Agency (MUDRA loan).
If an entrepreneur wants an MSME loan for new business, they must meet the eligibility criteria laid out by the lenders such as:
1) Applicants must be between 25-55 years of age
2) Applicants’ business vintage must be more than 3 years
3) They should have filed Income Tax Returns for the business for one year at least
5) The applicant must not have any past record of loan default in their or the business’ name
MSMEs are the backbone of the Indian economy, successfully empowering men and women in rural areas. The recent announcements made by the government of India are important steps in the right direction – it will ensure that in the coming years, MSMEs reach new heights of growth and success, further motivating more Indians to start their own entrepreneurial ventures.