Micro, Small, and

Medium Enterprises
(MSMEs)
•B.Tejasree(23d3067)
•Bhavana R(23d3068)
•Chandana K R(23d3070)
•Finamol wilson(23d3081)
•Madhumitha M(23d092)
Micro, Small, and Medium Enterprises (MSMEs)

It play a foundational role in economic development, employment generation,

innovation, and social stability.
Globally, MSMEs are vital contributors to GDP and employment, and they serve as
the backbone of economic growth, particularly in developing countries. Here’s an
in-depth look at the significance, challenges, and future of MSMEs, with a specific
focus on India, where MSMEs play a pivotal role in the economy.

1. Definition and Classification of MSMEs

• In India, MSMEs are classified under the Micro, Small, and Medium Enterprises
Development (MSMED) Act, 2006.
• The classification is based on the investment made in plant and machinery or
equipment, as well as the enterprise’s annual turnover. In June 2020, the Indian
government revised the classification to make it more inclusive:

-B.Tejasree
• Micro Enterprises: Investment up to INR 1 crore and annual turnover up to INR 5
crores.

• Small Enterprises: Investment up to INR 10 crores and annual turnover up to INR

50 crores.

• Medium Enterprises: Investment up to INR 50 crores and annual turnover up to

INR 250 crores.

• This reclassification aimed to broaden the scope of MSMEs, making it easier for
them to access benefits under various government schemes, and encouraging their
growth and transition into larger entities.

-B.Tejasree
2. Economic Significance of MSMEs

• MSMEs play a multifaceted role in the economy, contributing to various sectors

and fulfilling diverse needs:

• Employment Generation: MSMEs are a significant source of employment,

especially in rural and semi-urban areas where large industries are often absent. In
India, MSMEs provide employment to over 110 million people, which accounts
for around 40% of the workforce. They help in reducing regional economic
disparities by creating local employment opportunities.

• GDP Contribution: MSMEs contribute nearly 30% to India’s GDP, with some
estimates even higher. This contribution is critical for sustaining economic growth
and ensuring the participation of a large segment of the population in the
economic mainstream.
-Bhavana.R
• Promoting Exports: MSMEs contribute around 48% of India’s total exports.

• Their presence in various industries, such as textiles, handicrafts, and small-scale

manufacturing, makes them key players in the export market, driving foreign
exchange earnings.

• Innovation and Entrepreneurship: The flexible nature of MSMEs allows them to

adapt quickly to changing market demands and adopt innovative solutions.

• They are often incubators for entrepreneurship and innovation, providing

individuals with opportunities to start and grow their own businesses.

-Bhavana.R
3. Government Support and Initiatives for MSMEs

• Recognizing the importance of MSMEs, the Indian government has introduced a

wide range of programs and initiatives to support and foster their growth. Some of
the notable schemes and policies include:

• Prime Minister’s Employment Generation Programme (PMEGP): This program

aims to generate employment by promoting micro-enterprises in rural and urban
areas.
• It provides financial assistance for setting up new enterprises and covers up to
90% of project costs for certain categories.

• Credit Guarantee Fund Scheme for MSMEs (CGTMSE): This scheme encourages
banks to lend to MSMEs by offering a credit guarantee, allowing small businesses
to access collateral-free loans.

-Chandana K R
• MUDRA (Micro Units Development and Refinance Agency) Scheme: Launched
to extend affordable credit to micro and small enterprises, MUDRA provides
financial support through three types of loans—Shishu, Kishore, and Tarun—
based on the funding needs of enterprises.

• MUDRA loans help new entrepreneurs and micro-businesses access the capital
required to scale.

• MSME Samadhan: An online portal for resolving payment disputes, enabling

MSMEs to lodge complaints regarding delayed payments by buyers. It promotes
transparency and protects the financial interests of MSMEs.

• Atmanirbhar Bharat Package: This COVID-19 relief package provided collateral-

free loans, moratorium on loan repayments, and enhanced credit facilities for
MSMEs to help them cope with the economic impact of the pandemic.

-Chandana K R
4. Challenges Faced by MSMEs

• Despite their significant contributions, MSMEs face several challenges that hinder
their growth and competitiveness. Some of the most pressing challenges include:
• Access to Finance: Securing finance is one of the most critical issues for MSMEs,
especially for those without collateral. Due to perceived high risks and low
creditworthiness, MSMEs often struggle to obtain loans from banks and financial
institutions.
• Technological Obsolescence: Many MSMEs lack access to advanced technology,
which impacts productivity and the quality of their products. Limited resources
often prevent MSMEs from investing in technology upgrades, making it harder for
them to compete with larger enterprises.

-Finamol
• Complex Regulatory Environment: Compliance with regulations and procedures,
such as labor laws, tax filings, and environmental clearances, can be challenging
for MSMEs. Managing regulatory requirements often requires significant
resources, which can be a burden for small businesses.

• Skilled Workforce: MSMEs frequently lack skilled labor, as most skilled workers
prefer employment in larger, more stable companies. This shortage impacts
productivity and limits innovation.

• Market Access and Competition: MSMEs often lack the resources and network to
access larger markets. Competing with larger enterprises and imports, especially
in industries such as manufacturing and textiles, further limits their growth
prospects.

-Finamol
5.Digital Transformation in MSMEs

• With advancements in technology, digital transformation has become essential for

MSMEs to stay competitive. The government has encouraged digital
transformation through initiatives like Digital India and various skill development
programs that train MSME owners in digital literacy and technology adoption.
• Key areas of digital transformation for MSMEs include:
• E-commerce: By moving to online platforms, MSMEs can reach a larger customer
base and participate in global markets.
• Digital Payments: Adopting digital payment solutions reduces dependence on cash
transactions, enhances transparency, and allows better financial management.
• Cloud Computing: Cloud services offer affordable options for data storage,
communication, and collaboration tools that help small businesses manage
operations more effectively.
-Madhumitha.M
6. Future Outlook and Potential for Growth

The future of MSMEs holds significant potential if they are provided with the right
support, resources, and policy environment. Key areas for future growth include:

• Skill Development and Training: Enhancing the skill set of the workforce in
MSMEs is crucial for their productivity and competitiveness.
• International Market Expansion: With the right guidance and support, MSMEs can
tap into export opportunities by meeting global standards and certifications.
Government initiatives that promote exports and help MSMEs comply with
international quality standards can drive growth in foreign markets.
• Sustainable Practices: MSMEs can adopt sustainable practices, which not only
reduce environmental impact but also open up opportunities in sectors such as
renewable energy, eco-friendly manufacturing, and green products.

-Madhumitha.M
 Conclusion

• MSMEs are a critical pillar of the economy, driving job creation, economic
inclusivity, and innovation.

• The importance of MSMEs is likely to increase as more support and resources are
directed towards their growth and sustainability.

• Challenges remain, but with continued government intervention, technological

advancement, and focus on skill development, MSMEs have the potential to
become even more robust contributors to economic development.

• Empowering MSMEs to scale up, embrace technology, and access new markets
will enable them to fulfill their potential as engines of growth and employment,
thereby fostering a more resilient, inclusive, and diversified economy.
THANK YOU