Know The Growth Story of Indian MSME Sector

MSME sector plays a crucial role in generating large employment opportunities at a comparatively lower capital cost as compared to bigger industries. Since MSME‘s generally operate from small towns, they assist in the industrialisation of backward and rural areas. However, at the same time these MSMEs complement the large industries as well. The sector consists of 36 million units and provides employment to over 80 million people, according to a report published by the MSME Ministry in 2016. Producing more than 6,000 products, the contribution of MSMEs to the national GDP is 8 per cent. The sector also contributes 45 per cent to total manufacturing output and 40 per cent to export.

Government structure for the promotion of MSME‘s

The promotion and development of MSMEs is done by the State Governments, whereas the Ministry of MSME supports their efforts through various schemes and initiatives. Various institutions play their specific role for particular targets. For example, Khadi & Village Industries Commission (KVIC) aims to generate rural employment by promoting Khadi; Mahatma Gandhi Institute of Rural Industrialisation (MGIRI) works on R&D activities under rural industrialisation; Coir Board targets sustainable development of coir; National Small Industries Corporation (NSIC) aims to foster the commercial growth of MSMEs; National Institute for MSME (NIMSME) works towards entrepreneurship development and training; whereas National Board for MSME facilitates inter-institutional linkages. The Ministry of MSME runs various schemes aimed at financial assistance, technology up gradation, infrastructure development, skill development, and training for enhancing competitiveness of MSMEs.

Recent schemes and their performance

The Ministry has made several decisions in the recent years to boost the functioning of MSMEs and thereby enhance export, a few of which include the following:

●Simplifying the registration process through Udyog Adhaar Memorandum (UAM), this is a simple one-page form. Nearly 39 lakh UAM were signed between 2015 and 2017. The process upgraded the information available with the ministry regarding the trends in the sector, such as employment trends, investment details, manufacturing details etc, besides facilitating monitoring of those trends.

Performance and credit rating scheme – being implemented by National Small Industries Corp (NSIC), the scheme aims to provide a third party opinion on the capacities and credit worthiness of MSMEs. According to the Ministry of MSME, 12,842 units were rated under the scheme during 2015-16.

Framework for Revival and Rehabilitation of MSMEs: Working under the guidelines issued by the Reserve Bank of India, a corrective action plan was created at the banks for the revival and rehabilitation of MSMEs.

●The government has set up an online MSME data bank, on which enterprises can update information about their products and services, which can be accessed by government departments for procurement. More than 1.22 lakh units registered under the scheme until December 2017.

●The ministry facilitates buyer-seller meets, conferences and seminars within India and internationally as well.

●The government has provisions of skill training and then hold employment fairs for the induction of trainees.

●There are funding schemes, such as Prime Minister‘s Employment Generation Programme, Scheme of fund for Regeneration of Traditional Industries (SFURTI), which are financial assistance schemes for uplift of rural economy and traditional industries.

●There are a number of schemes for coir promotion.

●The government has also launched Micro Units Development and Refinance Agency (MUDRA) – which is a loan scheme for small enterprises.

A few more schemes are launched recently by the government for the promotion of MSMEs. Majority of schemes focus on lifting the rural economy through rural entrepreneurship by having incubation centres and technology centres for start-ups, such as ASPIRE: A Scheme for Promoting Innovation and Rural Entrepreneurship.

Budget Boost for MSME

MSME was one of the sectors that faced the worst impact of GST. To compensate the fall, the government incorporated various measures in its recent budget (2018-19). A few of these measures were:

Tax concession

●The lowering of corporate tax from 30 per cent to 25 percent for companies having a turnover up to Rs 250 crore. The government has changed the criteria of classifying MSMEs from investment in plants and machinery to the company turnover, they will directly benefit from the lowered corporate tax. The turnover criteria classifies companies having a turnover of up to 5 crore as micro, 5-75 crore as small, and 75-250 as a medium enterprise.

Apart from budget relief, the Reserve Bank of India (RBI) announced additional 180 days for MSMEs to clear their dues against loans. The government is also targeting recapitalisation of the banks to enable their lending capacity by Rs 5 lakh crore, of which a substantial chunk would be used by MSMEs, as expected by the government. The RBI has also removed the priority sector cap for MSME loans, which is expected to direct additional resources to this sector. Meanwhile, the banks have been allowed to treat all MSME loans as priority sector loans without any limit on their exposure. Recently in February 2018, the Finance Minister Arun Jaitley launched the CriSidEx, the first sentimental index for MSMEs. CriSidEx has been jointly developed by rating agency, CRISIL and Small Industries Development Bank of India (SIDBI), and is a composite index to measure MSME business sentiments on a scale of zero (extremely negative) to 200 (extremely positive).

Schemes for MSMEs in Textile and Apparel Sector
Integrated Textile Parks:

The government is giving additional grant for apparel manufacturing units for Integrated Textile Parks in order to provide state-of-the-art infrastructure for textile units. The scheme offers 40 per cent of the proposed project cost with a cap of Rs 10 crore per park.

WHO:A project scrutiny committee screens the proposals submitted by industry association or entrepreneurial groups.

Catalytic Development Programme (CAD):

To support states efforts in improving quality and productivity of raw silk, the scheme offers a project based funding through implementing agencies with a preference to small and marginal farmers.

WHO: Cooperative bodies can apply for the scheme through Central Silk Board

Comprehensive Handloom Cluster Development (CHCD):

The scheme executed from the Development Commissioner (Handlooms) office aims to improve the infrastructure, storage conditions, and technologies in pre and post loom operations.

WHO: Special Purpose Vehicles set up for the purpose in the cluster can avail the assistance in setting up basic and technical common infrastructure.

Comprehensive Handloom Development:

The Ministry provides need-based assistance to organisations towards integrated and holistic development of handlooms as well as weavers.

Yarn Supply:

National Handloom Development Corporation (NHDC) reinvests in mobiles vans, operated to supply yarn, at Rs 1500 per day, to supply yarn at mill gate price and at 10 per cent price subsidy.

Pashmina Wool Development:

Under the scheme, Pashmina wool-growers can avail the government support relating to livestock rearing or shearing.

Design and Technology Upgradation:

The government provides 100 percent grant to handicraft corporations and apex cooperatives for training in skill development, design technology, market intelligence, awareness activities, prototype designs etc. with a limit of Rs 10,000 per kit per person.

Ambedkar Hastshilp Vikas Yojana:

The scheme targets integrated development of potential handicraft clusters with participation of craft persons by supporting them through social, technological, financial, and market-oriented interventions.
WHO: Cooperatives, corporations, and organisations can avail the benefits of the scheme.

Incubation Centres for Textile and Apparel Industry:

To promote the sector, the government has introduced incubation centres to push the start-ups and first generation entrepreneurs. The scheme tackles the difficulties faced by new entrepreneurs to speed up the process of setting up businesses and focus on production. Under the scheme, incubation centres are set up in textile parks with a maximum number of three centres in one park.

WHO & HOW: Group of entrepreneurs, industry associations, developers of textile parks, state government, industrial development corporations, and special purpose vehicles backed by the Ministry of Textile can set up these incubation centres. These agencies provide factory area as well as plant and machinery to each beneficiary using the incubator. On the other hand, the government provides one hundred per cent grant in aid to the implementing agency that provides the infrastructure support, although the cost should not exceed Rs 4 crore per beneficiary and Rs 12 crore per incubator.

WHO & HOW: Anyone with a degree or diploma in textile, apparel and fashion design, or new entrepreneur can avail the scheme which involves the following benefits:

Skill Development: The beneficiary gets RS 20 lakh toward a three-month training of 200 workers, following the norms set under Integrated Skill Development Schemes of Textile Ministry.

Entrepreneurship development: Each beneficiary gets Rs 1 lakh for training on entrepreneurial development.

Design and product development: Each beneficiary gets Rs 5 lakh for training on product design and development.

Domestic and international fair participation: The beneficiaries get a grant of Rs 5 lakh for their participation to three domestic and one international textile fair.

More Government Schemes for MSMEs in the Textile and Apparel Sector
Marketing Assistance:

The government provides assistance for following activities:

a) Organising exhibitions abroad and participation in international exhibitions and trade fairs.
b) Co-sponsoring exhibitions organised by other organisationsfrasl;industry associationsfrasl; agencies.
c) Organising buyer-seller meets, intensive campaigns and marketing promotion events

WHAT & HOW: The government provides financial assistance of up to 95 per cent of the airfare and space rent for entrepreneurs, albeit the assistance is based on the size and type of the enterprise. The financial assistance for co-sponsoring is limited to 40 per cent of the net expenditure, subject to a maximum amount of Rs 5 lakh.

Marketing Intelligence Services Lease:

Under the scheme a Marketing Intelligence Cell acquires and analyses information for both the existing and potential customers to understand the market, determine current and future needs and preferences, attitudes and behaviour of market. It also assesses the changes in business environment that may affect the size and nature of the market. The following information is included in the scheme:

• Database of bulk buyers (product wise), buyers in government/ public sector undertakings.
• Database of rate contracts of various government departments and PSUs.
• Information on tenders floated by the government departments and PSUs.
• Database of Indian exporters to various countries, with lists of products.
• Database of international buyers with lists of products.
• Database of technology suppliers and projects for MSMEs.
•Business partner matchmaking (arrange one-to-one meetings for foreign delegations with Indian exporters)
• Market Intelligence reports can be found on the web portals pertaining to several sectors, trends analysis, along with export–import statistics.
•International library provision with global importers’ directory, sector specific booklets, 37 national and international business related magazines/databases/ booklets, and information guides.
•List of micro and small enterprises registered with NSIC for government purchases, raw material assistance, performance and credit rating schemes, and list of MSME industrial associations.
•List of micro and small enterprises registered with NSIC for government purchases, raw material assistance, performance and credit rating schemes, and list of MSME industrial associations.

WHAT & HOW: The MSMEs, willing to avail any Marketing Intelligence services of NSIC, can make the request by filling the online forms for the following information:
• Bulk buyers in government/public and private sectors
• Exporters
• International buyers
• Technology suppliers
• Units registered with NSIC under Single Point Registration Schemes
• DGS & D registered suppliers.

Credit Linked Capital Subsidy (CLCS) for Technology Upgradation:

The revised scheme aims at facilitating technology upgradation by providing 15 per cent upfront capital subsidy to MSMEs, including small, khadi, village and coir industrial units, on the institutional finance availed by them for induction of well established and improved technologies in specified subsectors/ products approved under the scheme.
Revised CLCS has been amended as follows:
• Ceiling on loans under the scheme has been raised from Rs 40 lakh to Rs 1 crore
• Rate of subsidy has been enhanced from 12 per cent to 15 per cent.
• Admissible capital subsidy is calculated with reference to purchase price of plant and machinery, instead of term loan disbursed to the beneficiary unit.

WHO: Eligible beneficiaries include sole proprietorships, partnerships, co-operative societies, and private and public limited companies in the MSME sector, with a priority to women entrepreneurs.

Design Clinic for Design Expertise to MSMEs Manufacturing Sector (DESIGN):

The government provides funding support for ‘Design Awareness’ workshops and seminars. There is funding support for implementing design projects as well.

• Government contribution of Rs 60,000 per seminar and 75 per cent (subject to a maximum of Rs 3 lakh) per workshop.
• Sixty per cent of the total approved project cost or Rs 9 lakh, whichever is less, in case of individual MSME or a group of not more than three MSME applicants.
• Sixty per cent of the total approved project cost or Rs 15 lakh, whichever is less, in case of a group of four or more MSME applicants.
• Forty per cent to be contributed by the applicant MSME/s in both the cases

WHO: Expert agencies (industry associations, technical institutions or other appropriate bodies) can avail the scheme for conducting seminars and workshops. The beneficiaries may be one MSME or groups of MSMEs as prime applicants; or academic Institutes, design companies, design consultants, etc., as co-applicants along with a designated MSME (prime applicant). Individuals, such as design students can also benefit as co-applicants in collaboration with the academic institution and MSME (prime applicant).

HOW: Expert agencies can directly apply to design clinic centres for conducting workshops and seminars. For design projects, application can be made by MSMEs without a design company or along with a design consultant/academic institution by submitting the proposal to Design Clinic Centre, or by applying online at or by downloading the form from www.

Raw Material Assistance:

The scheme aims at helping MSMEs by way of financing the purchase of raw material (both indigenous & imported). This gives an opportunity to MSMEs to focus better on manufacturing quality products. Under the scheme the government provides financial assistance for procurement of raw material up to 90 days. The scheme aims to help MSMEs in economics of purchase, like bulk purchase and cash discounts, because all procedures, documentation and the issuance of letter of credit, in case of imports, are taken care of under the scheme.

WHO & HOW: All registered MSMEs/ entrepreneurs can apply through the prescribed application forms along with requisite fee to regional and branch offices of NSIC.

Prime Minister‘s Employment Generation Programme (PMEGP):

The scheme is implemented by Khadi and Village Industries Commission (KVIC) as the nodal agency at the national level. At the state level, it is executed by the State KVIC Directorates, State Khadi and Village Industries Boards (KVIBs) and District Industries Centres (DICs) and banks. The Government subsidy under the scheme is routed by KVIC through the identified banks for eventual distribution to the beneficiaries/entrepreneurs into their bank accounts. Under the scheme, the maximum cost of the project/unit admissible in the manufacturing sector is Rs 25 lakh and in the business or service sector is Rs 10 lakh.

WHO: Any individual above 18 years of age can apply for the scheme. The beneficiary must have passed at least VIII standard for projects costing above Rs 10 lakh in the manufacturing sector, and above Rs 5 lakh in the business/ service sector. Only new projects are considered for sanction under the PMEGP. Self Help Groups (SHGs) (including those belonging to Below Poverty Line (BPL), provided that they have not availed benefits under any other scheme), institutions registered under Societies Registration Act, 1860; Production Co-operative Societies, and Charitable Trusts are also eligible.

Janshree Bima Yojana for Khadi Artisans:

In order to provide insurance cover to Khadi artisans, a scheme of group insurance in the name of Khadi Karigar Janshree Bima Yojana (JBY) was launched. This scheme was formulated by KVIC in association with the Life Insurance Corporation of India (LIC). Under the scheme, the government gives Rs 20,000 in case of death due to natural causes, Rs 50,000 in case of accidents. The insured sum for permanent disability (loss of two eyes or two limbs) is Rs 50,000 and for partial disability (loss of one eye or one limb) is Rs 25,000. The add-on benefit of the scheme is the scholarship of Rs 300 per quarter for Khadi craftsmen’ children studying in class 9 to class 12, subject to a maximum of 2 children per family.

WHO: Khadi Karigar (spinners and weavers) aged between 18 -59 years can apply for the scheme but they should be below or marginally above the poverty line.

Market Development Assistance:

A flexible, growth stimulating and artisan oriented scheme was introduced in the place of the earlier scheme of Rebate. Under the MDA, financial assistance is provided to institutions at the rate of 20 per cent of the value of production of Khadi and Polyvastra, to be shared among the artisans producing institutions and selling institutions in the ratio 25:30:45. MDA allows the Institutions flexibility to use the assistance for improving the outlets, products, and production processes, besides giving incentive to customers. The nature and limit of assistance is approved by the Standing Finance Committee (SFC) of KVIC for the year.

WHO: Only Khadi institutions, having valid Khadi certificate and categorised as A†, A, B and C are eligible to avail MDA grant from KVIC.

Exporter Credit Insurance:

The related scheme are Small Exporters Policy (SEP) and Small & Medium Exporters Policy which aim to provide ease and convenience to MSMEs. The Small Exporter Policy is for exporters with anticipated export turnover below Rs 5 crore. Under the scheme the exporter gets the benefit of 12-month insurance policy. The Small & Medium Exporters Policy offers them 12-month insurance with 90 per cent coverage and loss limit of Rs 10 lakh.

WHO & HOW: Exporters with turnover below Rs 5 crore can apply for the Small Exporter Policy at the ECGC branch offices. On the other hand, exporters of goods and services with investment in plant and machinery as per MSMED Act can apply for Small & Medium Exporters Policy at ECGC branch offices.

Raw Material Assistance:

The scheme aims at helping MSMEs by way of financing the purchase of raw material (both indigenous & imported). This gives an opportunity to MSMEs to focus better on manufacturing quality products. Under the scheme the government provides financial assistance for procurement of raw material up to 90 days. The scheme aims to help MSMEs in economics of purchase, like bulk purchase and cash discounts, because all procedures, documentation and the issuance of letter of credit, in case of imports, are taken care of under the scheme.

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