MSME - Micro, Small and Medium Enterprises

MSME stands for Micro, Small and Medium Enterprises. This is the organization responsible for the manufacturing, development, and preservation of goods and providing services. Micro, Small, and Medium Enterprises are commonly known as MSME.

What is MSME

The MSME was established in 2006, and it is responsible for the manufacturing, preservation, processing, and production of goods. MSME has highly impacted the GDP of our country.

MSME has acted as the backbone of the country's economy and has improved the socio-economic status of the country. It generates a large amount of employment and works for the people from backward and remote areas of the country.

History and Management of MSME

The Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries came to form the Micro, Small, and Medium Enterprise; this was not until May 2007. The main objective of the Ministry of MSME is to now scaleup the MSMEs.

The state government takes charge of the development of the MSMEs. Moreover, the central government actively takes initiatives to promote and develop the MSMEs. The Ministry of MSME plays a crucial role in providing employment, promoting entrepreneurship, and revolutionizing the economy of the country. It has enhanced its competitiveness through its initiatives.

Redefining of the MSME

The MSMEs were proposed to be redefined based on whether it is service providing or manufacturing. The redefining was done in the amendment bill in 2018, which classified the MSMEs based on their annual turnover.

The micro MSMEs had an annual turnover of about 5 Cr. additionally; the annual turnover of the small MSMEs is 5 Cr to 75 Cr, whereas the large MSMEs ranged from 75 Cr to 250 Cr.

Classification of the MSME

1. Micro -
   These contribute to the investment in the plant, machinery, and equipment that is less than Rs. 1 Crore. The annual turnover is less than Rs. 5 Crore.
2. Small -
   These contribute to the investment in the plant, machinery, and equipment that is less than Rs. 10 Crore. The annual turnover is less than Rs. 50 Crore.
3. Medium -
   These contribute to the investment in the plant, machinery, and equipment that is less than Rs. 50 Crore. The annual turnover is less than Rs. 250 Crore.

Advantages of the reclassification of the MSME

After the changes in the 2006 act and the introduction of the 2018 amendment bill, there is no need to inspect the amount invested in the plant and the machinery. This change led to the more transparent and non-discriminatory structure of the MSME.

Features of the redefined MSME

The introduction of the 'AtmaNirbhar Bharat Abhiyaan' has changed the MSME features and has given new dimensions. The self-reliant scheme was brought into effect in 2020 and has changed the MSME definition.

The features of the redefined MSMEs are -

1. The collateral-free loans were provided to the MSMEs.
2. The loans of about 3 lakh crores are offered to the MSMEs.
3. The moratorium period of about 12 months for the MSMEs.
4. The manufacturing and the service are considered as the same entities.
5. A 48 months repayment tenure is given to the MSME.
6. The credit guarantee of the MSME is 100%.
7. The benefit of reclassification of the MSME is for about 45 lakh units.

Elements of MSME

The important elements of MSME are -

1. MSME provides services and employment to the workers. The services also include loans.
2. MSME supports banks by providing them the funding.
3. They launch various training programs for the students to upgrade their knowledge. Additionally, they promote entrepreneurship.
4. They are responsible for upgrading technologies, developing infrastructure, and modernization of the sector.
5. Their services include modern facilities of testing and good quality certifications.
6. MSMEs have started developing according to the current requirements. These include design innovation, packaging, and product development.

MSME in India

There are over 6.3 crore MSMEs in India, and the number of MSME registrations is increasing year by year. MSMEs have now stressed the need to market their products. The government emphasizes the marketing of the MSME products through government-run portals like Government e-Marketplace (GeM). MSME is aiding in developing the country through training programs, upskilling students, developing infrastructure, technological developments, and financial support.

MSME Registrations

The registration of MSME is done on the udyamregistration.gov.in. There are two categories for registration on this portal -

1. The entrepreneurs who are not registered on the MSME or the ones having EM-II.
2. UAM registered entrepreneurs and the companies which are UAM registered through the assisted filing.

Visit the Ministry of Micro Small and Medium Enterprises homepage. Make selections on the homepage according to the categories. After selecting the corresponding button according to the category, the user can register by entering the Aadhaar card number and Pan number.

After entering the Aadhaar and Pan numbers, validate both using OTP. For the first category in registration, the user must provide the name of the entrepreneur and the type of organization.

The completion of the pan validation leads the user to the Udyam Registration box. In this box, the user must correctly fill all the personal and industry-related details.

The successfully registered message will appear after the user gets and enters the final OTP. The registration verification takes few days, after which a certificate known as the Udyam Registration Certificate can be obtained.

Those who satisfy the second criteria and hence are registered as UAM or through filing. Such users select the criteria accordingly.

After the selection, the user proceeds to the next step and enters the Aadhaar card number. It is validated using OTP, after which the MSME is registered.

Development in India by MSME

Overview

The MSME has played a crucial role in contributing to the Indian economy. It designs and manufactures the products for a large market which includes both local and international markets. The khadi, coir, and village industries have relied on the MSME for their development.

Opportunities for the Rural Areas

The MSME has significantly contributed to the upliftment of the rural areas by collaborating with the state governments.MSME has been crucial in employing the people in the rural and remote places of the country. Many rural areas have been converted into industrial areas by the MSME. This project is done at a lower cost when compared to the large industrialists.

Contribution to the Development of India

The ways through which the MSME have contributed to the development of our country include -

1. Low capital costs
2. Flexible operations
3. Mobility through the locations
4. Lowered the import rates
5. Emphasized the domestic production

Import functions of the MSME include -

1. Creating the defence materials
2. Providing training to the students through the training centres.
3. These upskill the student and provide them the necessary knowledge.

MSME and the Indian Economy

Over the years, MSME is known for its equitable development and for contributing to the economy. It has increased the growth rate of the economy of the country.It can conveniently develop modern technologies using low capital investments and flexible operations. The functions through which it has boosted the Indian economy are as follows -

1. MSME is the second-largest employment sector which provides employment to over 120 million people. These include people from the rural and remote areas of the country.
2. MSME significantly adds to the GDP of the country through its units which are widespread across the country. MSME has a contribution of 29% to the GDP of India. The manufacturing and the services provided by the MSME are the major reasons for their contribution to the GDP.
3. The Ministry of MSME has set a mark to achieve a 50% contribution to the GDP by 2025.
4. It is contributing about 45% to the total exports of the country.
5. MSME works for the welfare of the weaker sections of society through employment and training programs.
6. MSME has generated the services and opportunities for people to use banking products in the cities. This initiative contributes to the economy of the country.
7. MSMEs promote entrepreneurship by bringing innovative products. Students can learn creativity and innovation by developing products.

Advantages of the MSME Registrations

1. The MSME registration helps reduce the rate of interest on bank loans. Usually, it is provided at a 1% to 1.5% interest rate when registered through the MSME.
2. The MSME allows the minimum alternate tax (MAT) credit to be carried for 15 years rather than the usual 10 years period.
3. Several concessions are provided after the registration, which decreases the cost of patenting or establishing the industry.
4. The government tenders can be acquired easily in a much easier manner. It is because the registration portal is directly linked to the Government e-Marketplace. Additionally, it is also linked to the state government portals that make the e-tenders easily accessible.
5. The settlement fee is to be paid once, which accounts for the non-paid amounts of the MSME.

Khadi & Village Industries Commission

Khadi is crucial to the freedom movement in India. Khadi and Village Industries (KVI) have significantly contributed to the Indian economy. KVI sector is known for its sustainable development. Additionally, it also provides employment to rural India. It is well known for providing processed goods to remote areas. The Khadi and Village Industries Commission is responsible for the development of the sector. It helps in the rural employment of people and promotes the sector. It is the prime function of the organization to plan and organize schemes and policies to generate employment opportunities through Khadi & Village Industries. The major programs conducted by the Khadi & Village Industries include skill development and research and development. It also engages in the transfer of technology, marketing, etc.

Development of the MSME

1. Industrial policies to support the MSME firms: Alterations in the policies of state and central government can aid MSME by providing ease of doing business.
2. Foreign Direct Investment (FDI) promotion: A liberalized FDI policy should be introduced for the growth and efficient functioning of MSME. FDI also helps in bringing the multinational companies which generate employment and increase the tax revenue.
3. MSME cluster development: Government should focus on implementing the policies to develop the MSME clusters.
4. Access to Capital: Government can support the MSME by introducing the appropriate policies.
5. Involvement of Technology: The new technology must be provided to strengthen the business and improve its efficiency.

Requirements for the MSME Registration

The Aadhaar card and Pan card are mandatory documents for the MSME registration. There is no requirement for proof of documents. The Udyam Registration Portal automatically takes the PAN and GST details from the other government portals. Income tax and GSTIN systems are embedded in the Udyam Registration Portal.

The GST is applicable according to the GST law. GST is not mandatory for enterprises. The enterprises for which GST is compulsory must complete the GST registration for the Udyam Registration.

The re-registration is mandatory for the users who have UAM or other registration under the Ministry of MSME. Such users must select the appropriate category and register on the Udyam Registration Portal.

The deadline for the UAM Registered users for migrating to the Udyam registration Portal is December 31, 2021. After the deadline, the UAM registered users will not be able to claim the benefits for the MSME.

Conclusion

MSME provides support to the Indian economy in hard times, such as the global economic shocks. It is strengthening the economy of our country and setting new standards through its functions. Moreover, it is playing a significant role in the development of the country.The development of the country is done through training programs, upskilling students, developing infrastructure, technological developments, and financial support. The training programs of the MSME provide hands-on experience to the students. The certifications through MSME help in acquiring knowledge. Apart from the other developments in the country, MSME has a great contribution to the GDP. The goal of the Ministry of MSME is to increase its GDP contribution and aid in the further development of the country.