Micro, small, and medium-sized enterprises (MSMEs) have gainedincreased attentionin India in recent times, considering their strategic importanceto the economy and thecountry.
MSMEs play an important role in generatingemployment—48.8 millionMSMEs in the country provide employment to 111.4 million people.MSMEs in themanufacturing sector alone produce more than 6,000 products andcontribute 7.7% ofthe GDP of the country. Similarly, MSMEs in the services sectorcontribute 27.4% ofthecountry’s GDP.
In view of the fact that banks are the predominant source offinance in India, theReserve Bank of India includes micro and small enterprises in thelist of priority lendingsectors. Banks have also been advised to achieve a year-on-yeargrowth of 20% incredit to micro and small enterprises and an annual growth of 10%in the number ofmicroenterprise accounts. In view of such policies, this studyattempts to understandwhether such incentives and schemes have percolated down to theMSMEs and ifentrepreneursare aware of them.IFC-According to International Finance Corporation (2012), the supplyof finance to theMSME sector is estimated to be 32.5 trillion Indian rupees (Rs).This total comprisescontributions from informal finance, formal finance, andself-finance. Informal sourcesand self-finance contribute Rs25.
5 trillion to the sector, ofwhich informal financeaccounts for Rs24.4 trillion. In other words, 78% of the financeused by MSMEs is metby informal sources and self-finance.
The remaining 22% (Rs6.9trillion) is provided bybanks andNBFCs, of which banks provide the bulk (91.8%).A number of positive factors are working to create a growthenabling eco-system for the MSME sector.
First, favourable credit policymeasures, such as 20 percent annual credit growth to MSMEs, 60 percent of theMSME credit to be embarked for micro enterprises and 10 per cent annual growthin the number of microenterprise accounts. More importantly, its continuousmonitoring by Government of India and Reserve Bank of India will enhance creditaccess to the sector. Second, major constraints of MSME sector are now beingaddressed by SIDBI’s new business model which is oriented towards filling thefinancial gaps and developmental gaps in the MSME eco-system. In its newbusiness model, SIDBI would be providing venture /risk capital, energyefficiency investment loans, bills discounting / factoring which are generallynot beingprovided adequately to MSMEs by banks. Credit flow to MSME sectorwill be further augmented by SIDBI’sinitiatives in setting up of CreditAdvisory Centres with industry associations in clusters and providing loanfacilitation / syndication services. Third, a major constraint of information gap in MSME sector is nowbeing addressed by SIDBI’s MSME Sector – PrincipalCharacteristicsNo. of Enterprises in2014-15 (in million) Out of which,(in millions) 51.
1 a. Percentage share of Registered Units* 6 % b. Percentage share of Un-registeredunits* 94% c. Percentage share ofSocially Backward Classes (SCs/STs/OBCs)* 51 % d. Percentage share of Rural Units* 55% e. Percentage share of women enterprises* 7.4 %2.
Employment in2014-15 (in million) 117.1 3. Average Employment per Enterprise(No.) 2.
3 4. Investment per employment ( Lakh)* 5.3 5. Percentage of Enterprises availingloans* 7.3%a. From InstitutionalSources 5.2% b. From Non-institutional sources 2.
1% c. Percentage of Enterprises without loans /self-finance 92.7%6. Percentage share ofMSME GVA out of India’s GVA in 2014-15 33.3%7. Percentage share ofMSMEs in India’s Manufacturing Output in 2014-15 33.
4% 8. Percentage share in India’s exports in2014-15 45%(SIDBI Annual report 2016-17,)