MSME manufacturing firms have been imperative to the growth of the Indian economy. These small-to-medium-sized ventures have always contributed largely to the country’s GDP, thus contributing to different aspects of its development.
The Indian MSME sector contributes about 29% towards the GDP through its national and international trade. As per the MSME Ministry data, as of May 16, 2021, India has approximately 6.3 crore MSMEs (including both service and manufacturing firms). It is to be noted that this sector still has a lot of unexplored territory for growth. It won’t be wrong to say that, with so much growth potential, emphasising the development of MSME manufacturing firms can work as a long-term development tool for India.
Low Capita Requirements
One of the plus points of the MSME manufacturing units is their low-capital-intensive setups. These organisational units work with the manpower and raw materials that are easily available in the particular geographical regions. Such set-ups can also absorb semi-skilled and unskilled graduates into their work forces. Thus, solving issues like unemployment, seasonal unemployment, and disguised unemployment for the youth of the country. In short, MSME units operate with fewer business overheads.
Another advantage that MSME manufacturing businesses have over other businesses is their ability to produce goods quickly. With the ready availability of labour and a small managerial hierarchy, decisions can be taken and implemented faster than in organisational units with large structures. With optimal output in less time, it further reduces the cost of production.
Increased Per capita Income
The MSME manufacturing sector, which gives livelihood to so many families, is a driving factor for the per capita income of the country. With more MSMEs, more and more households’ per capita incomes increase, which leads to a general increase in lifestyle and overall development in the economy. Especially in these uncertain times when the world has been hit by COVID-19, India, like other countries, would like to depend less and less on exports. In such changing scenarios, MSMEs can prove to be the pillars of the changing economy.
As per a study by the Centre for Civil Society, the manufacturing sector among MSMEs, which is a little larger than the services sector, constitutes 90% of the total industrial units spread all over India. Only 55% of the total MSMEs units are located in urban areas; the other 45% of the units are located in rural areas of states like Uttar Pradesh, Maharashtra, Tamil Nadu, West Bengal etc. This leads to an equitable distribution of national income, poverty alleviation, and inclusive economic growth. Thus, growth in MSMEs can surely predict an increased GDP for the country.
Digital and entrepreneur boom in the country
All over the world, small and medium enterprises have always been considered the engines of growth. Only MSMEs have the advantage of bringing latent entrepreneur talent and providing opportunities to various sectors of society.
Also, the young entrepreneur talent in the country is keen on making digital deals. After major events such as demonetisation and the current pandemic, there has been a rise in digital transactions. According to a survey by web hosting solutions provider, Bluehost, Indian Micro, Small and Medium Enterprises (MSMEs) are prioritising payments digitally over cash. The survey further revealed that out of 400 MSMEs who participated in the survey, 72 percent transacted digitally, as compared to 28 percent who chose cash.
This is one such sphere that can help the youth channelize the country’s resources towards a common goal of growth.
Infrastructure Development
The rise in demand for machinery and raw materials for setting up MSME units leads to not just the B2C trade but also the B2B trade. This leads to inter-industry trade generation too.
More production by MSMEs will lead to more demand for manufacturing machinery. which further requires large-scale industries for the production of machinery. As a result, the infrastructure is growing.
It won’t be wrong to say that focusing on the development of MSME manufacturing firms will not just help in economic growth but will also accelerate the rate of its growth.
Authored by –
Mr. Ronak Chiripal,
CEO, Nandan Terry
