What is MSME? MSME Full Form, Features & Importance

MSME’s full form is Micro, Small and Medium Enterprises. Basically, MSMEs are businesses that are engaged in producing, processing or preserving goods. The MSME sector contributes about 30% of India’s GDP. Additionally, it contributes to exports and employment. 

For the economic and social development of the country, MSMEs are extremely important. These businesses were introduced by the Government of India under the Micro, Small, and Medium Enterprises Development (MSMED) Act of 2006. 

Ministry of MSMEs

The Ministry of Micro, Small and Medium Enterprises (MSMEs) is headquartered in New Delhi, India. It is responsible for managing the MSMEs in India. 

The Ministry of MSME is the apex body for the formulation and implementation of rules, and laws, related to micro, small and medium-sized enterprises across the nation.

Features of MSMEs

Here are some features of MSMEs that make them essential for socio-economic development across the country:

• A key feature of MSMEs is that they make a significant contribution to the industrialization and economic development of underdeveloped areas in the country.

• They provide training and technical support and facilitate better distribution of wealth and generation of new job opportunities.

• They can help small businesses in pricing their products competitively and allow them to compete with larger brands and international markets. This ensures fair competition and also drives innovation and offers consumers a broader range of affordable options.

• The MSMEs contribute to improve the quality of life for their employees and artisans by providing stable income, medical benefits, loan facilities, etc. 

• The micro, small and medium-sized enterprises also collaborate with banking institutions to offer credit limits and financial assistance to ensure smoother operations. Moreover, they establish specialized training centers to upgrade skills and create an inspiring environment for the entrepreneurs-in-the-making.

• MSMEs have quality certifications with a strong focus on technology and utilize advanced testing facilities to ensure high-quality goods.

Types of MSMEs

There are 2 types of Micro, Small and Medium-sized enterprises as per the Micro, Small and Medium Enterprises Development (MSMED) Act 2006:

• Manufacturing Enterprises: These enterprises focus on the production or manufacturing of goods. Their classification is determined based on the investment made in plant and machinery as well as their annual turnover.

• Service Enterprises: These enterprises are engaged in delivering services to companies, groups, or individuals. Their classification depends on the investment in equipment and their annual turnover.

Classification of MSMEs

Businesses are classified as micro, small or medium enterprises based on their turnover and investment:

Importance of MSMEs

The importance of MSMEs can be understood through the following points:

• The role of MSMEs in driving the country’s economic growth is irreplaceable. The MSME sector plays a major contribution to the GDP of India, exports and industrial production.

• It serves as an incubator for entrepreneurs, encourages innovation and accelerates economic development.

• The MSME sector plays an important role in promotion of inclusive growth by generating employment opportunities in both urban and rural areas, reducing regional disparities, and empowering marginalized communities.

• It is a vital contributor to India’s exports. It caters to both domestic as well as global markets.

• The government actively promotes MSMEs as they are crucial for achieving the Vision of “Make in India.”

Government Initiatives for MSMEs

The government actively showcases its support for MSMEs through various initiatives, including:

• Credit Linked Capital Subsidy Scheme for Technology Upgradation

• Credit Guarantee Scheme

• Assistance to Entrepreneurship Development Institutes

• Promotional schemes for women

• Schemes for weaker sections

• Micro Finance Programme

• Scheme on (TREAD) for Women

• ISO 9000 Certification & Reimbursement scheme

• Purchase and Price Preference Policy

• Prime Minister’s Rozgar Yojana (PMRY)

• Small Industry Cluster Development Program Scheme

• Integrated Infrastructural Development Schemes (IID)

• Mini Tool Rooms

• MSME MDA Scheme

• Other MSME Schemes

Summary

Micro, Small and Medium Enterprises (MSMEs) are businesses that produce, process and preserve goods. They are regulated by the Ministry of MSMEs. The MSME Registration is done according to the Micro, Small and Medium Enterprises Development Act (MSMED) 2006. Once an MSME has been registered, it receives an MSME registration certificate called Udhyam Certificate.