QUES . Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. UPSC 2023 GS MAINS PAPER III , 150 words, 10 Marks
HINTS:
The Share of Manufacturing sector to India’s GDP (16-17%) and employment (12%) has remained stagnant since 1991 reforms. India has followed a unique growth trajectory. Over the past two decades, the services sector grew rapidly without a manufacturing boom, unlike other countries where manufacturing growth precedes services.
However, the Micro, Small and Medium Enterprises (MSMEs) play an important role in GDP as they alone account for 45% of manufacturing output of the country.
Why MSMEs are indispensable for faster economic growth?
Micro, small and medium Enterprises (MSMEs) are the growth accelerators of the Indian economy, contributing significantly to the country’s gross domestic product (GDP). MSMEs contribute more than 29% to the GDP. MSMEs account for one-third of India’s manufacturing output.
MSMEs help in the industrialization of rural & backward areas, thereby, reducing regional imbalances, and assuring a more equitable distribution of national income and wealth.
Since the enterprises falling under MSMEs require low capital to start the business, it creates huge employment opportunities for many unemployed youths. MSMEs employ more than 11 crore people.
MSMEs promote innovation by providing an opportunity for budding entrepreneurs to help them build creative products hey and thereby boost competition in business and fuel growth.
MSMEs are complementary to large industries as ancillary units. large industries buy semi-finished, and auxiliary products from small enterprises.
MSMEs are responsible for 50% of the country’s total exports.
What are the steps taken by Government to support manufacturing sector particularly MSMEs?
‘Make in India’ initiative : It has played a key role in promoting business and local manufacturing in the country, giving special thrust to Micro, Small and Medium Enterprises (MSMEs).
Export promotion: Promoting the engagement of MSMEs in global trade through the provision of export incentives and simplification of export-related procedures. For example , facilitating duty-free import of capital goods for export production via schemes like the Export Promotion Capital Goods (EPCG).
One district one product: The scheme would help Micro, Small and Medium Enterprises (MSME) to produce and promote products that are unique in each district.
Raising and Accelerating MSME Performance (RAMP) program: It was launched in 2023-24. This initiative has a budget allocation of Rs. 6,000 crores and aims to offer both financial and technical assistance to MSMEs. Its primary goal is to enhance the quality, technology adoption, innovation capabilities, and market reach of these enterprises.
5 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for business, including MSMEs.
Launching of an online Portal “Champions” in June, 2020 to cover many aspects of e-governance including grievance redress and handholding of MSMEs.
Launch of Udyam Assist Platform (UAP) in Jan 2023 to bring the Informal Micro Enterprises (IMEs) under the formal ambit for availing the benefit under Priority Sector Lending (PSL).
Credit Linked Capital Subsidy and Technology Up-gradation Scheme (CLCS-TUS): One of the components under the schemes is Credit Linked Capital Subsidy (CLCS) under which capital subsidy up to Rs. 15 Lakh is provided to Micro and Small Enterprises (MSEs) for accessing modern technology.
Production-Linked Incentive (PLI) scheme for various sectors, including electronics and pharmaceuticals, which attract global manufacturers to set up production units in India.
MSME Samadhaan Portal: Ease of filing application under Micro, Small and Medium Enterprise Development (MSMED) Act, 2006 which contains provisions of Delayed Payment to Micro and Small Enterprise (MSEs).
Cluster Development Program: It has boosted competitiveness and promote synergy through cluster development, offering infrastructural facilities.
New revised criteria for classification of MSMEs.
Inclusion of Retail and Wholesale trades as MSMEs w.e.f. 02nd July, 2021.
Access to Credit through Start Up India, Stand Up India and the MUDRA yojna.
50,000 crore equity infusion through MSME Self-Reliant India Fund.
Tenders for government procurement will no longer be open for global companies in projects worth up to Rs 200 crore. This will give push to domestic manufacturing units especially MSMEs.
Issues which remain to be addressed in the MSME sector
Inspite of the above steps still there are many issues which remain to be addressed such as bureaucratic hurdles, delayed payments, GST complications, mismatch in skill training, limited scope in Startup India, inadequate infrastructure in Clusters, etc.
The MSMEs play an important role in promoting inclusive and balanced development and in making India a global manufacturing hub. However efforts are needed for easy, hassle-free access to credit; research and development in respect of innovative methods of production and service rendering; skill development and imparting training to MSME workers.
