A Snapshot on Challenges and Opportunities for MSMEs

Summary: Micro, Small, and Medium Enterprises (MSMEs) are pivotal to India’s economy, significantly contributing to exports and employment, and are central to the “Make in India” initiative. Governed by the MSME Act, 2006, MSMEs are classified based on investment and turnover. The Udyam registration portal, launched in July 2020, has seen over 4.32 crore registrations, offering various benefits despite not being mandatory. Key government schemes include the Credit Guarantee Scheme for loans without collateral, the MSE Cluster Development Programme for infrastructure support, the Entrepreneurship and Skill Development Programme for promoting new enterprises, and the International Cooperation Scheme for export market participation. Public procurement through the Government e-Marketplace (GeM) has also increased MSME opportunities, with specific procurement relaxations for MSEs. The SAMADHAAN portal addresses delayed payments to ensure financial stability for MSEs. Despite these initiatives, challenges such as compliance burdens, limited access to skilled professionals, and difficulties in securing financing persist. Addressing these challenges is crucial to unlocking the full potential of MSMEs, thereby enhancing their contribution to India’s economic growth.

Introduction

MSME or Micro, Small & Medium Enterprises are categorisation of Companies on the basis of pre-defined criteria.

MSMEs emerged as a backbone of Indian economy. From export to employment generation, MSMEs contribute significantly to achieve the desired outcome of $5 trillion economy. Approx. 45% of country’s export is done by MSMEs. MSMEs are governed by MSME Act, 2006 as updated from time to time.

MSMEs are integral part of government’s ambitious ‘’Make in India’’ initiative and that’s why various beneficial programmes have been developed to pace up the development of this industry.

Registration

As part of digital India and ease of doing business initiative, Udyam registration portal for MSMEs had been launched w.e.f. 01.07.2020. As many as 4.32 crore MSMEs registered on Udyam portal up to April 2024. Though it is not mandatory to get registered on this portal, but the benefits of obtaining this registration is beneficial. Here I would like to draw the attention of my reader’s that most of the schemes are reserved for MSE (Micro & Small) Enterprises. Various schemes have been launched for MSEs and they also get some exemptions in Income Tax Act.

Various Schemes

Public Procurement

GeM has emerged as a one- stop online procurement portal for all government buyers including central/state ministries, Departments etc. Rule 149 of GFR amended to ‘’ Procurement of Goods & services by Ministries or department will be mandatory for Goods or Services available on GeM’’. The rise of GeM also increases the scope for MSMEs as now they are able to participate in public procurement happening anywhere in country.

To further increase their participation, certain relaxations are there for MSEs in Public procurement like:

• At least 25% of annual procurement, by value, of goods and services by a department must be from MSE Vendors,
• 358 items reserved for procurement from MSEs exclusively, by the Central Ministries/PSUs,
• Relaxation from EMD (Bid security) requirement
• Purchase preference to MSE bidder over Non-MSE bidders, margin of preference 15%

MSEs have huge scope in public procurement and various policies are also there to support them.

SAMADHAAN Portal

Timely payment from Customers is of crucial to any business and especially for MSEs as they generally do not have large funds at their disposal. To ensure this, SAMADHAAN portal, a delayed payment monitoring system, is launched to ensure payments in timely manner. MSEs may lodged their grievance with SAMADHAAN portal if there is delay in payment from Customers. The portal ensures speedy disposal of their grievance.

Summing Up

Though we can say that a lot has been done for this Industry but yet we are facing some challenges due to which MSME units are not able to work at their full capacity.

• We are talking about ease of doing business but still we have so many compliances to follow that many of these units failed to comply with as they are not able to employed skilled professionals,
• Various schemes to arrange finance had been launched like CGTMSE but still many MSEs faced shortage of funds as banks are reluctant to sanction credit lines owing to their compliances,
• In the era of AI, large corporate houses are able to harness full benefits of technology but MSEs lag behind.

So this Industry has a lot of capability and if challenges can be tackled, we will witness true potential of MSMEs in every aspect of growth.