Daily Hot Topic
Topic : MSMEs: Growth and Challenges
GS-3 Mains : Economy
MSMEs: The Backbone of India’s Economy
- MSMEs (Micro, Small & Medium Enterprises) are crucial for job creation, income generation, and entrepreneurship.
- They contribute significantly:
- Employment: Over 11 crore jobs (23% of workforce)
- GDP: Around 27%
- Output: 38.4% of total manufacturing output
- Exports: 45.03% of total exports
- Number of MSMEs: 6.4 crore (1.5 crore registered)
Challenges Faced by MSMEs
- Access to Finance: Lack of collateral, limited credit history, and limited access to formal institutions hinder loan approvals.
- Bureaucracy: Complex regulations and procedures consume time and resources.
- Competition: Established companies with greater resources pose a challenge.
- Technological Knowledge Gap: Lack of expertise hinders modernization and adoption of new technologies.
- Marketing and Networking: Limited resources restrict effective marketing and reaching new customers.
- Informalization: Many MSMEs operate informally, limiting access to government support and benefits.
Government Initiatives
- MSME Champions Scheme: Modernizes processes, reduces waste, encourages innovation, and enhances competitiveness.
- Udyam Registration: Simplifies registration for availing government benefits.
- Payment Terms: Businesses must pay registered MSMEs within 15 days (or 45 days with agreement).
- Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE): Provides collateral-free credit through a guarantee mechanism.
Way Forward for Sustainable Growth
- Extend NPA Timeline: Relief for struggling MSMEs by extending the non-performing asset (NPA) classification period from 90 days to 180 days.
- Extend Interest Equalisation Scheme: Support exports by extending the scheme for five years.
- Extend Duty & Tax Benefits for Textiles & Garments: Extend Remission of Duties and Taxes on Exported Products (RODTEP) and Rebate of State and Central Taxes and Levies (RSTCL) schemes for five years.
- Focus on Infrastructure, Technology, and Climate Change: Schemes for infrastructure creation, technology upgradation, and climate change adaptation can empower MSMEs for a greater contribution to the economy.
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