MSME sector and government policies
B.9] MSME Sector and Government Policies
1. MSME Sector: Definition and Importance
1.1 Definition
- MSME stands for Micro, Small and Medium Enterprises.
- Micro Enterprises: Enterprises with investment in plant and machinery (for manufacturing) or equipment (for service) not exceeding ₹ 25 lakh.
- Small Enterprises: Investment not exceeding ₹ 5 crore.
- Medium Enterprises: Investment not exceeding ₹ 10 crore.
1.2 Importance of MSME Sector
- Employment Generation: Contributes significantly to employment, especially in rural and semi-urban areas.
- Economic Growth: Accounts for about 30% of GDP and 45% of India’s manufacturing output.
- Export Contribution: About 25% of India’s total exports come from MSMEs.
- Innovation and Entrepreneurship: Encourages innovation and fosters a culture of entrepreneurship.
- Decentralization of Economic Power: Reduces regional and sectoral imbalances.
1.3 Key Facts (SSC, RRB)
- Contribution to GDP: ~30%
- Contribution to employment: ~45%
- Contribution to exports: ~25%
- MSMEs are the backbone of India’s economy.
2. Government Policies and Schemes
2.1 Policy Framework
- MSME Act, 2006: First comprehensive legislation for MSMEs in India.
- MSME Development Act, 2020: Replaced the 2006 Act, aimed at simplifying procedures and improving ease of doing business.
2.2 Key Schemes and Initiatives
| Scheme | Objective | Key Features |
|---|---|---|
| Credit Guarantee Fund Trust for Micro and Small Enterprises (CGFTMSME) | Provide credit guarantee to banks | Covers 80% of loan defaults |
| Stand Up India Scheme | Promote entrepreneurship among SC/ST/OBC and women | Provides loans up to ₹ 10 lakh |
| MSME Credit Line | Facilitate access to credit | Offers interest subvention and credit guarantee |
| Udyam Registration | Digital registration for MSMEs | Launched in 2020, replaced Udyog Aadhaar |
| Atmanirbhar Bharat | Self-reliant India | Includes various schemes for MSMEs |
| MUDRA Yojana | Financial support for micro enterprises | Three categories: Shishu, Kishor, Tarun |
| Credit Linked Subsidy Scheme (CLSS) | Subsidy on interest rates | For MSMEs in specific sectors |
| National Bank for Agriculture and Rural Development (NABARD) | Financial assistance for rural MSMEs | Provides refinance and credit support |
2.3 Important Dates
- Udyam Registration Launched: April 1, 2020
- MSME Development Act Enacted: April 1, 2020
- MUDRA Yojana Launched: April 1, 2018
- Stand Up India Scheme Launched: August 2016
2.4 Key Terms and Definitions
- MSME: Micro, Small and Medium Enterprises
- Udyam Registration: Digital registration portal for MSMEs
- MUDRA Yojana: Micro Units Development & Refinance Agency
- CLSS: Credit Linked Subsidy Scheme
- CGFTMSME: Credit Guarantee Fund Trust for Micro and Small Enterprises
2.5 Differences Between Micro, Small and Medium Enterprises
| Parameter | Micro | Small | Medium |
|---|---|---|---|
| Investment | Up to ₹ 25 lakh | Up to ₹ 5 crore | Up to ₹ 10 crore |
| Number of Employees | Up to 10 | Up to 200 | Up to 500 |
| Turnover | Up to ₹ 5 crore | Up to ₹ 50 crore | Up to ₹ 100 crore |
2.6 Key Facts (SSC, RRB)
- MSMEs contribute 30% to GDP and 45% to employment.
- MUDRA Yojana provides credit to micro enterprises.
- Udyam Registration is a digital portal for MSMEs.
- Stand Up India Scheme supports SC/ST/OBC and women entrepreneurs.
- MSME Development Act, 2020 replaced the 2006 Act.
- CGFTMSME covers 80% of loan defaults.
- CLSS provides interest rate subsidies.
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