MSME sector is an indispensable part of Indian Economy but reforms were long awaited in this sector since MSME Devt. Act 2006. In this context highlight the role MSMEs paly in our economy and bring out the reasons that necessitated the recent measures.
Search
Being the largest employer after agriculture, contributing 30 % to India's GDP and 45 % Manufacturing exports, MSME's are the backbone of the Indian Industry.
MSME's play a very important role which is discussed below:
1- Generates large scale employment: In a labour surplus country like India, MSME plays an important role in absorbing them and provide them with employment opportunities.
2- Reduces Rural distress: Agricultural is a tricky business and sometimes it may lead to rural distress during the lean season and would lead to distress migration.
MSME's absorbs these peoples and provides a cushioning effect on the members of these families.
3- Wholesome Inclusion: Most of the employees working in MSME are from lower strata. Hence MSME provides them with an opportunity to work. Women are also benefited.
4- Growth Engine: MSME accounts for nearly 45% of our manufacturing exports and helps in earning much needed foreign income which is essential for the growth of Indian economy.
5- Other benefits include: Reduces stress on other big industries, today's MSME are tomorrow's giant industries, manufactures products which are essential for daily use etc.
Issues with respect to current MSME Devt. Act 2006:
1- Investment limits are obsolete to cover the need of today- fails to reflect the price increase as this act is with respect to 2006 and not current times.
2- Dwarfism syndrome- MSMEs are not willing to lose the benefits that they receive and hence they don't grow. This leads to informalisation.
3- Due to the informal nature of jobs in MSME's, employers don't maintain accounts and employees lose social security benefits.
4- Nothing is mentioned in the act which would encourage MSMEs to use technology which in itself acts as breakwaters for growth of MSMEs.
COVID-19 has hit the MSMEs very hard which in turn has impacted a lot of peoples. The reforms that have been announced such as a change in investment limits, credit guarantee to banks to support MSMEs, collateral-free automatic loans for MSME, setting up Fund of Funds to provide support etc. would go in a long way to encourage these industries to rise again which in turn will help India to achieve it's SDG 8 ( Decent work & Economic growth), SDG 9 (Industry) and SDG 10 (Reduce Inequalities).
Also mention the raised limit in the classification of MSME. Overall good.
1.Deliberate dwarfism. Mention such terms and underline. 2.mention limit if possible ( subject to the word limit ) 3. Explicitly state where and when by whom these measures were announced. That will put your answer in right context. 4. Mention credit guarantee 3 l crore and direct capital infusion. Keep writing.
"Zero Defect,Zero Effect"for the MSMEs is the slogan the PM had for the indigenous companies.It is true that proper development of MSMEs and their products hold the key to make India a manufacturing hub which has spillover effects for the economy resulting in inclusive growth. Highlights of the role MSME play: •They are the largest employer after agriculture requiring semi-skilled and low-skilled workers. •They account for 45% of the exports bringing in the valuable foreign exchange. •They employ low-skilled women workers giving a flip to woman empowerment and reducing gender disparity. •They increase the vareity of products controlling inflation. •Rural-urban divide can be minimized by holistic development of MSMEs. •Crime rate and migration comes come down leading to less crowding of already exhausted cities. However,some issues continue to lag the MSME sector: I)Less access to raw materials and capital. ii)Outdated machinery which would hamper the quality of products. III) Compliance to multiple laws of the government and bureaucratic delays in getting clearances IV)Large MNCs being more competitive. V) Investment limits in the manufacturing and service sectors not updated with time as in MSME Development Act 2006. vi)Poor litigation system for solving cases. vii) Government procurement for 25% for public sector companies from MSMEs. Credit Based Capital Subsidy schemefor technological upgradation,Interest Subvention on loans,self certification of the Labour and Environmental laws and avoiding litigation by simplifying process are the steps by government to address the issues. Way Forward: The more focus now is on 'Turnover' and less on investment.So,traders would pass themselves off as manufacturers and importing cheap products and show it as made in India by relabelling them to avail government procurement benefit.It will sideline the original industries.So government should address that.Moreover,manpower should also be taken into account while defining MSMEs. Conclusion: All the coherent steps in the right direction can add to the Make in India Initiative and fulfillment of SDG 8 and 9.
You have not answered the question asked. Discuss why recent policy changes were brought. Refer to my comments on others answer.
Ok sir
Dwarfism. Revised limits. Credit guarantee. Mention above. Rest is good. Keep writing.
Ok sir.Thank you
Do we have to post our answer here???
Yes. Please do. Either you type or write down on a piece of paper and upload it as a photo.
Importance of MSME 30 percent of GDP, 40 percent of export, 45 percent of manu output. Employment generation, inclusive growth and poverty eradication, self reliance(atmanirbharata) and reducing import burden, social mobility ( socio economic backward section), women empowerment (many are owned by women), will play a crucial role in the next age "cillage" ecosystem ( dev of rural India), linkages with agri- agri equipments, food processing etc, cascading effect on investment- forward and backward linkages to other industries. Need for reforms- Msme dev act- classification based on investment in equipments- obsolete with present needs, deliberate dwarfism- incentive to stay small, differentiates manu and service- many service firms will be out. Quality issue and lack of capacity addition, obsolete technology, liquidity crunch, NPA, banks are not willing to lend, their prime funding source NBFC are in disarray too, delayed payments of dues, mostly informal. Reforms taken- Reclassification- investment to turnover cum investment, limit raised, no distinction between manufacturing and services, will incentivise growth, liquidity through credit guarantee, partial credit guarantee even for stressed ones, liquidity window to NBFC, equity infusion through fund of funds, payment of dues by psus and government in a time bound manner., Limit for global procurement( can't be till 200 cr) These measures will go a long way in propelling the growth of msme and the economy at large. But further overarching reforms is needed for example by introducing a sunset clause for the benefits that will incentivise the firms to grow big.