Micro, Small & Medium Enterprises (MSME’s)

 

 

Micro, Small & Medium Enterprises (MSME’s) have been accepted as a catalyst factor for economic growth and for promoting equitable development. The employment generation intensity of MSME’s sector is higher than the large enterprises. In India, MSME’s have created more than 90 percent of the jobs, employing 114million people, contributing 30 percent of GDP and also contributing major share of industrial production and exports. These MSME’s   are playing significant role in the development of developing countries like India. It is considered as backbone of the economy. With the qualities like dynamism, briskness and convertibility to survive in recession, this sector can have wide opportunities in coming future.

MSME Sector:

Earlier the industrial unit’s structure in India was classified as Small Scale units and Large Scale Units based on investment ceiling of the installed plant and machinery. Small Scale Units were classified as ancillary units, tiny units, women enterprises, and small scale services and business units. Medium scale units were not defined in India. However, the enactment of Micro, Small & Medium Enterprises (MSME) Development Act, 2006, defined and clearly classified micro units, small units, medium units and large units.

Micro, Small & Medium Enterprises (MSME) Development Act, 2006 defined the term MSME as, enterprises engaged in the manufacture or production, processing or preservation of goods as specified below.

·         Micro Enterprise: Investment in plant and machinery does not exceed Rs. 25 lakh for manufacturing. Investment in equipment does not exceed 10 Lakhs for service.

·         Small Enterprise: Investment in plant and machinery is more than Rs. 25 lakh but does not exceed Rs. 5 crore for manufacturing. Investment in equipment is more than Rs. 10 lakh but less than Rs. 2 crore.

·         Medium Enterprises: investment in plant and machinery is more than Rs. 5 crore but does not exceed Rs. 10 crore for manufacturing. Investment in equipment is more than Rs. 2 crore but less than Rs. 5 crore.

The definitions of MSME sector were revised in 2018 and implemented w. e. f. 01.07.2020 and added new criteria of turnover in addition to investment. The investment in plant and machinery will be calculated as per Income Tax Act and turnover will be calculated as per GST act. Export turnover will not be included while calculating the turnover.

Sr. No.	Particulars	Investment in Plant and Machinery	Turnover as per GST Act except export
1	Micro Enterprises	Rs. 1 crore	Rs. 5 crore
2	Small Enterprises	Rs. 1-10 crore	Rs. 5-50 crore
3	Medium Enterprises	Rs.10-50 crore	Rs. 50-500 crore

 

Performance of Micro, Small, and Medium Enterprises Sector:

In India, MSME’s have created more than 90 percent of the jobs, employing 114million people, contributing 30 percent of GDP and also contributing major share of industrial production and exports. The employment generation intensity of MSME’s sector is higher than the large enterprises. MSME also have contributed toward technological development and exports. MSME’s are established almost in all major sectors in India, e.g. Textile and Garment, Agricultural Inputs, Leather goods, Chemical and Pharmaceuticals, Food Processing, Bio-engineering, Computer Software, Electronics etc. But, in order to find out the true performance of MSME’s, it is better to observe the contribution in terms of number of units, production, employment, exports etc., which is as follows: 

Performance of SSI/ MSME Units:

Employment, Investments and Gross Output

Sr. No.	Year	No. of Working Enterprises(in Lakh)	Employment (in Lakh)	Market Value of Fixed Assets(in Crore)	Gross Output ( in Crore)
1	2006-07	361.76	805.23	868543.79	868543.79
2	2007-08	377.36	842.00	868543.79	920459.84
3	2008-09	393.70	880.84	920459.84	977114.72
4	2009-10	410.82	922.19	1029331.46	1619355.53
5	2010-11	428.77	965.69	1094893.42	1721553.42
6	2011-12	447.73	1012.59	1176939.36	1834332.05
7	2012-13	467.56	1061.52	1182757.64	1268763.67
8	2013-14	488.46	1114.29	1268763.67	1363700.54
9	2014-15	510.57	1171.32	1363700.54	1471912.94
10	2015-16	553.65	805.24	1363700.32	107721286

Source: MSME Annual Report 2015-16, Government of India.

             Table reveals that the number of MSME’s were registered an impressive growth from 361.76 lakh in 2006-07 to 553.65 lakh in 2015-16, showing significant increase over a decade. Similarly there is significant increase in the employment generation from 805.23 lakh in 2006-07 to 1171.32 lakh in 2014-15. Same is the case with fixed assets market value, export as these all were also continuously increased. Hence, it is clear from the table that, the number of enterprises, employment, investment in fixed assets, and gross output of MSME units in India show an increasing trend during the period of ten years.

MSME Sector’s contribution to GDP and Output:

One of the variable measuring the performance of any sector in an economy is the contribution of the sector to the Gross Domestic Product (GDP) of the country. The contribution of MSME sector can be revealed from following table:

Contribution of MSME Sector in GDP and Output

(At 2004-05 prices)

Year	Gross Value of Output of MSME Manufacturing Sector (Rs. In crore)	Share of MSME Sector in total GDP (%)			Share of MSME Manufacturing output in total manufacturing output (%)
		Manufacturing Sector MSME	Services Sector MSME	Total
2006-07	1198818	7.73	27.40	35.13	42.02
2007-08	1322777	7.81	27.60	35.41	41.98
2008-09	1375589	7.52	28.60	36.12	40.79
2009-10	1488352	7.45	28.60	36.05	39.63
2010-11	1653622	7.39	29.30	36.69	38.50
2011-12	1788584	7.27	30.70	37.97	37.47
2012-13	1809976	7.04	30.50	37.54	37.33

Source: MSME Annual Report 2015-16, Government of India

Table indicates the contribution of MSME’s in GDP and Output of India. Table reveals that, the gross value of output of MSME’s manufacturing sector shows increasing trend throughout the period from Rs. 1198818 crores in 2006-07 to Rs. 1809976 crore in 2012-13. Share of manufacturing sector remain constant i.e. around 7 percent. Service sector is emerged as a growing sector in India, it also shows increasing trend from 27.40 percent in 2006-07 to 30.70 percent in 2011-12. Share of MSME’s manufacturing output in total manufacturing output maintain its consistency around 40 percent. It means MSME sector’s contribution towards GDP is significant.

In India, MSME’s have created more than 90 percent of the jobs, employing 114million people, contributing 30 percent of GDP and also contributing major share of industrial production and exports. The number of enterprises, employment, investment in fixed assets, and gross output of MSME units in India show an increasing trend during the period of ten years. The gross value of output of MSME’s manufacturing sector shows increasing trend throughout the period from Rs. 1198818 crores in 2006-07 to Rs. 1809976 crore in 2012-13. Share of manufacturing sector remain constant i.e. around 7 percent. Share of MSME’s manufacturing output in total manufacturing output maintain its consistency around 40 percent. It means MSME sector’s contribution towards GDP is significant.