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Role of MSMEs in India
Context
MSMEs play a crucial role in India's economic growth by contributing to employment, industrial output, and exports. Recognized as a key driver of development, they help in fostering entrepreneurship and regional economic balance.
Contribution of MSMEs to the Indian Economy
- Employment Generation: MSMEs employ over 110 million people, making them one of the largest sources of employment in the country.
- GDP Contribution: MSMEs contribute around 30 percent to India’s GDP. They account for about 45 percent of total industrial production.
- Exports and Global Trade: MSMEs contribute nearly 40 percent to India's total exports. They are major exporters in sectors like textiles, handicrafts, engineering goods, and food processing.
- Support to Rural and Small Industries: MSMEs promote small-scale industries, including Khadi, Village, and Coir industries.
Major Challenges Faced by MSMEs
- Limited Access to Finance: Many MSMEs struggle to obtain loans due to lack of credit history and collateral. Dependence on informal lending increases financial burden and costs.
- Shortage of Skilled Workforce: MSMEs face difficulties in finding trained professionals, affecting productivity and efficiency. Limited access to vocational training programs hinders skill development.
- Technological Barriers: Many MSMEs lack resources to adopt modern technologies and automation. Low investment in research and development reduces their competitiveness.
- Regulatory and Compliance Burden: Complex taxation, licensing, and labor laws increase operational challenges. Delayed payments from larger firms and government agencies affect cash flow.
- Infrastructure Gaps: Inadequate transportation, unreliable power supply, and lack of warehousing impact MSME efficiency.
- Global Competition and Market Access: MSMEs face competition from international manufacturers offering low-cost alternatives. Limited branding and marketing restrict their global reach.
Classification of MSMEs
Government Support for MSMEs
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