The Micro, Small and Medium-scale Enterprises (MSMEs) face challenges, including issues with formalisation and inclusion, limited access to finance, markets, technology, and digitalisation, infrastructural bottlenecks, and skilling, according to the Economic Survey.
As per the information available from the Ministry of Statistics and Programme Implementation, the share of MSMEs in all-India manufacturing output in FY22 was 35.4%. Data Dissemination Portal of Directorate General of Commercial Intelligence and Statistics (DGCIS) states the share of exports of MSME-specified products in all-India exports in FY24 was 45.7%.
However, an area where policy intentions are yet to manifest in desired outcomes is with respect to the small, medium, and large enterprises, according to the Survey.
Earlier, several products were reserved for small-scale industries. That was phased out as it benefitted neither small-scale industries nor the overall economy. Recent concerted efforts at formalising them are making progress.
The Finance Ministry acknowledged the challenges faced in formalising the MSME sector in the Survey. It mentioned the 2020 Udyam Registration Portal (URP) that aims to bring MSMEs under the ambit of the formal banking sector, to enable greater access to credit at subsidised rates. But it said, “one challenge with URP is the registration of Informal Micro Enterprises (IMEs) that are sizeable in number. As per the 73rd National Sample Survey, 6.3 crore unincorporated non-agricultural entities existed in FY16, primarily micro-enterprises. Since IMEs do not have a PAN/GST, they cannot register on URP and avail themselves of the benefits of government programmes. To formalise such enterprises, the Ministry of MSME, in collaboration with the Small Industries and Development Bank of India (SIDBI), launched the Udyam Assist Platform in 2023. As of June 2024, 1.86 crore IMEs have been onboarded on UAP. More than 4.5 crore enterprises have been registered on URP and UAP as of June 3 this year.”
The Ministry sought India’s financial sector to support capital formation and promote trade, business, and investments in MSMEs. “In the future, the development of new technologies, such as the Open Credit Enablement Network (OCEN) are expected to boost credit flow to the MSME sector, it mentioned in the Survey.
Acknowledging compliance challenges, the Survey stated, licensing, inspection and compliance requirements that all levels of the government continue to impose on businesses “is an onerous burden”. “The burden is felt more acutely by those least equipped to bear it – small and medium enterprises,” it added.
Despite several initiatives to support formalisation and ease of registration of the MSME sector, the Ministry emphasised the “growth and expansion of India’s Mittelstand (MSMEs) as a strategic priority”.
Invigorating efforts to improve efficiencies and skills for labour-intensive sectors like textiles, food processing, and MSMEs, will lend “greater balance to industrial expansion”, the Survey added.
