MSME Full Form

What is the full form of MSME? The full form of MSME is the Ministry of Micro, Small and Medium Enterprises in full. It is a governing body of these enterprises in both the manufacturing sector and in the service sector which gets funded by the government of India. It helps in providing large employment opportunities and the industrialization of rural and backward areas, assuring equal distribution of income and wealth throughout the region.

It is also sometimes referred to as the backbone of the country. As it contributes nearly 8% of the country’s GDP and 40-45% to manufacturing output.

Why MSME is required?

Before the formation of MSME, many micro and small industries were struggling to come out and increase their business due to various factors such as funds and advice. And during that time India relied upon other countries for the import of various products which took huge money out from the Indian pocket. Earlier, MSME was a legalized constituted non-governmental and non-profit trust in 2005. And the idea for this concept initially was given by The United Nations Industrial Development Organization (UNIDO). And on May 9, 2007, the Government of India Rules, 1961 (that describes the allocation of business) was amended by the President of India, later a ministry was created and was tasked to promote micro and small enterprises and to promote self-employment in the country.

This ministry comes under the micro, small, medium enterprises development (MSMED) act, 2006. This act seeks to develop these enterprises and their competitiveness. And provide the first-ever legal framework to work upon in both manufacturing and service sector. Also, this act provides an advisory body for all sections at a balanced level. Also, provided specific funds, schemes, and practices for the growth and development of these enterprises.

Amendment in 2006 MSME Act

Recently in 2018, the Government of India amended the 2006 MSME bill for change in the classification of MSMEs from ‘time current investment in machinery or equipment and plant’ to ‘newly fresh and uniform criteria’. Which is the same for both manufacturing and service sector MSMEs, and is based on their annual turnover. This bill was aimed to promote companies to grow and develop and make it easier for them to adjust toward a new regime of GST (goods and services tax).

Change in classification of the same is tabled below as of according to MSME 2006 act and bill passed in 2018.

MSMEs Importance in the Indian Economy

As India is growing toward Atmanirbhar Bharat, the various MSMEs across India contribute a large proportion for its growth. They are well known to generate a high amount of wealth for India from both the manufacturing and service sectors. Some of the key importance of MSMEs are:

• It contributes around 40-45% of Indian Exports
• It improves the country’s employment rate. As of now it employs around 120-130 million persons and is the second largest in employment generation
•  MSME promotes the emergence of any new enterprise and helps them to grow and develop by providing them funds and schemes
• In the GDP of the country, it contributes about 6-7 % from the manufacturing sector and about 24.63% from the service sector
• The Ministry of MSME targets to increase the contribution in GDP of India to 50% by 2025

New enterprises are flourishing today as the government of India is supporting them a lot in their development by providing subsidized loans and funds and well-developed schemes for their benefit.

The benefit to an MSME registered Company

• Funding from the Government of India with a very less interest rate
• Subsidies in funds
• Training of Manpower
• Promotion for export of Indian Products
• Support from Government
• Protection from any delayed payments
• exemption from overdraft interest rates
• Industrial Promotion and many more

Conclusion

MSME is the Indian Ministry of Micro, Small and Medium Enterprises that focuses on governance, promotion and development of these enterprises in both the manufacturing and service sector. In 2018, the President of India amended the 2006 MSME act, which provides a new method of classification of enterprises in MSME to help them to cope with the new regime of GST. Today, after the emergence of Atmanirbhar Bharat, MSME registered companies or enterprises are getting more attention from the Government of India as they are helping the government to make India a Manufacturing Hub of the world.