PROJECT REPORT

ON

A COMPRATIVE ANALYSIS OF MICRO SMALL AND MEDIUM

ENTERPRISE
Submitted in partial fulfilment of the requirement for the award of the degree of

BACHLOR OF BUSINESS ADMINISTRATION

SESSION (2022 – 2025)

Maharshi Dayanand University, Rohtak

In partial fulfilment of the requirement for the award of the degree of Bachelor of Business
Administration

UNDER SUPERVISION OF: SUBMITTEDBY

Ms. Komal Verma Sadekul Islam

(Assistant Professor) Reg. No:2212201088

DEPARTMENT OF BUSINESS ADMINISTRATION

WORLD COLLEGE OF TECHNOLOGY AND MANAGEMENT

1
 STUDENTS DECLARATION

I, Sadekul Islam Reg. No 2212201088, B.B.A. (6th Semester) of World College

of Technology and Management, Farrukh Nagar, Gurugram, hereby declare that
the Project Report entitled " A COMPRATIVE ANALYSIS OF MICRO SMALL
AND MEDIUM ENTERPRISE." is my original work and the same
has not been submitted to any other institute for the award of any other degree

Sadekul Islam

WORLD COLLEGE OF TECHNOLOGY AND MANAGEMENT

2
 CERTIFICATE OF HOD

Sadekul Islam Reg. no. 2212201088a bona fide student of Bachelor of Business Administration,
World college of technology and management Gurugram, an affiliated institute of Maharshi
Dayanand university, Rohtak has carried out the “Project report on Micro small and medium
enterprise in partial fulfilment of the requirements for the degree of Bachelor of Business
Administration under my supervision and guidance. I certify that this project report is the record
of the work done by the candidate herself and that to the best of my knowledge the content of
this project did not basis of award of any previous degree of anybody else.

Dr. Himani Avasthi

HOD

DEPARTMENT OF BUSINESS ADMINISTRATION

WCTM, GURUGRAM

WORLD COLLEGE OF TECHNOLOGY AND MANAGEMENT

CERTIFICATE OF GUIDE

This is to certify that the summer training Project Report on “Micro small and
medium enterprise.” is the Bonafede work carried out by Sadekul Islam
(2212201088) Student of Bachelor of Business Administration, World college of
Technology and Management, Gurugram, an affiliated institute of Maharshi
Dayanand University, Rohtak during the year 2023 in partial fulfilment of the

3
requirements for the degree of Bachelor of Business Administration under my
supervision and guidance. I certify that this project report is the record of the work
done by the candidate herself and that to the best of my knowledge the content of
this project did not basis of award of any previous degree of anybody else.

Ms. Komal Verma

Assistant Professor

Department of Business Administration

WCTM, Gurugram

WORLD COLLEGE OF TECHNOLOGY AND MANAGEMENT

CERTIFICATE OF HOD

Sadekul Islam Reg. no. 2212201088a bona fide student of Bachelor of Business
Administration, World college of technology and management Gurugram, an affiliated institute
of Maharshi Dayanand university, Rohtak has carried out the “Project report on Micro small
and medium enterprise in partial fulfilment of the requirements for the degree of Bachelor of
Business Administration under my supervision and guidance. I certify that this project report
is the record of the work done by the candidate herself and that to the best of my knowledge
the content of this project did not basis of award of any previous degree of anybody else.

4
Dr. Himani Avasthi

HOD

DEPARTMENT OF BUSINESS ADMINISTRATION

WCTM, GURUGRAM

ACKNOWLDGEMENT

A Project Report is never a sole product of one person, whose name appears on
the cover. I consider it a privilege to acknowledge the contribution of all helping
hands for their cooperation and guidance that enabled me to dedicate time and
effort in framing my analysis in conceivable system. I extend my deepest thanks
to my faculty guide Assistant Professor Mr. Naveen Yadav, World College of
Technology and Management, for giving me the opportunity to understand the
project and for providing me the necessary information whenever required.
Without his/her constant guidance and feedback, I would have never been able to
complete this project. A Special thanks to all faculty members, World College of
Technology and Management, whose consistent support and cooperation showed
the way towards the successful completion of the project.

5
Sadekul Islam

TABLES OF CONTENTS
Student Declaration

Certificate of HOD

Certificate of Guide

Acknowledgement
CHAPTER TITLE Page no.

1 INTRODUCTION 8- 16
• Problem 11
• Need 13
• Objective 15

2 Research methodology 17-21

3 Research data Analysis 22-36

4 Findings 37-43

5 Interpretation 44-48

6 Suggestion and Recommendation 49-53

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Appendices

Bibliography

CHAPTER 1

INTRODUCTION

Role of MSMEs in the Indian Economics Development

7
Micro, Small, and Medium Enterprises (MSMEs) stand as the unsung heroes of India's
economic landscape, contributing significantly to the nation's growth story. These enterprises
form the bedrock of the Indian economy, constituting a vast and diverse sector encompassing
a multitude of industries ranging from manufacturing to services. Despite their modest size,
MSMEs wield substantial influence, serving as engines of economic growth, employment
generation, and innovation diffusion across urban and rural communities.

One of the most profound roles played by MSMEs lies in their contribution to employment
generation. In a country where job creation remains a pressing concern, MSMEs emerge as
vital engines of employment, absorbing a significant portion of the workforce, especially in
rural and semi-urban areas. Their labor-intensive nature and decentralized operations make
them potent instruments for addressing unemployment and underemployment challenges,
thereby fostering inclusive growth and reducing socio-economic disparities.

Moreover, MSMEs play a pivotal role in driving entrepreneurship and fostering innovation.
These enterprises often serve as breeding grounds for aspiring entrepreneurs, offering a
conducive environment for nurturing creativity, experimentation, and risk-taking. By
promoting a culture of innovation and entrepreneurship, MSMEs contribute to the
diversification of the economy, catalyzing technological advancements and enhancing
productivity across various sectors. Furthermore, MSMEs act as crucial intermediaries in the
innovation ecosystem, facilitating the diffusion of new technologies and processes from larger
firms to smaller players, thereby promoting technological spillovers and enhancing the overall
competitiveness of the economy.

Furthermore, MSMEs serve as key contributors to export promotion and foreign exchange
earnings. Despite their relatively small scale, MSMEs account for a significant share of India's
total exports, catering to niche markets and fulfilling diverse global demand. Through their
participation in international trade, MSMEs not only enhance the country's export
competitiveness but also contribute to foreign exchange earnings, thereby bolstering India's
external sector resilience and reducing its dependence on imports.

8
In conclusion, the role of MSMEs in Indian economic development cannot be overstated. These
enterprises serve as the backbone of the economy, driving growth, fostering innovation, and
promoting inclusive development. As India embarks on its journey towards becoming a global
economic powerhouse, nurturing and empowering MSMEs will remain imperative for
unlocking the nation's full socio-economic potential and ensuring a sustainable and inclusive
growth trajectory.

9
 PROBLEMS

1. Financial assistance – The most common problem that all small-scale businesses have
faced, and are still facing is of credit. MSMEs struggle to obtain financial assistance due to
several factors like absence of collateral, lengthy paperwork, and lack of trust in loan
repayment capabilities. These obstacles remain despite the government’s conscious effort to
provide easy credit line to MSMEs. To help your business overcome this, IndusInd Bank offers
hassle-free MSME loans at attractive interest rates. Entrepreneurs can enjoy doorstep banking,
customized product, comfortable repayment tenure, and much more.

2. Marketing – Increasing marketability of products is a difficult task not just for

MSMEs, but for large-scale businesses as well. Inconsistence and sporadic marketing efforts
yield no results. When it comes to small-scale businesses, the lack of resources – time, money,
and skilled employees make it impossible to increase visibility and generate quality leads. To
help MSMEs overcome this, the NSIC (National Small Industries Corporation (NSIC) under
the Ministry of MSME organizes frequent workshops to train enterprises in online and offline
marketing of their products and services.

3. Technology – Majority of the MSMEs in India operate on stale and obsolete technology
which obstructs them from keeping up with the new age world. This is despite the fact, that
India is said to have the third largest pool of technologically trained manpower. Adoption of
new technology and training employees with these technological upgradations is not only
difficult, but also costly – especially for manufacturing businesses where the scope is not just
in terms of software, but also in terms of production units. While lack of access to IT education
is partly responsible for the technological gap, the biggest factor is lack of awareness which
reduces willingness to investment in advanced tech solutions.

4. Upskilling – Skilled employees are essential for growth of businesses. Multi-national

companies (MNCs) understand this and keep on-the-job training at the centre of their
functioning. Unfortunately, small-scale enterprises fail in upskilling their manpower,
unknowingly taking a hit.

10
5. Business expertise – While entrepreneurs may have subject matter expertise relevant
to their goods and services, they might lack the business acumen needed to run an enterprise
smoothly.
These include funding & financing, tracking sales, managing input & output costs, etc.

6. Procurement of raw material – The prices of raw materials have increased manifold,
especially since the beginning of the Covid-19 pandemic. For MSMEs in the manufacturing
sector, the procurement of raw material is extremely important to continue operations.
However, lack of bulk orders, credit facilities and transportation of raw material make the
procurement tedious. To eliminate these limitations, the NSIC runs a ‘Raw Material Assistance
Scheme’ which helps small businesses by financing the purchase of raw material – both
indigenous and imported.

7. Hiring – MSMEs struggle to hire skilled and competent manpower. Lack of name
recognition of the company reduces the talent pool from which MSMEs can hire employees as
there are fewer responses to job postings by small-scale businesses. Even after finding the right
candidate from this small pool, MSMEs lose the right candidate due to inability to offer
competitive salary, job security and career development opportunities similar to larger
organizations.

8. Innovation – The rate of changes is accelerating rapidly. The role of creativity and
innovation has increased in this change process for survival. Businesses are becoming
knowledge-based and their success & survival is directly related to their creativity, innovation,
discovery and inventiveness. MSMEs will have to learn and imbibe the process of innovation
in their day to day working to remain competitive.

9. Stiff competition from giant businesses – Indian MSMEs are finding it difficult to sell
their products in the domestic and international markets because of increasing competition.
Smallscale enterprises face a tough competition from their global counterparts due to
liberalisation, as well as from domestic giants due to their immense scale of operation. While
the government does run protective schemes for such small-scale enterprises, the competition
remains onesided by and large.

10. Overall management – Inadequate management skills hamper business expansion and
often cause non-competitiveness of small enterprises. A successful business must be able to

11
grow workforce, cater to diverse customer needs, manage inventory, deal with new
competitors, keep the supply chain running and sustain the company’s culture. More often than
not, entrepreneurs undermine the importance of effective management and face numerous
hurdles when the business expands at the later stage. To help your enterprise manage its
finances batter, IndusInd Bank Current Accounts offers multiple money-managing solutions

NEED

MSME has introduced in the year 2006 in India. There are still some service sectors that was
not yet included in this sector was included in the definition of the Micro, Small and
Mediumsized Enterprises making a historic change to this Act. Therefore, leveraging the scope
of the sector even now government simplified the MSME Registration online with the paperless
work.
The further Importance of MSME in India has been described below:
1. It creates large-scale employment: Enterprises that are inclusive in this sector
require low capital to start up new business. Moreover, it creates a vast opportunity
for the unemployed people to avail. India produces about 1.2 million graduates per
year out of which the total number of engineers are around 0.8 million. There is no
economy so far that could provide that large number of freshers in one year only.
MSME is the boon for the fresh talent in India.
2. Economic stability in terms of Growth and leverage Exports: It is the most
significant driver in India contributing to the tune of 8% to GDP. Considering the
contribution of MSME to manufacturing, exports, and employment, other sectors are
also benefitting from it. Nowadays, MNCs are buying semi-finished, and auxiliary
products from small enterprises, for example, buying of clutches and brakes by
automobile companies. It is helpful in creating a linkage between MSME and big
companies even after the implementation of the GST 40% MSME sector also applied
GST Registration that plays an important role to increase the government revenue by
11%.
3. Encourages Inclusive Growth: The inclusive growth is at the top of the agenda of
Ministry for Medium, and small and Medium-sized enterprises for several years. On
the other hand, poverty and deprivation are a deterrent to the development of India.
Besides, it includes marginalized sections of a society which is a key challenge lying
before the Ministry of MSME.

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4. Cheap Labor and minimum overhead: While in the large-scale organizations, one
of the main challenges is to retain the human resource through an effective human
resource management professional manager. But, when it comes to MSME, the
requirement of labour is less and it does not need a highly skilled labour. Therefore,
the indirect expenses incurred by the owner is also low.
5. Simple Management Structure for Enterprises: MSME can start with limited
resources within the control of the owner. From this decision making gets easy and
efficient. On the contrary, a large corporation requires a specialist for every
departmental functioning as it has a complex organizational structure. Whereas a small
enterprise does not need to hire an external specialist for its management. The owner
can manage himself. Hence, it could run single-handedly.
6. The main role in the mission of “Make in India”: The signature initiative by the
Prime Minister of India “Make in India” has been made easy with MSME. It is taken
as a backbone in making this dream a possibility. In addition, the government has
directed the financial institution to lend more credit to enterprises in the MSME sector.

13
 OBJECTIVE
The role of Micro, Small, and Medium Enterprises (MSMEs) in India's economy is
multifaceted and crucial for several reasons:

1. Employment Generation: MSMEs are significant contributors to employment

generation, particularly in rural and semi-urban areas. They absorb a vast portion of the
workforce and provide livelihood opportunities to millions of people, including those with
limited formal education or specialized skills. The labour-intensive nature of many MSMEs
makes them effective engines for reducing unemployment and underemployment.

2. Contribution to GDP: MSMEs make a substantial contribution to India's Gross

Domestic Product (GDP). Although individually small in scale, collectively, they account for
a significant share of the country's economic output. Their diverse activities span across
manufacturing, services, and trade sectors, playing a vital role in driving economic growth and
development.

3. Promotion of Entrepreneurship: MSMEs foster entrepreneurship by providing a

platform for aspiring business owners to realize their ideas and ambitions. With relatively lower
entry barriers compared to large corporations, MSMEs offer an environment conducive to
innovation, experimentation, and risk-taking. They serve as breeding grounds for new ventures,
encouraging individuals to explore entrepreneurial opportunities and contribute to economic
dynamism.

4. Regional Development: MSMEs play a crucial role in promoting regional

development and reducing regional disparities. By establishing operations in remote and
underserved areas, they drive economic growth, infrastructure development, and job creation
in regions that may otherwise lag behind in development indicators. MSMEs leverage local
resources and talent, thereby empowering communities and fostering social inclusion.

14
5. Export Promotion: Despite their small size, many MSMEs actively participate in
exportoriented activities, contributing to India's export earnings and foreign exchange reserves.
They cater to niche markets, produce specialized goods, and provide high-value services that
enhance the country's export competitiveness on the global stage. MSMEs play a vital role in
diversifying India's export basket and reducing dependency on traditional sectors.

6. Innovation and Adaptability: MSMEs are known for their agility, adaptability, and
innovation. They are often at the forefront of technological advancements, embracing new
processes, and technologies to improve efficiency and competitiveness. MSMEs contribute to
innovation diffusion by implementing best practices, adopting emerging technologies, and
collaborating with larger firms and research institutions.

7. Social Impact: Beyond economic contributions, MSMEs have a significant social

impact. They empower marginalized communities, including women, minorities, and rural
populations, by providing employment, income-generating opportunities, and skills
development. MSMEs contribute to poverty alleviation, social mobility, and community
development, thereby fostering inclusive growth and societal well-being.

In summary, MSMEs play a pivotal role in India's economic development by driving

employment, GDP growth, entrepreneurship, regional development, export promotion,
innovation, and social empowerment. Recognizing their significance, policymakers and
stakeholders must implement supportive policies and initiatives to nurture the MSME sector,
unlock its full potential, and harness its transformative impact on the economy and society.

15
 CHAPTER 2

RESEARCH METHODOLOGY

Research methodology encompasses a structured and systematic approach that guides

researchers through the entire process of conducting a study. At its core, it involves a series of
carefully planned steps aimed at acquiring, analysing, and interpreting data in order to address
specific research questions or objectives. A fundamental aspect of research methodology is the
design of the study, which outlines the overall strategy and framework for the research
endeavour. This includes decisions regarding the type of study to be conducted (such as
experimental, observational, qualitative, or quantitative), the sampling method to be employed,
the data collection techniques to be utilized, and the procedures for data analysis.

1. Research Design: This involves outlining the overall strategy or plan of the research
study. It includes decisions about the type of study (e.g., experimental, observational,
qualitative, quantitative), the sampling method, data collection techniques, and data
analysis procedures.

2. Data Collection Methods: Researchers employ various methods to gather data

depending on the nature of the research. Common data collection methods include
surveys, interviews, observations, experiments, and document analysis.

3. Sampling Techniques: Sampling involves selecting a subset of individuals or items

from a larger population for study. Different sampling techniques include random
sampling, stratified sampling, convenience sampling, and purposive sampling. The
choice of sampling method depends on the research objectives and resources available.

4. Data Analysis: Once data is collected, it needs to be analysed to draw meaningful

conclusions. Data analysis techniques vary depending on the research design and data
type. Quantitative research often involves statistical analysis, while qualitative research
may involve coding, thematic analysis, or discourse analysis.

5. Validity and Reliability: Validity refers to the extent to which a study accurately
measures what it claims to measure, while reliability refers to the consistency and

16
 stability of the research findings. Researchers must employ measures to ensure the
validity and reliability of their research instruments and procedures.

6. Ethical Considerations: Researchers must adhere to ethical principles throughout

the research process. This includes obtaining informed consent from participants,
ensuring participant confidentiality, minimizing harm, and disclosing any potential
conflicts of interest.
7. Research Instruments: Researchers use various tools and instruments to collect
data, such as questionnaires, interview guides, observation checklists, and experimental
protocols. These instruments should be carefully designed to ensure they gather relevant
and reliable data.

8. Data Interpretation and Presentation: Researchers interpret the data collected

in light of the research objectives and theoretical framework. Findings are presented in
a clear and organized manner through tables, charts, graphs, and written reports.

Overall, research methodology provides a systematic approach to conducting research,

ensuring that the study is rigorous, credible, and contributes to the existing body of knowledge
in the field.

Research in Micro, Small, and Medium Enterprises (MSMEs) encompasses various

methodologies tailored to the specific context and challenges faced by these businesses. Here's
an overview of some common research methods used in MSME research:

1. Surveys and Questionnaires:

• Surveys and questionnaires are widely used to gather quantitative data from
MSMEs. They can be administered online, via email, or in-person.
• Surveys can cover various aspects such as business operations, challenges
faced, access to finance, market trends, and growth prospects.
• Questionnaires can be structured to collect specific information relevant to the
research objectives, such as financial data, market preferences, or perceptions
of government policies.

2. Interviews:
• In-depth interviews with MSME owners, managers, employees, and other
stakeholders provide valuable qualitative insights.

17
 • Semi-structured or open-ended interviews allow for probing deeper into issues
and understanding the nuances of challenges faced by MSMEs.
• Interviews can explore topics such as business strategies, innovation practices,
networking opportunities, and barriers to growth.

3. Case Studies:
• Case studies involve in-depth examination of individual MSMEs or groups of
MSMEs to understand their unique experiences, strategies, and challenges.

• Case studies provide rich qualitative data and allow researchers to contextualize
findings within specific industry sectors or geographical regions.
• They can highlight best practices, success stories, and lessons learned that can
be valuable for other MSMEs, policymakers, and support organizations.

4. Focus Groups:
• Focus groups bring together a small group of MSME owners or stakeholders to
discuss specific topics or issues.
• They encourage interaction and collaboration among participants, allowing for
the exploration of diverse perspectives and experiences.
• Focus groups can be used to gather insights on topics such as product
development, marketing strategies, workforce issues, and regulatory challenges.
5. Quantitative Analysis:
• Quantitative analysis involves the use of statistical techniques to analyse
numerical data collected from MSMEs.
• This may include analysing financial statements, market data, customer surveys,
or government databases.
• Quantitative analysis can provide insights into trends, patterns, correlations, and
factors influencing the performance of MSMEs.

6. Qualitative Analysis:
• Qualitative analysis involves the interpretation of textual or narrative data
obtained from interviews, focus groups, or case studies.
• Techniques such as thematic analysis, content analysis, and narrative analysis
are used to identify recurring themes, patterns, and meanings.
• Qualitative analysis provides depth and context to understanding the
experiences, perceptions, and behaviours of MSMEs.

18
 7. Mixed Methods Research:
• Mixed methods research combines qualitative and quantitative approaches to
gain a comprehensive understanding of MSMEs.
• This may involve collecting both numerical data and qualitative insights, and
integrating findings to provide a holistic understanding of research questions.

8. Action Research:
• Action research involves collaboration between researchers and MSMEs to
address specific challenges or problems faced by the businesses.
• It emphasizes participatory approaches, empowering MSMEs to be active
participants in the research process and driving change based on research
findings.

9. Secondary Data Analysis:

• Secondary data analysis involves analysing existing data sources such as
government reports, industry studies, and academic literature relevant to
MSMEs.
• It can provide valuable insights into industry trends, policy implications, and
comparative analysis across regions or sectors.

10. Experimental Research:

• Experimental research involves controlled interventions or treatments applied
to MSMEs to test hypotheses or assess the impact of specific factors on business
outcomes.
• Experimental designs may include randomized controlled trials,
quasiexperimental designs, or field experiments to evaluate the effectiveness of
interventions or policy changes.

These research methods can be adapted and combined based on the specific research objectives,
resources available, and the context of MSMEs being studied. Each method offers unique
advantages and limitations, and researchers should carefully select and justify their choice of
methods to ensure the validity, reliability, and relevance of their research findings.

19
 CHAPTER 3

RESEARCH DATA ANAYLSIS

20
The BSE SME (small and medium enterprises) platform is expected to witness >60 SMEs to
enter the market in one year (2021-22) to bring up equity funds for meeting their business
requirements. The initial public offering (IPO) route witnessed 16 SMEs enter the market; they
raised Rs. 100 crore (US$ 13.74 million) in 2020. In June 2021, Bombay Stock Exchange
(BSE) announced that it has collaborated with Electronics and Computer Software Export
Promotion Council (ESC) to build awareness among small businesses and start-ups about
advantages of listing.

MSMEs are being encouraged to market their products on the e-commerce site, especially
through Government e-Marketplace (GeM), owned and run by the government, wherefrom
Ministries and PSUs (public sector undertakings) source their procurement.

STATUTORY BODIES

MSME Ministry has four statutory bodies namely, Khadi and Village Industries Commission
(KVIC) who is responsible for promoting and developing khadi and village industries for
providing employment opportunities in rural areas, thereby strengthening the rural economy,
Coir Board in charge of promoting overall development of the coir industry and improving
living conditions of workers in this industry, National Small Industries Corporation Limited
(NSIC) responsible for promoting, aiding and fostering growth of micro and small enterprises
in the country, generally on commercial basis, National Institute for Micro, Small and Medium
Enterprises, (NI-MSME) in-charge of enterprise promotion and entrepreneurship development,
enabling enterprise creation, performing diagnostic development studies for policy

21
formulation, etc. and lastly, Mahatma Gandhi Institute for Rural Industrialisation (MGIRI)
responsible for accelerating rural industrialisation for sustainable village economy, attract
professionals and experts to Gram Swaraj, empower traditional artisans, encourage innovation
through pilot study/field trials and R&D for alternative technology using local resources. New
online system of MSME/Udyam Registration launched by the Union MSME Ministry, w.e.f.
July 01, 2020, successfully registered >1.1 million MSMEs until November 2020. The Ministry
of Micro, Small and Medium Enterprises extended the validity of Udyog Aadhaar
Memorandum from December 31, 2021, to June 30, 2022.

GOVERNMENT POLICIES

The Government of India has designed various policies for the growth of MSMEs in the
country.

• Since the launch of the Credit Guarantee Trust Fund for Micro and Small Enterprises
(CGTMSE), till June 30, 2023 guarantees amounting to Rs. 4,50,163 crore (US$ 54.16
billion) have been issued under Credit Guarantee Scheme for Micro and Small
Enterprises (CGMSE).

• The Department of Animal Husbandry & Dairying (DAHD) under the Ministry of
Fisheries, Animal Husbandry and Dairying announced the launch of a new credit
guarantee scheme. The scheme under the Animal Husbandry Infrastructure
Development Fund (AHIDF) aims to facilitate collateral-free credit for MSMEs in the
livestock sector.

• Under Pradhan Mantri Mudra Yojana (PMMY), in FY23, Rs. 4.56 lakh crore (US$
55.58 billion) was sanctioned under 6.2 crore Mudra loans to non-corporate and
nonfarm MSEs, against a target of US$ 48.75 billion (Rs. 4 lakh crore).The "Vivad se
Vishwas I-Relief to MSMEs" scheme was launched in May, 2023 by the Department of
Expenditure, Ministry of Finance, to provide relief to MSMEs during the COVID19
period. The programme was announced by Union Finance Minister Ms. Nirmala
Sitharaman in the Union Budget 2023-24.

• The Defence Ministry will procure 928 strategically-important Line replacement units,
subsystems, spares, and components from Indian MSMEs, as informed in May, 2023.

22
Through the Public Procurement Policy, the Central Government is promoting small-
scale enterprises by purchasing the products of MSEs. In the financial year 2022-23,
the government spent Rs. 60,432 crore (US$ 7.3 billion), which is 42% more than the
target.

In February 2023, government revamped credit guarantee scheme for MSMEs to take
effect from April 1, 2023 through the infusion of Rs. 9,000 crore (US$ 1.09 billion) in
the corpus. This scheme would enable additional collateral-free guaranteed credit of Rs
2 lakh crore (US$ 24.41 billion) and also reduce the cost of the credit by about 1%.

In February 2023, government announced in budget 2023-24 that a unified Skill India
Digital Platform to be launched in order to enable demand-based formal skilling,
linking with employers including MSMEs, and facilitating access to entrepreneurship
schemes.

As on July 8, 2022 the number of loans sanctioned under the Pradhan Mantri MUDRA
Yojana (PMMY) scheme was 10.03 million and the amount disbursed was Rs.
73,199.89 crore (US$ 9.15 billion).

In the Union Budget of 2022-23 MSMEs sector was allocated an Emergency Credit Line
Guarantee Scheme (ECLGS) of Rs. 50,000 crore (US$ 6.55 billion).

On March 30 2022, the Indian government allocated Rs. 6,062.45 crore (US$ 808
million) for the scheme Raising and Accelerating MSME Performance (RAMP). The
programme aims to improve market and credit access, strengthen institutions and
governance at the centre and state levels, improve centre-state connections and
partnerships, resolve late payment difficulties, and green MSMEs.

In November 2021, the Indian government launched the Special Credit Linked Capital
Subsidy Scheme (SCLCSS) for the services sector. This scheme will help enterprises
in the services sector meet various technology requirements.

In November 2021, the Ministry of Micro, Small and Medium Enterprises launched
SAMBHAV, a national-level awareness programme to push economic growth by
promoting entrepreneurship and domestic manufacturing.
25
RECENT DEVELOPMENTS

Major Recent Developments in the MSMEs include:

• Google plans to make a calculated investment in digital payments with the aim
to strengthen the dynamic Indian Micro, Small and Medium Enterprise (MSME)
market, said Mr. Sanjay Gupta, Country Head and Vice President of Google
India. Google plans to expand its impact beyond payments, aiming to unlock
India's MSME potential through financial inclusion and digital empowerment.

• In a significant move to bolster the MSME sector in India, the Technology

Development Board (TDB) and the Small Industries Development Bank of India
(SIDBI) formalized a Memorandum of Understanding (MoU) to facilitate easier
access to credit for enterprises engaged in the development and commercial
application of indigenous or imported technology.

• As announced in December 2023, the share of MSME-related products in all

India exports stood at 45.56% as of September 2023 (FY24), informed the
Minister of State in the MSME Ministry Mr. Bhanu Pratap Singh Verma.

• The Reserve Bank of India on August 17, 2023 announced the launch of the
Public Tech Platform for Frictionless Credit (PTPFC) pilot project. The PTPFC
has been created by the Reserve Bank Innovation Hub (RBIH), a wholly-owned
subsidiary of the central bank. The aim of the pilot project is to connect
borrowers and lenders, which will make credit more accessible to millions of
individuals looking for small loans. The PTPFC will be enabling the disbursal of
non-collateral based loans for Micro, Small and Medium Enterprises (MSMEs),
Kisan Credit Card loans up to Rs. 1.6 lakh (US$ 1,924.07), dairy loans, personal
loans, and home loans.

• In August 2023, Flipkart partnered with the Government of Gujarat through a

MoU with the Commissioner of Cottage & Rural Industries, Government of
Gujarat, under its Flipkart Samarth program. The tie-up aims at digitising local
businesses that focus on the development of the crafts in every district and to
revive the languishing crafts in the state.
26
In August 2023, DBS Bank in collaboration with supply chain platform Infor
Nexus announced the launch of a pre-shipment financing solution for SMEs part
of the Infor Nexus supply chain ecosystem.

In May 2022, Aditya Birla Capital launched Udyog Plus, an MSME-focused

portal, which provides capital and other business solutions to small businesses,
including investments, advisory services, and utility services. It offers online
loans up to Rs. 10 lakh (US$ 120,000) to MSMEs through various product
offerings such as supply chain finance and transaction-based loans.

Life insurance company Max Life on May 8, 2023 announced a strategic tie-up
with an MSME representative body Indian Industries Association (IIA) to
provide life insurance to employees working in MSMEs based in Uttar Pradesh.
The insurance programme will cover more than 11 lakh MSME workers
affiliated with IIA and their families in the state and will be undertaken with Sana
Insurance Brokers as the enrolment partner.

In February 2023, government announced in budget 2023-24 that Entity

DigiLocker is to be setup for use by MSMEs, large businesses, and charitable
trusts to store and share documents online securely.

In February 2023, government announced in budget 2023-24 that 95% of the

forfeited amount relating to bid or performance security, shall be returned to
MSMEs by the government and government undertakings in cases wherein the
MSMEs failed to execute contracts during the Covid period.

In June 2022, the central government announced a new initiative called

"Promotion of MSMEs in North Eastern Region and Sikkim." The main purpose
of this project was to stimulate MSMEs in the North East by establishing
minitechnological centres, developing new and existing industrial estates, and
promoting tourism.

In November 2021, the Small Industries Development Bank of India (SIDBI)

inked a pact with Google to pilot social impact lending with financial assistance
up to Rs. 1 crore (US$ 133,939.60) at subsidised interest rates to micro
enterprises. To reinvigorate the Indian MSME sector, Google India Pvt. Ltd.
27
GIPL, will bring a corpus of US$ 15 million (~Rs. 110 crore) for micro enterprises as a
crisis response related to COVID-19.

In November 2021, digital freight forwarder Freightwalla, launched a shipment

tracking service for MSME exporters and importers based on predictive analytics
to help businesses tackle risks associated with shipment delays and improve
supply chain efficiency.

In November 2021, Cashinvoice, a supply chain financing (SCF) platform,

announced that it will aid MSMEs with over Rs. 10,000 crore (US$ 1.33 billion)
worth of financing in the year ahead, as it has raised Pre-Series A funding of US$
1 million from Accion Venture Lab.

In October 2021, Sundaram Finance and the MSME Development Institute

(Chennai), provided marketing assistance to MSMEs. Entrepreneurial and
managerial development of MSMEs will be done through an incubator scheme,
that will give innovators opportunities to develop and nurture ideas for the
production of new products.

In September 2021, Aerospace Engineers Private Limited, a Tamil Nadu-based MSME,

secured a contract from Boeing to produce and supply critical aviation components.

ACHIEVEMENTS IN THE SECTOR

The Ministry of MSME runs numerous schemes targeted at providing credit and
financial assistances, skill development training, infrastructure development,
marketing assistance, technological and quality upgradation and other services
for MSMEs across the country.

28
ROAD AHEAD
The Government of India has envisioned doubling the Indian economy to US$ 5
trillion in five years. In order to achieve this goal, career opportunities for the
young population have been generated and MSMEs have the potential to serve
as a key employment generator. Therefore, the government has taken up
promotion of MSMEs i n order to create new jobs in the sector. Further, the
government aims to enhance MSME’s share in exports and its contribution to
GDP.
In order to achieve these targets, the government should invest in providing more
back-end services to improve performanc e of the MSME sector as it supplies
goods and services to big industrial enterprises. Lack of technology -based
production activities and low investment in R&D activities are bottlenecks
hindering the sector to become competent. Globally available technolog y could
be subsidised by the government so that the product quality of MSME players
can be improved using the existing resources. This also requires the help of
academic institutions in the form of providing research and development (R&D)
services for product innovation.

29
The Indian economy thrives on the contributions of the Micro, Small, and
Medium Enterprises (MSME) sector, which significantly contributes to the GDP,
employment, and exports. In recent years, the MSME sector in India has faced
challenges in accessing the credit necessary for growth and expansion. This has
hindered the sector's potential to contribute even more significantly to the Indian
economy. The sector faces a notable credit gap, presenting challenges and
opportunities for financial institutions (FIs) and fintech companies to collaborate
and create value. Addressing this credit gap is crucial for unlocking MSME's
growth potential and fostering a more self-reliant and sustainable economy. With
the rise of digital innovation and technology, a new opportunity exists to bridge
this credit gap and drive economic growth. In this blog, we will delve into the
challenges of the credit gap in India's SME sector, exploring the potential of
digital lending solutions and their impact on the overall economy.
Understanding the Credit Gap in the MSME Sector in India
The MSME sector in India is a cornerstone of the economy, encompassing over
63 million enterprises and contributing ~30% to the country's GDP. It employs
over 164 million people, making up ~31% of the workforce. In addition, it
accounts for 44% of the country's exports, highlighting its vital role in India's
economic landscape.
As per a report published by the World Bank/IFC in November 2018, the
addressable credit gap in the MSME sector was estimated to be INR 25.8 trillion
(US$ 397 billion). The micro, small, and medium enterprise segments
respectively account for INR 8 trillion (US$ 123.3 billion), INR 16.8 trillion
(US$ 258.6 billion), and INR 1 trillion (US$ 15.6 billion) of the debt gap that is
viable and can be addressed by financial institutions.
Micro and small enterprises account for 95 percent of the viable debt gap financial
institutions can address.
30
Source- IFC, World Bank
Exploring the Future of India's Digital SME Credit Gap
As India's GDP is expected to reach US$ 5 trillion, MSMEs will play a pivotal
role in accelerating this growth, with the sector's exports projected to reach US$
1 trillion by 2028. MSMEs will require more credit to invest and grow to achieve
this level of exports, implying immense potential for growth and development
for the institutions offering credit to MSMEs. As per the latest available data, the
MSME segment's share of commercial loan originations increased by 38% in
FY22, compared to 27% in FY21, reaching a total value of Rs 25.3 trillion (US$
304 billion), accounting for 38.1% of the total originations value of Rs 66.6
trillion (US$ 801 billion). This demonstrates significant growth in lending to the
MSME sector. This significant growth reflects the increasing demand for credit
among SMEs and the expanding opportunities for financial institutions and
fintech companies.
In addition to lending, there are niche opportunities in credit demand,
technological advancements, export financing, supply financing, and advisory
services. These opportunities represent diverse areas where digital lending and
financial technology can significantly impact. For example, technological
advancements such as digital KYC (Know Your Customer) processes, credit
scoring models, and automated loan origination systems can enhance the
efficiency and accuracy of lending operations. Export financing and supply
financing provide avenues for supporting SMEs in expanding their international
trade activities and optimizing their supply chain operations.
31
 DFM FOOD

Dfm Foods Limited is an unlisted public company incorporated on 17 March, 1993. It is

classified as a public limited company and is located in South Delhi, Delhi. It's authorized share
capital is INR 15.00 cr and the total paid-up capital is INR 10.08 cr.

Dfm Foods Limited's operating revenues range is Over INR 500 cr for the financial year
ending on 31 March, 2023. It's EBITDA has decreased by -154.24 % over the previous year.
At the same time, it's book networth has decreased by -37.63 %.

Description: The company manufactures, markets, and sells packaged snack foods

Products & Services: corn rings, wheat puffs, bhujiyas, daals, mixtures, and nut mixes
Category: Manufacturer

The current status of Dfm Foods Limited is - Active.

The last reported AGM (Annual General Meeting) of Dfm Foods Limited, per our records, was
held on 29 November, 2023.

Dfm Foods Limited has seven directors

Provided here are the financial indicators for financial year ending on 31 March, 2023. Actual
numbers and updated financial data are included in purchased financial report. View Sample
Report.

42
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Research data on Micro, Small, and Medium Enterprises (MSMEs) in India covers various
aspects of these businesses, including their characteristics, challenges, opportunities, and

43
contributions to the economy. Here are some key points and sources of research data on
MSMEs in India:

1. Number and Distribution:

- According to the Ministry of Micro, Small & Medium Enterprises, there are over 63
million MSMEs in India, contributing significantly to employment generation and economic
growth.

- Data on the distribution of MSMEs across states and sectors can be found in
government reports, such as the Annual Report of the Ministry of MSME.

2. Employment Generation:

- MSMEs are a major source of employment in India, providing livelihoods to millions

of people, especially in rural and semi-urban areas.

- The National Sample Survey Organization (NSSO) and the Labour Bureau conduct
surveys on employment in MSMEs, providing data on workforce size, composition, and trends
over time.

3. Financial Performance:

- Data on the financial performance of MSMEs, including revenue, profit margins, and
access to finance, can be obtained from government reports, industry surveys, and academic
research.

- The Reserve Bank of India (RBI) publishes data on bank lending to MSMEs, including
credit flows, loan size distribution, and sectoral allocation.

44
4. Challenges and Constraints:

- Research studies and surveys identify various challenges faced by MSMEs in India,
such as limited access to finance, infrastructure constraints, regulatory burdens, and skill
shortages.

- Reports by industry associations, think tanks, and academic institutions provide insights
into sector-specific challenges and policy recommendations.

5. Government Policies and Support Programs:

- Data on government policies, schemes, and initiatives to promote MSME development

in India are available from official sources, including the Ministry of MSME and various state
governments.

- Evaluation studies assess the effectiveness and impact of government interventions,

such as credit guarantee schemes, technology upgradation programs, and skill development
initiatives.

6. Technology Adoption and Innovation:

- Research data on technology adoption and innovation in MSMEs can be found in

surveys, case studies, and reports by industry associations and research organizations.

- Studies examine the use of digital technologies, adoption of advanced manufacturing

techniques, and innovation strategies among Indian MSMEs.

7. International Comparisons and Benchmarks:

- Comparative studies and international surveys provide benchmarks for assessing the
performance of Indian MSMEs relative to their counterparts in other countries.

45
- Global indices such as the World Bank's Doing Business Report and the Global
Entrepreneurship Monitor (GEM) offer insights into the regulatory environment,
entrepreneurial activity, and business climate for MSMEs worldwide.

8. Impact of COVID-19 Pandemic:

- Recent research focuses on the impact of the COVID-19 pandemic on Indian MSMEs,
including disruptions to supply chains, declines in demand, financial stress, and policy
responses.

- Surveys and studies assess the resilience, adaptation strategies, and recovery prospects
of MSMEs in the post-pandemic era.

Researchers, policymakers, and practitioners can access a wealth of research data on MSMEs
in India from government reports, academic publications, industry surveys, and research
organizations. Analysing and synthesizing this data can provide valuable insights for policy
formulation, program design, and support interventions aimed at strengthening the MSME
sector and promoting inclusive economic growth.

CHAPTER 4

FINDINGS

46
Here’s a comprehensive overview of the Micro, Small, and Medium Enterprises (MSME)
sector in India, highlighting its significance, challenges, and recent developments:

Micro, Small, and Medium Enterprises (MSMEs) in India

The MSME sector plays a pivotal role in India’s economy, contributing significantly to
employment generation and economic development. Let’s delve into the key aspects:

1. Background and Mandate

• The MSME sector encompasses a diverse range of enterprises, including micro, small,
and medium-sized businesses.
• Its mandate involves fostering entrepreneurship, promoting innovation, and
supporting existing enterprises.
• Recent initiatives have focused on adopting cutting-edge technologies and
encouraging inclusive industrial development.

2. Role of MSMEs in the Indian Economy

MSMEs contribute substantially to the Indian economy by:

o Generating employment opportunities. o
Providing ancillary products and
services. o Widening the industrial base. o
Complementing larger industries.
The NSS 73rd Round Survey (2015-16) highlighted the role of MSMEs in various
sectors.

3. Statutory Bodies and Attached Offices

The Ministry of Micro, Small and Medium Enterprises oversees several statutory and
nonstatutory bodies:

1. Khadi and Village Industries Commission (KVIC): Promotes khadi and village
industries.
2. Technology Centres (TCs): Support technological advancements in MSMEs.
3. Coir Board (CB): Focuses on coir-related activities.
4. National Small Industries Corporation (NSIC): Facilitates growth and
development.

47
 5. Mahatma Gandhi Institute for Rural Industrialisation (NI-MSME): Works
toward rural industrialization.

4. Major Schemes and Targeted Activities

The Ministry of MSME and its attached offices implement various schemes:
o Activities for the North Eastern Region (NER): Targeted initiatives for the
northeastern states.
o Welfare of Women: Programs aimed at empowering women entrepreneurs.
o Welfare for Persons with Disabilities (PWDs): Inclusive measures for
differently-abled individuals. o International Cooperation (IC) Scheme:
Enhancing global collaboration.

5. General Statutory Obligations

The Ministry adheres to several obligations:

o Official Language (OL): Promoting the use of the official language. o
Vigilance: Ensuring transparency and accountability. o Citizen’s
Charter: Commitment to efficient service delivery. o Right to
Information (RTI): Facilitating access to information. o
Prevention of Sexual Harassment: Creating a safe work environment.

Research findings in Micro, Small, and Medium Enterprises (MSMEs) in India reveal a
dynamic and diverse sector that plays a vital role in the country's economy. Here are some key
findings:

1. Economic Contribution: MSMEs contribute significantly to India's GDP,

employment generation, and export earnings. They account for a large share of
industrial production and provide employment to millions of people, particularly in
rural and semi-urban areas. Research indicates that MSMEs contribute around 30% of
India's GDP and employ over 110 million people across various sectors.

2. Employment Generation: MSMEs are a major source of employment, especially

for the marginalized sections of society such as women, youth, and rural populations.

48
 Studies show that MSMEs create jobs at a faster rate compared to large enterprises,
thereby playing a crucial role in poverty alleviation and inclusive growth.

3. Challenges Faced: Despite their significant contributions, MSMEs face various

challenges that hinder their growth and competitiveness. Access to finance remains a
major concern, with many MSMEs struggling to secure credit from formal financial
institutions. Other challenges include inadequate infrastructure, regulatory complexity,
bureaucratic hurdles, and skill shortages. Research findings highlight the need for
policy interventions to address these challenges and create an enabling environment for
MSMEs to thrive.

4. Digital Transformation: With the advent of digital technologies, MSMEs are

increasingly adopting digital solutions to enhance productivity, efficiency, and
competitiveness. Research indicates a growing trend of MSMEs leveraging ecommerce
platforms, digital marketing, cloud computing, and mobile technologies to reach new
markets, streamline operations, and improve customer engagement. Digital
transformation presents opportunities for MSMEs to overcome traditional barriers and
expand their presence in domestic and international markets.

5. Innovation and Entrepreneurship: MSMEs play a crucial role in driving

innovation and entrepreneurship in India. Research findings highlight the innovative
capabilities of MSMEs in developing new products, processes, and business models.
MSMEs are hubs of creativity and experimentation, fostering a culture of
entrepreneurship and risk-taking. Initiatives such as startup incubators, technology
parks, and innovation clusters support MSMEs in harnessing their innovative potential
and scaling up their ventures.

6. Policy Implications: Research underscores the importance of policy support and

institutional reforms to strengthen the MSME ecosystem in India. Policy interventions are
needed to improve access to finance, simplify regulatory procedures, upgrade
infrastructure, and enhance skills training. Government initiatives such as the 'Make in
India', 'Startup India', and 'Digital India' programs aim to promote MSME development
and facilitate ease of doing business. Research findings provide valuable insights for
policymakers to design effective policies and programs that address the needs and
challenges of MSMEs.

49
In conclusion, research findings highlight the crucial role of MSMEs in India's economic
development and underscore the need for concerted efforts to address the challenges they face
and unleash their full potential. By fostering a conducive environment for MSME growth and
innovation, India can harness the transformative power of MSMEs to drive inclusive and
sustainable economic growth.

Overview of Govt. Initiatives on MSMEs

MSMEs are the backbone of the Indian economy, contributing approximately 30% of the
country’s GDP (Gross Domestic Product), 45% of manufacturing output and providing
employment to 11 Cr of India’s population. The Government of India has been proactive to
ensure that all the benefit of these MSME schemes reaches to the MSMEs in time. The Union
Budget 2023-24 focuses on ease of doing business for MSMEs. The most important measures
include:
• Emergency Credit Line Guarantee Scheme (ECLGS) has delivered additional credit to
more than 130 lakh MSMEs. The ECLGS will be extended up to March 2023 expanding
the guarantee cover by INR 50,000 Cr to a total cover of INR 5 Lakh Cr.
• INR 2 Lakh Cr additional credit for Micro and Small Enterprises to be facilitated under
the Credit Guarantee Trust for Micro and Small Enterprises (CGTMSE).
• Raising and Accelerating MSME performance (RAMP) programme with an outlay of
INR 6,000 Cr to be rolled out.
• INR 50,000 Cr equity infusion through MSME Self-Reliant India Fund.
• Udyam, e-Shram, National Career Service (NCS) and Aatamanirbhar Skilled Employee
Employer Mapping (ASEEM) portals will be interlinked. They will now serve as portals
with live, organic databases, delivering G2C, B2C, and B2B services relating to credit
facilitation, skilling, and recruitment.
• Launch of Udyam Assist Platform (UAP) to bring the Informal Micro Enterprises
(IMEs) under the formal ambit for availing the benefit under Priority Sector Lending
(PSL).

LIMITATION

50
Despite their significant contributions to the economy, Micro, Small, and Medium Enterprises
(MSMEs) in India face several limitations and challenges:

1. Limited Access to Finance: MSMEs often struggle to access formal sources of finance
due to factors such as lack of collateral, inadequate credit history, and stringent lending
criteria. Traditional financial institutions may perceive MSMEs as risky borrowers, leading
to limited access to credit at affordable rates. This constrains their ability to invest in
technology upgrades, expand operations, and innovate, hindering their growth potential.
2. Infrastructure Constraints: Many MSMEs grapple with inadequate infrastructure,
including power supply, transportation networks, and access to markets. Poor infrastructure
not only increases production costs but also impedes the efficient movement of goods and
services, thereby affecting competitiveness and market reach. Addressing infrastructure
deficiencies is crucial for enhancing the productivity and competitiveness of MSMEs.
3. Regulatory Compliance Burden: MSMEs face a plethora of regulatory compliance
requirements, including registrations, licenses, permits, and tax obligations. Navigating
through complex regulatory frameworks and bureaucratic procedures can be daunting for
small businesses, leading to compliance costs, administrative burdens, and regulatory
uncertainty. Simplifying regulatory procedures and reducing compliance burden can
alleviate the challenges faced by MSMEs and promote ease of doing business.
4. Limited Market Access and Marketing Skills: MSMEs often struggle to access domestic
and international markets due to lack of market information, limited market linkages, and
inadequate marketing skills. Limited market access constrains their ability to scale up
operations and diversify customer base, thereby affecting growth prospects. Enhancing
market access and providing support for marketing skills development can enable MSMEs
to tap into new markets and expand their business opportunities.
5. Technology Adoption and Innovation Gap: Many MSMEs lag behind in technology
adoption and innovation due to resource constraints, lack of awareness, and limited R&D
capabilities. Failure to embrace emerging technologies and innovative practices can render
MSMEs less competitive in the rapidly evolving business landscape. Providing support for
technology adoption, R&D initiatives, and innovation ecosystems can enhance the
competitiveness and sustainability of MSMEs.
6. Skills Shortage: MSMEs often face challenges in attracting and retaining skilled
workforce, particularly in specialized sectors and emerging industries. Skill shortages can
hamper productivity, quality standards, and innovation capabilities, thereby affecting

51
 business performance. Investing in skill development programs, vocational training, and
industry-academia collaborations can address the skills gap and enhance the employability
of the workforce in MSMEs.
7. Vulnerability to External Shocks: MSMEs are highly vulnerable to external shocks such
as economic downturns, policy changes, natural disasters, and global market fluctuations.
Their small scale and limited resources make them less resilient to disruptions, increasing
the risk of business failures and closures during challenging times. Building resilience
through risk management strategies, access to social safety nets, and diversification of
revenue sources can help MSMEs withstand external shocks and sustain long-term
viability.

Addressing these limitations requires concerted efforts from policymakers, financial

institutions, industry associations, and other stakeholders to create an enabling environment for
MSMEs to thrive. By addressing the challenges faced by MSMEs, India can unlock their full
potential as engines of economic growth, job creation, and innovation.

CHAPTER 5

INTERPRATATION

52
Certainly, here's a detailed interpretation of Micro, Small, and Medium Enterprises (MSMEs)
in India presented in points:

1. Economic Backbone:
• MSMEs are integral to India's economic landscape, contributing significantly to
the GDP by accounting for a substantial share of industrial output and services.
• They operate across diverse sectors, including manufacturing, agriculture,
services, and technology, showcasing their versatility and resilience.
• MSMEs are major contributors to job creation, particularly in rural and
semiurban areas, where they serve as catalysts for local development and
poverty alleviation.
2. Employment Generation:
• MSMEs are pivotal in addressing India's employment challenges by offering
livelihood opportunities to millions, especially youth, women, and marginalized
communities.
• They absorb surplus labour from agriculture and informal sectors, mitigating
urban-rural migration and promoting inclusive growth.
• The sector's labour-intensive nature makes it a significant contributor to job
creation, supporting India's demographic dividend.
3. Challenges and Constraints:
• Access to finance remains a persistent challenge for MSMEs, with issues such
as stringent collateral requirements and high-interest rates limiting their ability
to secure credit from formal financial institutions.
• Inadequate infrastructure, bureaucratic red tape, regulatory complexities, and
skill shortages hinder MSME growth and competitiveness.
• Addressing these challenges is essential to unlocking the full potential of
MSMEs and fostering sustainable economic development.
4. Digital Transformation:
• MSMEs are increasingly leveraging digital technologies to enhance
productivity, efficiency, and market reach.
• Digital transformation enables MSMEs to overcome traditional barriers and
access global markets through e-commerce platforms, digital marketing, and
online marketplaces.

53
 • However, challenges such as the digital divide and cybersecurity risks must be
addressed to ensure inclusive digital growth for MSMEs.
5. Policy Imperatives:
• Policymakers recognize the crucial role of MSMEs in India's economic
development and have introduced various initiatives to support their growth and
innovation.
• Programs such as 'Make in India', 'Startup India', 'Digital India', and 'Amenabar
Bharat' aim to promote MSME entrepreneurship, innovation, and
competitiveness.
• However, effective implementation, monitoring, and evaluation of these
policies are essential to ensure their impact on the ground.
• The Micro, Small, and Medium Enterprises (MSMEs) sector in India has a
profound and multifaceted impact on the country's economy, society, and
development trajectory. With over 63 million enterprises operating across
diverse sectors, MSMEs form the backbone of India's economic landscape,
contributing significantly to GDP growth, employment generation, and
industrial output.

• At the core of MSMEs' impact lies their role as engines of economic growth and
productivity. Despite their small size, MSMEs collectively make a substantial
contribution to India's Gross Domestic Product (GDP), accounting for around
30% of the country's GDP. Their ability to operate across various sectors,
including manufacturing, agriculture, services, and technology, showcases their
versatility and resilience in driving economic dynamism.

• One of the most significant contributions of MSMEs is in employment

generation. The sector is a vital source of livelihood for millions of people,
especially in rural and semi-urban areas where large-scale industries are limited.
MSMEs play a pivotal role in absorbing surplus labour from agriculture and
informal sectors, thereby mitigating urban-rural migration and promoting
inclusive growth. They provide opportunities for entrepreneurship and
selfemployment, empowering individuals to create their own livelihoods and
contribute to the economy.

54
55
Moreover, MSMEs foster entrepreneurship, innovation, and grassroots-level
creativity, fuelling economic growth and competitiveness. These enterprises are
often hubs of innovation, developing novel products, services, and business
models tailored to local needs and market demands. Their ability to adapt to
changing market conditions and embrace new technologies enables them to stay
competitive in the global marketplace.

MSMEs also serve as critical nodes in India's supply chains, supporting larger
industries and contributing to export earnings. They play a crucial role in
fostering linkages between different sectors of the economy, creating
valueadded products and services, and driving economic integration.
Additionally, MSMEs contribute to regional development by promoting local
industries, creating ancillary businesses, and enhancing infrastructure in smaller
towns and rural areas.

Despite their significant contributions, MSMEs face numerous challenges that

hinder their growth and sustainability. Access to finance remains a persistent
hurdle, with many enterprises struggling to secure credit from formal financial
institutions due to stringent collateral requirements and high-interest rates.
Moreover, inadequate infrastructure, bureaucratic red tape, regulatory
complexities, and skill shortages further impede their growth trajectory.
Addressing these challenges is crucial to unlocking the full potential of MSMEs
and fostering sustainable economic development.

In recent years, digital transformation has emerged as a game-changer for

MSMEs in India. Digital technologies enable these enterprises to enhance
productivity, efficiency, and market reach. From adopting e-commerce
platforms and digital marketing strategies to implementing cloud computing and
automation solutions, MSMEs are leveraging technology-driven approaches to
stay competitive in the global marketplace. However, challenges such as the
digital divide and cybersecurity risks must be addressed to ensure inclusive
digital growth for MSMEs.

57
47
59
Policy imperatives aimed at bolstering MSMEs in India encompass a holistic
approach encompassing regulatory reforms, financial inclusion, skill
development, technology adoption, and market access. Initiatives such as 'Make
in India', 'Startup India', 'Digital India', and 'Amenabar Bharat' underscore the
government's commitment to fostering MSME growth, entrepreneurship, and
innovation. However, effective implementation, monitoring, and evaluation of
these policies are essential to ensure their impact on the ground.

In conclusion, MSMEs in India play a pivotal role in driving economic growth,

employment generation, and innovation. Their resilience, adaptability, and
entrepreneurial spirit position them as key drivers of India's development
trajectory. Policymakers, industry stakeholders, and financial institutions must
collaborate to address the barriers hindering MSME growth and foster an
enabling environment conducive to their success. By supporting and nurturing
the MSME sector, India can unlock its growth potential and foster inclusive
prosperity for all.
48

61
 CHAPTER 6

SUGGESTION AND RECOMMENDATION

Supporting and enhancing the Micro, Small, and Medium Enterprises (MSMEs) sector in India
is crucial for fostering economic growth, job creation, and innovation. Here are comprehensive
suggestions to empower MSMEs and unleash their full potential:

1. Access to Finance:

- Simplify loan approval processes and reduce collateral requirements to improve access
to finance for MSMEs.

- Encourage the development of innovative financing mechanisms such as venture

capital, angel investment, and peer-to-peer lending platforms tailored to the needs of MSMEs.

- Strengthen credit guarantee schemes and financial inclusion initiatives to facilitate

lending to MSMEs, particularly those in underserved areas.

2. Skill Development:

- Enhance vocational training programs and skill development initiatives to equip

MSMEs with the necessary technical, managerial, and entrepreneurial skills.

- Foster partnerships between MSMEs, educational institutions, and industry bodies to

promote industry-relevant training and apprenticeship programs.

- Encourage lifelong learning and continuous skill upgradation among MSME

entrepreneurs and employees to adapt to evolving market dynamics.

3. Technology Adoption:

- Provide incentives and subsidies to encourage MSMEs to adopt digital technologies

such as cloud computing, data analytics, Internet of Things (IoT), and artificial intelligence.

63
- Facilitate technology transfer and knowledge-sharing partnerships between MSMEs
and research institutions, startups, and larger enterprises.

- Establish technology parks, incubation centres, and innovation hubs to support MSMEs
in developing and implementing innovative solutions.

4. Market Access:

- Facilitate market linkages for MSMEs through e-commerce platforms, online

marketplaces, and business networking events.

- Support MSMEs in accessing domestic and international markets through trade fairs,
exhibitions, and export promotion initiatives.

- Provide assistance in obtaining quality certifications, intellectual property rights

protection, and compliance with regulatory standards to enhance market competitiveness.

5. Infrastructure Development:

- Invest in infrastructure development projects such as roads, transportation, logistics,

and industrial parks to improve connectivity and accessibility for MSMEs.

- Promote cluster-based development initiatives to foster collaboration, resource-sharing,

and economies of scale among MSMEs operating in similar sectors or geographic locations.

- Encourage public-private partnerships (PPPs) and corporate social responsibility (CSR)

initiatives to bridge infrastructure gaps and promote inclusive development.

6. Policy Reforms:

64
- Streamline regulatory procedures and reduce bureaucratic red tape to ease the burden
of compliance for MSMEs.

- Implement a single-window clearance system for MSME registration, licenses, and

approvals to simplify administrative processes and enhance ease of doing business.

- Review and update existing policies and regulations to address emerging challenges
and promote a conducive business environment for MSMEs.

7. Access to Information and Support Services:

- Establish MSME support centres and helplines to provide information, guidance, and
advisory services on various aspects of business management, finance, technology, and
marketing.

- Promote networking and collaboration among MSMEs through industry associations,

business chambers, and online forums to facilitate knowledge-sharing and collective action.

- Provide mentoring, coaching, and consultancy services to MSME entrepreneurs to

enhance their managerial and leadership capabilities.

8. Inclusive Growth and Social Responsibility:

- Promote diversity and inclusion in MSMEs by providing support to women-owned

enterprises, minority-owned businesses, and socially disadvantaged groups.

- Encourage MSMEs to adopt sustainable business practices, environmental stewardship,

and corporate social responsibility (CSR) initiatives to contribute to inclusive and sustainable
development.

- Facilitate access to government procurement contracts, public sector projects, and

corporate supply chains to enhance market opportunities for MSMEs from marginalized
communities.

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By implementing these suggestions, policymakers, industry stakeholders, and development
agencies can create an enabling environment for MSMEs to thrive, innovate, and contribute
effectively to India's economic growth and social development. Empowering MSMEs is not
only essential for achieving inclusive growth and poverty reduction but also for building a
resilient and competitive economy that can withstand global challenges and capitalize on
emerging opportunities.

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APPENDICES

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 In India, the sector has gained significant importance due to its contribution to Gross Domestic
Product (GDP) of the country and exports. The sector has also contributed immensely with respect
to entrepreneurship development especially in semi-urban and rural areas of India.

A revision in Micro Small and Medium Enterprises (MSME) definition was announced under the
Samirbhai Bharat Abhiyaan Scheme on May 13, 2020. The Ministry of Micro, Small, and Medium
Enterprises, vide its gazette notification dated June 1, 2020, has announced the upward definition
and criteria of the MSME. The new classification for MSME came into effect from July 1, 2020.

Therefore, according to the new classification of Micro, Small and Medium Enterprises (MSME)
under the Padmanabha Bharat Abhiyaan Scheme, enterprises are defined based on the investment
criteria in plant and machinery and turnover.

Criteria Manufacturing Enterprises and Enterprises rendering Services

(Revised classification with effect from July 1, 2020)

Turnover Investment
Micro Rs. 5 crores Less than Rs. 1 crore (US$ 120,000)

(US$ 610,000)
Small Rs. 50 crores More than Rs. 1 crore (US$ 120,000) but less than Rs. 10 crore (US$
1.2 million)
(US$ 6.1
million)
Medium Rs. 250 crores More than Rs. 10 crore (US$ 1.2 million), but less than Rs. 50 crore
(US$ 6.1 million)
(US$ 30.4
million)

MARKET SIZE
The BSE SME (small and medium enterprises) platform is expected to witness >60 SMEs to enter
the market in one year (2021-22) to bring up equity funds for meeting their business requirements.
The initial public offering (IPO) route witnessed 16 SMEs enter the market; they raised Rs. 100
crore (US$ 13.74 million) in 2020. In June 2021, Bombay Stock Exchange (BSE) announced that

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it has collaborated with Electronics and Computer Software Export Promotion Council (ESC) to
build awareness among small businesses and start-ups about advantages of listing.

MSMEs are being encouraged to market their products on the e-commerce site, especially through
Government e-Marketplace (Gem), owned and run by the government, wherefrom Ministries and
PSUs (public sector undertakings) source their procurement.

As per data from the Ministry of Micro, Small & Medium Enterprises, as of December 14, 2023,
the Udyam Registration portal registered 21,516,394 MSMEs, replacing the former process of
filing for a Udyog Aadhaar Memorandum (UAM). Registered micro-enterprises stood at
20,812,759 (96.74%), followed by small enterprises at 586,643 (2.69%) and midsized enterprises
at 54,352 (0.25%).

As of May 9, the total number of transactions or orders processed on the Government EMarketplace
(Gem) portal stood at 1.50 crore by 68,620 buyer organizations from over 60 lakh sellers and
service providers, of which 8.73 lakh sellers were micro and small enterprises (MSEs).

As of November 2022, the Gem portal has served 12.28 million orders worth Rs. 334,933 crores
(US$ 40.97 billion) from 5.44 million registered sellers and service providers for 62,247 buyer
organisations.

As of December 14, 2023, under the top five state-wise Udyam registrations, Maharashtra recorded
the maximum number of registrations with 37.12 lakh units, followed by Tamil Nadu (21.74), Uttar
Pradesh (20.28), Gujarat (15.53), Rajasthan (15.57).

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The number of MSMEs in the country is expected to grow from 6.3 crore, of which only 2.5 crore
have ever availed credit from formal sources to approximately 7.5 crore in the coming times,
growing at a projected CAGR of 2.5%.

The Ministry of MSME spent Rs. 23,583.90 crore (US$ 2.84 billion) in FY23, over 260% increase
from Rs. 6,513.13 crore (US$ 786.75 million) spent in FY19.

In FY22, the loan disbursals to MSMEs stood at Rs. 37.29 trillion (US$ 492.96 billion), a 5%
increase compared to FY21.

Domestic business requires a strong financial stimulus with concessional working capital loans to
ensure adequate liquidity is maintained in business operations from the government and financial
institutes.

Indian Micro, Small and Medium Enterprises (MSMEs) are rapidly adopting digital payments over
cash, with 72% payments done through the digital mode compared with 28% cash transactions.
Rise in digital adoption presents prospects for further growth in the sector. In FY23 till December
31, 2022, the number of digital transactions stood at 9,192 crore and worth Rs. 2,050 trillion (US$
24.73 trillion).

INDIA: SNAPSHOT

More
FDI In India

According to the Department for Promotion of Industry and Internal Trade (DPIIT), foreign
direct investment (FDI) equity inflows to India reached US$ 72.12 billion in 2020-21 (until
January 2021) while the cumulative FDI equity inflows to the country from April 2000 to
January 2021 reached US$ 545.0 billion.

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SECTOR
OVERVIEW
*The number of MSMEs in the country is expected to grow from 6.3 crore, toapproximately 7.5 crore in the
coming times, growing at a projected CAGR of 2.5%.

*The number of MSMEs in India increased by a CAGR of 18.5% from 2019 to 2020.

*In FY22, the loan disbursals to MSMEs stood at Rs. 37.29 trillion (US$ 492.96 billion), a 5% increase
compared to FY21.

STATUTORY
BODIES

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 *The MSME Ministry heads five statutory bodies—KVIC, Coir Board, NSIC, NI-MSME and the MGIRI

*These bodies are responsible for aiding MSMEs with respect to government schemes and policies

GOVERNMENT
SCHEMES
*The " Vivid se Vishwas I -Relief to MSMEs" scheme was launched in May, 2023 by the Department of
Expenditure, Ministry of Finance, to provide relief to MSMEs during the COVID
-19 period. The programme
was announced by Union Finance Minister Ms. Nirmala Sitharaman in the Union Budget 2023-24.

POLICY
SUPPORT
*In February 2023, government announced in budget 2023-24 that a unified Skill India Digital Platform to
be launched in order to enable demand-based formal skilling, linking with employers including MSMEs, and
facilitating access to entrepreneurship schemes.

*In Budget 2023-24, government revamped credit guarantee scheme for MSMEs to take effect from April
1, 2023 through the infusion of Rs 9,000 crore (US$ 1.09 billion) in the corpus. This scheme would enable
additional collateral-free guaranteed credit of Rs 2 lakh crore (US$ 24.41 billion) and also reduce the cost
of the credit

BIBLIOGRAPHY
MINISTRY OF MICRO SMALL AND MEDIUM ENTERPRISE

MSME Industry in India – Market Share, Reports, Growth & Scope | IBEF

[Link]

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