Issues of Micro, Small and Medium Enterprises (MSME) in India

Small Enterprise

Industrial development of any country is the main pillars for the economic growth of that particular country. Now, the dependency of the Industrial development depends on various parameters. Those small parameters include development of infrastructure, support from the government, the present market, various banking facilities, different government based policies and much more.

A sustainable industrial development is a must to move the graph up. The industries are being divided into many different types. Based on the nature and capability, the MSME plays a very vital role because of its unique nature as compared to others, although there are Issues of Micro, Small and Medium Enterprises (MSME) in India. MSME requires the least investment, but they create a huge employment at the same time. MSMEs provide a helping hand to the national priorities of employment, removing poverty and regional imbalances.

There are two categories of MSME:


Any enterprises which are engaged in the manufacturing or production of goods related to any industry specified in the first schedule to the Industries ( under Development and Regulation Act) or employing plant and machinery in the process of adding value to the final product having a distinct name or character or use. The Manufacturing Enterprises are being defined in terms of the amount of investment in Plant & Machinery.

Service Enterprises:

Those include enterprises which are engaged in providing or rendering of services. They are defined in terms of investment in equipment.

Limitations for investment:

Under Manufacturing Sector, in the enterprise such as an Investment in plant & machinery, the micro enterprises cannot exceed a sum amount of 25 lakh rupees. Under small enterprises, the limitations may not be more than 25 lakh rupees but do not exceed 5 crore rupees. Where as in the Medium Enterprises, the limitations could be more than 5 crore rupees but should not exceed 10 crore rupees

Where as in the Service Sector In enterprises such as Investment in equipment, the Micro Enterprises should exceed the limitation for investment beyond 10 lakh rupees. While in small and medium enterprises the limitation should not exceed two crore and five crore rupees respectively.

So the major obstacle to the growth of the important Indian MSME sector is its lack of adequate access to finance.

It has been observed that over the last five decades Micro, Small and Medium Enterprises sector have emerged as a highly vivid and dynamic sector of the Indian economy. MSMEs play a very crucial role in providing large employment opportunities that too at a lower capital cost as compared to the large industries. They also help in the industrialization of the rural areas & areas which belong to the backward sector, this would help in reducing the regional imbalances which assure more equitable distribution of national income and wealth.

MSMEs are complementary to the large industries. This sector contributes enormously to the socio-economic development of the country. MSME in India contributes to financial growth, reducing poverty, a creation of employment, etc. It provides support for the development of new business & thus an innovation wave. MSME have the special role in balanced regional development along with rural development as well as outsourcing support and linkages with large units. MSMEs act as a backbone for the Indian economy.

The Micro, Small and Medium Sector Enterprises (MSMEs) are some of the most labor vigorous as well as productive industries in India.

But they have been plagued by various problems like;

Ø  The High-interest rates charged and collateral requirements by banks are one of the major issues when MSMEs want to raise their capital

Ø  Equity capital also has only limited access. The reason behind this is that most of the investors do not risk investing in unknown/small companies.

Ø  Market access for MSMEs is still very limited. This is due to lack of capital and various other reasons they cannot tap profitable export markets.

Ø  Revival mechanism for sick companies is virtually non-existent in the MSME sector, therefore a company never gets a chance to reinvent itself and become profitable.

Ø  Outdated technology and innovation can be one of the issues since the use of such technology impedes MSMEs’ competitiveness and growth.

Ø  The need for skill development and training has not been addressed adequately which can be another issue.

Ø  Marketing and Procurement of raw materials and lack of market information due to lack of awareness and financial assistance are constrained in this sector.

Ø  For MSME’s required raw material skilled work force and other inputs, which are not available in the market. Due to unavailability of these resources, it becomes very difficult to produce the products at affordable prices.

Ø  The MSME`S are not adopting the innovative channels of marketing. Their advertisement and sales promotion are comparatively weaker as compared to the multinational companies. The ineffective advertisement and poor marketing channels lead to a very poor selling.

Ø  All the laws related to all aspects of manufacturing and service concern are very complex and compliance with the laws are practically difficult. The various decisions of a factory are depended upon the factory commissioner and inspector, so there are so many chances of red tape in the operation of MSME’S.

There can be various ways in which such issues could be resolved. Few of them are listed below:

Mutual Supply of Various Technologies: A number of appropriate technologies for the MSME sector have developed in various sectors. While each MSME has its own boundaries of strengths and weaknesses, therefore, it would be mutually valuable if already developed technologies are made available to each other. A complete list of all sorts of technologies should be prepared and made available accordingly to the MSMEs requiring it.

The Constitution of a Panel of Consultants: For the purpose of technological advancement and guidance a panel of experts and consultants should be arranged, who can help the MSMEs within the region for effectively transfer the available technologies. The Constitution of the panel of these consultants could be nature wise of the activities of the MSME.At the time of the constitution of the panel of experts, there should be the inclusion of the owners of different sectors of MSME’S.

Determine the Technological Needs: There should be depth survey to assess the technical and financial needs of MSME. So that, the proper arrangement could be made to fulfill the requirements of the MSME’S.

Conduct various Training and development awareness programs: There must be conduction of training and development programs by the MSME ministry. The currently running programs are not so productive and sufficient. One of the important reasons for slow intake in the utilization of schemes is the lack of knowledge about schemes and their advantages. There is a need to develop a better communication strategy and there is a need of usage of new age media tools.

Relaxation in labor laws and red tape: There should be a relaxation in complex labor laws to avoid the inconvenience in compliance. Uniform labor laws should not be applicable for each MSME

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