Problem and Prospects of Micro, Small and Medium Scale Enterprises in India

S Santhanalakshmi; M Kannan

S Santhanalakshmi Assistant Professor of Economics CBM College, Kovaipudur, Coimbatore
M Kannan Assistant Professor (SS) of Economics, CBM College, Kovaipudur, Coimbatore

Keywords: MSMEs, exports, self-employment, entrepreneurship, industrial production, Indian economy

Abstract

Micro, small and Medium Enterprises (MSMEs) constitute an important segment of the Indian economy in terms of their contribution to countries industrial production, exports, employment and creation of entrepreneurship base. The Small Scale Industries (SSI) has been renamed as Micro, Small and Medium Enterprises (MSMEs) with the introduction of MSME Act, 2006. The Act provides the first ever legal framework for recognition of the concept of the concept of “enterprise”. Under the act, enterprises have been categorized broadly into those engaged in (i) manufacturing and (ii) providing/rendering services. Both the categories have been further classified in to micro, small, medium enterprises based on their investment in plant or in equipment (for manufacturing enterprises) or in equipment (in case of enterprises providing or rendering services). This sector continues to be the vibrant sector of the Indian economy and it is estimated that there are about 12.8 million units in this sector employing nearly 31 million people. This sector contributes nearly 39 percent of the total industrial production and accounts for approximately 33 per cent of the total exports. This sector has consistently registered a higher growth rate than the rest of the industrial sector. There are over 6500 products ranging from traditional to high-tech items, which are being manufactured by the MSMEs in India. After Agriculture, MSMEs provides the maximum opportunities for both self-employment and jobs in the country. As per the estimates compiled for the year 2010-11, the employment was 750.15 laks persons in the sector. Of the total working enterprises, the proportion of micro, small and medium enterprises were 94.94 percent, 4.89 per cent and 0.17 per cent respectively. Presently, the MSMEs in India are at cross road and it needs to be examined what would be the future of the MSMEs? In this context, it is important to re-look on these basic issues of MSMEs and its future prospects.