Profile
Settings
Refer your friends
Sign out
The government of India introduced MSME in an agreement with the MSMED (Micro, small, medium enterprises development) Act of 2006. In India, the availability of finance for MSMEs falls critically behind the actual need and demand. This affects the employment opportunities and income of a large section of the population. Together, these factors impact the productivity of the Indian economy with a direct effect.
What are MSMEs?
MSMEs are essentially micro, small, and medium enterprises. Any manufacturing enterprise with an investment of up to 25 lakh is defined as a micro-enterprise. In contrast, any service enterprise with an investment of up to 10 lakh comes under the micro category. But the criteria for the definition of MSMEs have been widely criticised as authorities have not made credible and precise details of investments readily available.
In February 2018, the Union Cabinet agreed to shift the criteria to “annual turnover”.
In the MSMEs scheme of 2020 for new business, the government changed the classification of MSMEs. The government believed a low threshold limit in the former description of MSMEs developed a “fear” among enterprises that they may miss the advantages that MSMEs enjoy if they improve further.
Steps Taken by the Government to Help MSMEs
By setting up self-employment projects across the country, the government is trying to generate employment opportunities in rural and urban areas through MSMEs. New credit support schemes have been launched. Steps are being taken to significantly help the farmers by developing banks in rural areas of India. The government is also trying to push the growth of MSMEs by providing technology upgradation, quality certification, and credit-linked capital subsidy for technological upgrades.
Economic Stress Faced by MSMEs
MSMEs are vulnerable to economic stress because of lack of capital, low production capacity, lack of knowledge and expertise, non-availability of skilled labour at affordable cost, and lack of economies of scale.
The majority of the activities in MSMEs are done at the home level. At times, the production cost is too significant to afford. Even if the issue of production cost is dealt with, additional finance is required to maintain the production capacity. During economic stress like the Covid 19 pandemic, MSMEs are the hardest hit because of low or no formal registration.
They don’t have access to various government schemes when there is a lack of demand and a lack of money flow due to a lack of credit or financial supply chains in the economy. They often don’t have enough working capital because of the absence of developed banks. Lack of credit guarantees for bank loans is another major factor that has a crippling effect on MSMEs.
What Measures can be Taken to Improve the Condition of MSMEs?
Below are a few measures that can help in bettering the condition of MSMEs:
Digitization in MSMEs
Digitization of MSME is essential because it will enable them to transact at a lower cost, reducing their working or production capacity. They don’t have to spend more capital on inventory management, and as a result, production capacity will expand, and profits will rise.
Digitalization considers financially savvy answers for MSMEs in urban territories to achieve a more extensive client base worldwide, unlike offline setups, which are restricted to a constrained group of onlookers.
The establishment of MSMEs on online platforms allows them to develop and get increments best to the line. By developing banks in different areas in India, the financial condition of the farmers would improve.
Thus, digitalization encapsulated in the services and manufacturing sector uniquely to MSMEs will help enhance effectiveness, which may add factors like profitability, overflow impacts, straightforwardness, and responsibility.
Innovative Approach to MSMEs
An innovative marketing approach will help the MSMEs improve the client base and ensure that the best product quality is supplied.
As market competition has again increased, providing quality products and services alone is no longer sufficient; this calls for innovation in terms of technologies, products in the market, systems, and practices, which can only be achieved by improving strategies and innovation. Writing blogs and advertisements with influencers can boost the marketing strategy of MSMEs. Through email marketing which can be used in the use of digitization, MSME can achieve a lot.
Conclusion
MSMEs are extremely crucial for providing employment opportunities in India, especially in rural areas. They directly affect the economy. Therefore, their growth is vital. The government has taken some concrete measures to ensure the same. Under the Atma Nirbhar Bharat Abhiyan scheme, the government has decided to provide Rs 3 lakh crores in collateral-free loans to MSMEs.
The majority of MSMEs are run by micro players who don’t have enough exposure or resources to use bank finance. The ‘59- Minute Loan Program’ launched by the government will ensure that loans are being sanctioned at the earliest. The government has also disallowed global tenders to protect MSMEs. The market for developing linkages for MSMEs is being promoted to replace trade fairs and exhibitions.
