MSME was introduced in India in the year 2006. Recently the definition of MSME made a major shift to this Act also contains some service industries which haven’t been included in this sector.
The importance of MSME is described below
- Employment generation – Businesses which are inclusive in this sector need low capital to start. In fact, it provides a massive opportunity for the unemployed people. India produces around 1.2 million graduates per year which is difficult for any economy to employ this huge number of freshers in just one year. MSME is the gift to fresh Indian talent.
- Economic stability in terms of Growth and leverage Exports – MSME contributes to 8% to the GDP. Many industries also thrive from this given MSME ‘s contribution to production, exports and employment. MNCs also buy semi-finished and secondary items from small businesses, such as buying clutches and brakes from automakers. It is important in establishing a connection between MSMEs and large companies, even after imposing the GST, 40% MSME industry also implemented GST registration, which plays a significant role in growing government income by 11%.
- Encourages Inclusive Growth – For many years, inclusive growth is at the main goal of the Ministry for MSME. On the other hand, poverty and impoverishment serve as a barrier to India ‘s growth. This also involves marginalized sections of a society that is an obstacle that lies before the MSME ministry.
- Cheap Labor and minimum overhead – Even in large organisations, one of the key challenges is to maintain the human resource with an appropriate skilled HR manager. But when it comes to MSME, labor necessity goes way down and a highly experienced worker is not needed. Hence the owner’s indirect expenses are also small.
- Simple Management Structure for Enterprises – MSME can begin with small resources within the owner ‘s control. Because of its size It gets quick and effective from this decision taking. On the contrary, a large company needs a professional because it has a complex organizational structure. Whereas a small business does not need to hire an outside specialist to manage it. The owner is allowed to control himself. It could then run on its own.
- Support for Make in India – India’s Prime Minister ‘s signature campaign “Make in India” has indeed been made simple with MSME. It is considered a backbone which will convert this vision to reality. Additionally , the government has instructed the financial institution to extend more credit to MSME-sector companies.