Micro, Small and Medium Enterprises (MSMEs) form a vital component of the Indian Economy. MSMEs contribute to around 29% of total India’s GDP and are the second-highest employment generation sector in the country, only next to the agricultural sector. This post gives an overview of the MSME sector in India
The definition of small businesses varies from country to country. While most of the countries identify small businesses by the number of employees, the India MSMED act 2006, defines MSMEs based on the investment in the equipment for the organisation.
But the recent formalisation methods like GST does not capture the equipment investment data making it difficult to identify the MSMEs. Hence the government has proposed to change the definition of MSME by identifying them through turnover data that is available through a single common network like GSTN.
Formalisation & Registration
- The formalisation of MSMEs has been a challenge in India.
- In 2015, to promote the ease of doing business for MSME, the government introduced the Udhyog Aadhaar Memorandum (UAM) registration for MSMEs.
- UAM is a one-page online registration system for MSMEs based on self-certification. The entrepreneurs need to fill a single form online to get an instant Udhyog Aadhaar Number with no supporting documents that are required during the time of filing.
MSMEs based on activities
According to the 73rd National sample survey, it is observed that there are around 6.33 crore of unincorporated non-agricutlral MSMEs in the country. Out of which 3.24 crore (51%) MSMEs were in the rural area and another 3.09 crore(49%) were in urban areas.
Of the 6.33 crores MSMEs, manufacturing comprised of 1.96 crores (31%), trade comprised of 2.30 crores (36%)and another 2.06 crore (31%)MSMEs were in other services
MSMEs based on gender divide:
Out of 6.33 crore MSMEs, 6.08 crore(95.98%) MSMEs are proprietary enterprises. A proprietary enterprise is one run by an individual that does not require any formal government registration. Among the proprietary MSMEs, 79.63% were owned by men and 20.37% were owned by women. This depicts a strong need for more women-run enterprises in the country. Also, women-run MSMEs were higher in rural areas as compared to urban counterparts.
Distribution of MSME’s
Uttar Pradesh recorded the highest share of MSMEs contributing to around 89.99 Lakhs(14.20%) with West Bengal recording 88.67 Lakhs (14%) coming closer to it. The top 10 states contribute to around 74.05% of the total estimates MSMEs in India.
The total outstanding lending in India is around ₹116.7 Lakh crores and out of it, commercial lending comprises around ₹64.1 Lakh crores. Under the commercial lending MSME Corporate covers organisation with less than ₹50 crores exposure. In individual lending, business lending is classified as individual loans disbursed for a business purpose.
Consumer Lending includes Personal Loan. Home Loan, Education Loan, Auto Loan, Consumer Durable Loan etc. Other Lending includes Other Retail Loan, Priority Sector and Agri Loans
- MSME Annual report — 2018/19
- RBI Expert committee report on MSME — June 2019
- MSME Pulse — June 2019 Transunion Cibil report
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