Q. Discuss the challenges in accelerating the growth of Micro, Small & Medium Enterprises (MSMEs) in India. Suggest measures to counter these challenges effectively. (Answer in 150 words).

03 Oct, 2022 GS III Daily Answer Writing 2022-23 ( Upgrade)
Modal Answer
MSME in India contributes to 30% of GDP (Manufacturing & Services), while employing more than 11 crore people, making it the “Backbone of Indian manufacturing”.


Challenges: 

  • Dwarfism: Perverse incentives to remain small, leading to a heavy concentration of micro enterprises (99%).
  • Lack of Infrastructure & outdated Technology: absence of economies of scaleàhigh costs, low output and quality.
  • Competitiveness deficit: unable to integrate in global value chain.
  • Lack of adequate credit: Delayed payment nearing to Rs 25000 crore, while <40% can access formal credit.
  • Limited access to marketing: lack of integration with markets and e-commerce.
  • Skills deficit: Lack of on the job or vocational training leading to low productivity.
  • Inadequate social security: >90% of MSMEs in unorganized sectorè informalisation & contractualisation.
  • Lack of awareness: about various schemes & benefits.

Key initiatives taken by govt.:

  • Change in MSME Definition
  • RAMP scheme: for comprehensive reform.
  • Credit: 59 min loan, TrEDS, ANBA package
  • Skill: PM Kaushal Vikas Yojana
  • Market: GeM portal (Compulsory procurement)
  • Grievance redressal: Samadhaan portal
  • Handholding: Udyami Mitra Yojana
  • Enhance Productivity & innovation – ASPIRE, SFURTI ARISE-ANIC Initiative etc

Further Measures needed: MSMEs should focus on SCALE – 

  • Sense of security: bringing comprehensive MSME Code as recommended UK Sinha committee.
  • Credit availability: through Distress Asset Funds, crowdfunding, collateral free loans, etc.
  • Access to Markets: on-board MSME to 'B2B' and 'B2C' e-commerce market places.
  • Leveraging technology: Customised technology solutions & employing frontier technologies like IoT, Big Data etc.
  • Ease of Doing Business: Incentives to start-ups through tax concessions, easing the registration process etc.
  • Other measures: Checking delayed payments, Enterprise Development Centres (EDCs) for skilling (Parliamentary Committee Recommendation) etc.
Shifting from ‘scale based policies’ to ‘age based policies’ will ensure that MSMEs expand rapidly to generate economies of scale, quality employment, and promote entrepreneurship & competitiveness, thereby creating a sustainable manufacturing base.

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