November , 2019
MSME – Strategic Importance and Challenges
14:49 pm

Ellora De

The Micro, Small and Medium Enterprises (MSME) are the most important stakeholders of the Indian economy. According to the Central Statistics Office (CSO), Ministry of Statistics and Programme Implementation (MOSPI), the share of MSME gross value added (GVA) in total GVA during the 2016-17 fiscal was 31.8%.

According to The Bengal Chamber of Commerce & Industry (BCC&I), the MSME sector’s contribution to both output and exports is about 45% and more than 70 million people are employed by the sector.

Strategic importance

India is a labour surplus economy. The output-employment ratio for the small scale sector is 1:1.4. A big push in the small scale sector can lead to a stabilising effect in a capital deficient country like India by providing higher output-capital and higher employment-capital ratios.

Deb Kumar Basu, Chairperson, MSME Committee, The Bengal Chamber of Commerce & Industry, told BE, “In India, capital is scarce and labour abundant. MSMEs have lower capital-output and capital-labour ratio as compared to large industries and therefore better serve the growth and employment objectives. MSMEs also go a long way in checking rural-urban migration by providing people living in isolated areas with sustainable sources of employment. Non-traditional products account for substantial part of MSME exports like sports goods, ready-made garments among others. These products are mostly handcrafted and eco-friendly.”

He added, “MSMEs act as ancillary industries for large scale industries providing them with raw materials, vital components and backward linkages. They tend to be cost effective on account of the comparatively lower overhead cost of smaller units. MSMEs touch upon the lives of the poorand marginalised. The sector seeks to empower people to break the cycle of poverty and deprivation.”


Rina Chakraborty, Assistant Director, MSME Development Institute, Kolkata, pointed out, “Access to credit is the biggest problem for this sector. The micro and small enterprises do not have proper knowledge regarding accessibility to funds and they do not have proper access to banks. Another problem is marketing support. People involved in the MSME sector do not get proper exposure to the various existing business opportunities and do not know the facilities which are available in their field.”

She added, “The products of micro and small enterprises are usually not up to the mark to meet export standards. There is also acute shortage of raw materials. Players in the MSME sector do not know how to procure raw materials at cheaper prices. Problems related to delayed payments are another major issue of this sector. MSMEs face problems pertaining to delayed payments from the comparatively bigger firms and even from PSUs. Logistic is also a problem. Moreover, as the entire MSME sector is not organised, there are problems related to collective bargaining. Lack of technical knowhow is another important problem.”

Though the government has initiated various programmes to support this sector, its efforts have largely been insufficient to meet the vast requirements of the MSME sector. According to many industry insiders, the sector needs individual attention and mentoring. This is not easy in a populous country like India. But as this sector is the backbone of our economy, India needs to find ways to strengthen it.


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