Chapter 03: Entrepreneurship and Micro, Small and Medium

Enterprises (MSME) [15]

3.1 Meaning & Importance of MSME
3.2 Ministry of MSME
3.3 Problems of MSME and Remedies
3.4 Steps involved in the formation of MSME
3.5 Registration Procedure to acquire license to run sole proprietorship under
Maharashtra Shop and Establishment Rules, 2018.
3.6 Udyog Aadhar – Concept & Importanc
3.7 Procedure to obtain Udyog Aadhar from Ministry of MSME
MSME stands for Micro, Small, and Medium Enterprises, and these
enterprises play a crucial role in the economic development of a country
1. Meaning of MSME:
Micro Enterprises: These are the smallest entities, usually run by a single person or a small
team. The investment in plant and machinery or equipment does not exceed one crore
rupees.
Small Enterprises: Small enterprises are larger than micro-enterprises but still smaller in
scale compared to medium enterprises. The investment in plant and machinery or
equipment is more than one crore rupees but does not exceed ten crore rupees.
Medium Enterprises: Medium enterprises are larger than small enterprises but smaller
than large-scale industries. The investment in plant and machinery or equipment is more
than ten crore rupees but does not exceed fifty crore rupees.
2. Importance of MSME:
•Employment Generation: MSMEs are significant contributors to
employment generation, providing job opportunities to a large
segment of the population, especially in developing countries. They
are often more labor-intensive than large enterprises.
•Contribution to GDP: MSMEs contribute significantly to the Gross
Domestic Product (GDP) of a country. Their collective output and
contribution to economic activities contribute to overall economic
growth.
•Promotion of Entrepreneurship: MSMEs provide a platform for individuals to start and
grow their businesses with relatively lower investment. This promotes entrepreneurship,
innovation, and diversity in the business landscape.
•Regional Development: MSMEs are often located in rural and semi-urban areas,
leading to balanced regional development. They bring economic activities to areas that
might otherwise lack industrial development.
•Flexibility and Adaptability: MSMEs are generally more flexible and adaptable to
changing market conditions. This agility allows them to respond quickly to market
demands, introducing new products and services efficiently.
•Linkages with Large Industries: MSMEs often serve as suppliers to larger industries.
The growth and efficiency of MSMEs contribute to the overall competitiveness of the
supply chain and the industries they serve.
•Innovation and Creativity: Due to their smaller size and less bureaucratic structure,
MSMEs can often be more innovative and creative. They can experiment with new ideas
and technologies, contributing to overall industry innovation.
•Financial Inclusion: MSMEs, being smaller in scale, often have better access to local
markets and can contribute to financial inclusion by bringing economic activities to areas
that might be excluded from the mainstream financial system.
3.2 Ministry of MSME:
In many countries, especially in India, there is a dedicated
ministry that focuses on the Micro, Small, and Medium
Enterprises (MSME) sector. In India, this ministry is known as the
Ministry of Micro, Small and Medium Enterprises (MoMSME). The
ministry is responsible for the formulation and implementation of
policies and programs to promote the growth and development
of MSMEs in the country.
Roles and Responsibilities of the Ministry of MSME:
1.Policy Formulation: The Ministry of MSME is involved in
formulating policies and strategies that are conducive to the growth
of MSMEs. These policies cover various aspects, including finance,
technology, marketing, and skill development.
2.Implementation of Schemes: The ministry implements various
schemes and programs aimed at supporting MSMEs. These schemes
may include financial assistance, technology upgradation, capacity
building, and market access initiatives.
3.Financial Support: Providing financial support to MSMEs is a key
function of the ministry. This includes facilitating access to credit,
subsidies, and other financial incentives to promote
entrepreneurship and business expansion.
1.Technology Upgradation: The ministry works towards the technological
advancement of MSMEs. This involves promoting the adoption of modern
technologies and providing support for research and development activities.
2.Skill Development: Skill development is crucial for the success of MSMEs. The
ministry initiates programs for the skill development of entrepreneurs and workers
in the MSME sector, enhancing their capabilities and competitiveness.
3.Market Access: Facilitating market access for MSMEs is vital for their growth. The
ministry takes steps to connect MSMEs with larger markets, both domestically and
internationally, through various trade promotion initiatives.
4.Entrepreneurship Development: Encouraging and nurturing entrepreneurship
is a key focus. The ministry undertakes initiatives to promote a culture of
entrepreneurship, providing support to aspiring entrepreneurs through training and
mentorship programs.
5.Monitoring and Evaluation: The ministry monitors the implementation of its
policies and programs to assess their impact. Regular evaluations help in refining
strategies and ensuring that the objectives of promoting MSME growth are met.
Problems of MSMEs:

Limited Access to Finance:

1.Problem: Many MSMEs face challenges in accessing
adequate financial resources, including loans and working
capital.
2.Remedies: Governments and financial institutions can
introduce special financial schemes, reduce interest rates, and
simplify loan application processes for MSMEs.
Lack of Technology Adoption:
1.Problem: Some MSMEs struggle to adopt and integrate modern
technologies, hindering their competitiveness.
2.Remedies: Government and industry associations can provide
training programs, subsidies, and incentives for technology
adoption. Collaboration with research institutions can also facilitate
technology transfer.

Inadequate Infrastructure:
3.Problem: Poor infrastructure, such as inadequate transportation
and power supply, can hinder the smooth operations of MSMEs.
4.Remedies: Government investments in infrastructure
development, public-private partnerships, and improved
connectivity can address these challenges.
Limited Market Access:
1.Problem: MSMEs often face difficulties in accessing larger markets,
both domestically and internationally.
2.Remedies: Government initiatives for market linkage, participation
in trade fairs, e-commerce platforms, and export promotion schemes
can help MSMEs expand their market reach.

Skilled Labor Shortage:

3.Problem: MSMEs may struggle to find skilled workers, impacting
productivity and efficiency.
4.Remedies: Skill development programs, partnerships with
educational institutions, and apprenticeship schemes can address
the shortage of skilled labor.
Vulnerability to Economic Fluctuations:
1.Problem: MSMEs, due to their smaller size, are often more
susceptible to economic downturns.
2.Remedies: Diversification of products/services, financial planning,
and access to risk mitigation instruments can help MSMEs better
navigate economic fluctuations.
Limited Innovation:
3.Problem: Some MSMEs may struggle to innovate, hindering their
ability to stay competitive.
4.Remedies: Government-sponsored research and development
grants, innovation hubs, and collaboration with research
institutions can encourage innovation in MSMEs.
Steps involved in the formation of MSME

1. Business Idea and Feasibility Study:

Task: Identify a business idea and conduct a feasibility study to assess its viability,
market potential, and resource requirements.
2. Business Plan:
Task: Develop a comprehensive business plan outlining the business objectives, target
market, products/services, marketing strategy, financial projections, and operational
plan.
3. Legal Structure Selection:
Task: Choose a legal structure for the business, such as a sole proprietorship,
partnership, limited liability company (LLC), or any other structure based on legal
requirements and business goals.
4. Name Registration:
•Task: Register a unique and suitable business name with the
appropriate authorities. Check for the availability of the chosen
business name to avoid conflicts.
5. Registration with Regulatory Authorities:
•Task: Register the business with relevant regulatory authorities.
This may include obtaining licenses and permits specific to the
industry or sector.
6. Obtaining PAN and TAN:
•Task: Obtain a Permanent Account Number (PAN) for taxation
purposes and a Tax Deduction and Collection Account Number (TAN)
if the business is liable to deduct tax at source.
7. Opening a Bank Account:
•Task: Open a business bank account in the name of the
enterprise. Provide the necessary documents, including business
registration certificates and identification proof.
8. MSME Registration:
•Task: Register the business under the MSME category to avail
benefits and support provided by the government for micro, small,
and medium enterprises. This registration is typically voluntary.
9. Goods and Services Tax (GST) Registration:
•Task: If applicable, register for Goods and Services Tax (GST) with
the tax authorities. This is mandatory for businesses meeting
certain turnover criteria.
10. Compliance with Labor Laws:
•Task: Ensure compliance with labor laws, including employee
welfare, benefits, and safety regulations. Obtain necessary
registrations related to labor if required.
11. Environmental Clearances:
•Task: If the business involves activities that impact the
environment, obtain necessary clearances and comply with
environmental regulations.
12. Insurance:
•Task: Consider obtaining business insurance, including property
insurance, liability insurance, and any other relevant coverage.
13. Accounting and Record Keeping:
•Task: Set up an accounting system to maintain accurate financial
records. Ensure compliance with accounting standards and tax
regulations.
 Registration Procedure to acquire license to run sole
proprietorship under Maharashtra Shop and Establishment
Rules, 2018
To register a sole proprietorship under the Maharashtra Shops
and Establishment Rules, 2018, you can follow these general
steps:

1.Check Eligibility: Ensure that you meet the eligibility criteria

for establishing a sole proprietorship in Maharashtra.

2.Business Name and Location: Choose a business name and

decide on the location of your establishment. The name should
comply with the rules and not violate any trademarks.
3. Visit the Municipal Corporation or Local Authority: Contact
the local municipal corporation or the appropriate local authority to
inquire about the specific requirements and procedures for
obtaining a license.

4. Application Form: Obtain the application form for the

registration of a sole proprietorship under the Maharashtra Shops
and Establishment Rules, 2018. You can usually get this form from
the municipal office or download it from their official website.
5. Provide Necessary Information: Fill in the application form with
accurate details such as your business name, address, nature of
business, number of employees, working hours, etc.
6. Attach Required Documents: Prepare and attach the necessary
documents, which may include:
1.Identity proof (PAN card, Aadhar card)
2.Address proof of the business premises
3.Passport-size photographs
4.Details of the proprietor
5.Any other documents as specified by the authorities
7. Submit the Application: Submit the completed application
form along with the required documents to the municipal
corporation or the designated local authority. Pay the prescribed
fees, if any.

8. Verification Process: The authorities will review your

application and may conduct an inspection of your business
premises to ensure compliance with the rules.
9. Receive the License: Once the verification process is successful,
you will be issued a license to operate your sole proprietorship under
the Maharashtra Shops and Establishment Rules, 2018.

10. Renewal: Be aware of the license renewal requirements and

ensure that you renew your license on time to avoid any legal
complications.
Udyog Aadhar – Concept & Importance

Udyog Aadhar is a government initiative in India that aims to

simplify the registration process for micro, small, and medium
enterprises (MSMEs). The term "Udyog Aadhar" translates to
"Industry Aadhar" in English, and

it is essentially a unique identification number assigned to

MSMEs to facilitate their recognition and support their growth.
Concept:
1.Simplified Registration: Udyog Aadhar simplifies the registration
process for MSMEs by providing a single-page registration form. This
form, known as the Udyog Aadhar Memorandum (UAM), includes
details such as the business name, type of organization, location, and
bank account information.

2.Unique Identification Number: Upon successful registration, the

MSME is issued a unique 12-digit identification number, which is
the Udyog Aadhar Number.

3.This number is used to identify and verify the MSME for various
purposes.
3. Online Registration: The registration process is primarily online, making it
convenient for entrepreneurs and business owners to register their MSMEs
without the need for extensive paperwork.

4. Inclusive Approach: Udyog Aadhar is applicable to various types of entities,

including sole proprietorships, partnerships, Hindu Undivided Families
(HUFs), private limited companies, and more, as long as they fall within the
defined MSME criteria.
3. Subsidies and Incentives: Registered MSMEs can avail
themselves of various subsidies, incentives, and support
schemes offered by the government. This includes financial
assistance, tax benefits, and preferential treatment in government
procurement processes.

4. Facilitation of Business Operations: Udyog Aadhar

simplifies the regulatory framework for MSMEs, reducing
bureaucratic hurdles and making it easier for them to operate
and expand their businesses.

In summary, Udyog Aadhar plays a crucial role in providing formal recognition to MSMEs,
simplifying their registration process, and opening doors to various benefits and support
mechanisms offered by the government for their growth and development.
Importance:

1.Government Recognition: Udyog Aadhar provides official

recognition to MSMEs, making it easier for them to avail themselves
of various benefits and schemes offered by the government.

2.Access to Credit: Many financial institutions and banks consider

the Udyog Aadhar registration while providing loans and credit
facilities to MSMEs. It enhances their credibility and makes it easier
for them to access financial assistance.
5. Market Access: Having a Udyog Aadhar registration can improve
the market access for MSMEs. It can act as a credential, giving them
an edge in business dealings and collaborations.

6. Technology and Marketing Assistance: Some government

initiatives and schemes specifically target Udyog Aadhar registered
entities, providing them with technology and marketing support to
enhance their competitiveness.
General procedure to obtain Udyog Aadhar for a
micro, small, or medium enterprise (MSME) from the
Ministry of Micro, Small and Medium Enterprises
(MSME) in India.
Procedure to Obtain Udyog Aadhar:
1.Visit the Official Udyog Aadhar Portal:
1.Go to the official Udyog Aadhar website (
https://udyogaadhar.gov.in/).
2.New Registration:
1.Look for the option to register a new Udyog Aadhar. On
the homepage, you may find a button or link such as
"Udyog Aadhar Registration" or "New Udyog Aadhar."
3. Fill in the Udyog Aadhar Form (UAM):
Complete the Udyog Aadhar Memorandum (UAM) form. This is a
single-page form that includes details such as the name of the
enterprise, type of organization, location, Aadhar number of the
entrepreneur, and other relevant information.

4. Verification of Aadhar Number:

The Aadhar number of the entrepreneur is usually verified through
an OTP (One-Time Password) sent to the registered mobile number
linked with the Aadhar card.
5. Fill in Business Details:
1.Provide information about the business activities, investment in
plant and machinery or equipment, and other relevant details.

6. Submit the Form:

2.After completing the form, submit it electronically. Upon
successful submission, you should receive an acknowledgment
with a unique Udyog Aadhar Number.
7. Download Udyog Aadhar Certificate:
Once the application is processed, you can download the Udyog Aadhar
Certificate from the portal. The certificate contains the Udyog Aadhar
Number.

8. Note the Acknowledgment Number:

Make a note of the acknowledgment number provided at the time of
submission. This number can be used to track the status of your Udyog
Aadhar application.