Setting Up of MSMEs

 

Step-by Step approach to start an MSME 

1. Identifying the opportunity

It all begins with an Idea

The overriding reason for anyone to think of establishing a MSME unit can be summarised in one word - opportunity. An opportunity to provide a product or service, which can generate sufficient surplus. This is all the more true if one is a believer in the maxim, "Small is Beautiful".

However, ideas need to be filtered through a multi-layer sieve. This model is shown in the following flow:

- Does the idea fire up your motivation?
- Is it a viable business proposition in your area? - Does it match the needs of your clientele?
- Check it out with basic market research
- Test it out at market place
- Consult with the experts
- Look out for competition in the field
- Is it a sunrise industry?
- Your business opportunity
- Project conceptualisation

Once the ideas are screened and a viable business opportunity emerges the project has to be conceptualised in all its dimensions. The 4 Ps of Project Conception is:

- PRODUCT (Shape, Size and Nature)
- PROCESS (Technology to produce the product)
- PLACE (Location of Plant)
- PARTNER (Technological of Financial Collaborator)

2. Making a Product Choice

In a project conceptualisation stage while making a product choice following factors are related to product need to be considered:

- Product Line - Depth, Width - Packaging
- Branding
- Warranties

- After Sales Service
Some other factors that one should consider while finalising the product choice are:

- Ease of availability of raw-material - Process Technology

- Accessibility to the market
- Incentive and support from Government

Market information is also important for product selection. Products, which are likely to have a number of players in the market, are best avoided. Some such products in the recent past have been plastic footwear, audio cassettes, disposable gloves and bulk drugs.

In case the entrepreneur is looking for a product, which has export potential, the following additional questions need to be asked:

- What should be the contents of export-product portfolio?
- What are the special requirements for packaging if one has to export the products?
- What product adaptations are needed to be made for exporting a product to a specific country?
- Are any WTO conditionalities involved e.g. "child labour free", ISO 9000 certified, GMP followed etc.

The development of export-product portfolio can be done by considering 4 parameters viz.

- External demand conditions
- Internal supply capability
- Complexity of marketing tasks
- Amount of investment required to penetrate the market

Analysis can be conducted using this four dimensional model. The obvious choice is a product which scores a high rating on first two parameters and low rating on last two parameters.

EXIM (Export Import Bank of India) Bank has also developed an excellent model to conduct the export-product portfolio analysis based on three parameters viz.

- Supply Capability In Product Group - Domestic Environment
- Export Market Attractiveness

This analysis gives rise to product groups with high potential or low potential.

With regard to special packaging requirements one has to be careful about laws of the country one is exporting to. For instance, while exporting to Australia, wooden- packaging cannot be done.

Product adaptations for country's specific needs look into things like whether voltage supply is 220V or 110V for electric appliances and for automobiles whether left-hand drive or right-hand drive is appropriate.

It has now become important to understand the implications of the various agreements which form part of WTO.

Once the product is finalised, choices of process technology emerge.

3. Process Selection

Choices of process technology emerge once the product is finalised. For some complex products, process know how has to be imported. In such cases agreements for technology transfer should be made with due care to safeguard interest. A lot of appropriate technology is being developed at CSIR and Defense Research Labs and some of this technology can now be bought. Indigenously developed process know- how has intrinsic benefits such as appropriateness and relative inexpensiveness.

While checking out on a process technology, the following things need to be considered with utmost care:

• -  Whether process requires very high level of skilled workers or complex machines?

• -  Whether process requires large quantities of water and/or power?

• -  Whether any process or product patent needs to be honoured while utilising the

  selected process technology.

• -  Any special pollution or environmental regulations.

         -  Finally, the appropriateness to the indian environment and conditions. Machinery

and equipment

One of the major deficiencies in the micro, small and medium enterprises scenario is the prevalence of outdated production and management methods hindering the efficient operation of micro, small and medium-scale units. It was also found that the most important reason for the reluctance of the small industrialists to install modern machinery and equipment was the lack of investible funds. The main objective of National micro, small and medium enterprises (NMSME) is to provide machinery and equipment to small industrial units offering them long repayment period with moderate rate of interest.

4. Arranging Finance

No MSME unit can take off without monetary support. This need for finance can be classified into following types:

- Long and medium term loans
- Short term or working capital requirements - Risk Capital
- Seed Capital/Marginal Money
- Bridge loans

Financial assistance in India for MSME units is available from a variety of institutions. The important ones are:

(i) Commercial/Regional Rural/Co-operative Banks.
(ii) SIDBI: Small Industries Development Bank of India (refinance and direct lending)

(iii) SFCs/SIDCs: State Financial Corporations (e.g. Delhi Financial Corporation)/State Industrial Development Corporations.

Long and medium term loans are provided by SFCs, SIDBI and SIDCs. Banks also finance term loans. This type of financing is needed to fund purchase of land, construction of factory building/shed and for purchase of machinery and equipment. The short-term loans are required for working capital requirements, which fund the purchase of raw materials and consumables, payment of wages and other immediate manufacturing and administrative expenses. Such loans are generally available from commercial banks. The commercial banks also sanction composite loan comprising of working capital and term loan up to a loan limit of Rs.1 crore.

For loans from financial institutions and commercial banks a formal application needs to be made. The details of documentation that need to be provided with the loan application are indicated below:

- Documentation for Loan Application
- Balance Sheet and Profit Loss Statement for last three consecutive years of firms owned by promoters
- Income Tax Assessment Certificates of Partners/Directors
- Proof of Possession of Land/Building
- Architect’s estimate for construction cost
- Partnership deed/Memorandum and Articles of Associations of Company
- Project Report
- Budgetary Quotations of Plant and Machinery

A sanction or rejection letter is issued by bank after its assessment of the application. After receiving a sanction letter, applicants need to indicate in writing their acceptance of terms and conditions laid down by FI/Banks.

Subsequently, loan is disbursed according to the phased implementation of the project. In today’s environment there are other choices apart from commercial banks and Government owned financial institutions. These options include venture capital funds and non-government finance companies.

5. Filing of Entrepreneurs Memorandum

Section 8 of the Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 provides for filing of memorandum by a Micro, Small or Medium Enterprise. Sub-section (2) of section 8 stipulates that the form of the Memorandum, the procedure of its filing and other matters incidental thereto shall be such as notified by the Central Government.

• The memorandum may be filed by all three categories of enterprises with the District Industries Centre in the jurisdiction of which the enterprise is (or, is proposed to be) located,

• The procedure for filing it has been outlined in Schedule. II of the Notification for the format of EM,

Download Registration Forms & Related Documents (Proforma) File Format for Entrepreneurs Memorandum

Features of the Scheme

• The memorandum may be filed by all three categories of enterprises with the District Industries Centre in the jurisdiction of which the enterprise is (or, is proposed to be) located,

• The procedure for filing it has been outlined in Schedule. II of the Notification for the format of EM

  Procedure for Filing Memoranda

  Features of the present procedures are as follows:

• Form of the Entrepreneurs Memorandum can be downloaded from the Internet, the address of which can be obtained from Directorate dealing with Micro, Small & Medium Enterprises of the State Governments/ UTs. or the hard copies of the same can be obtained from the District Industries Centres. This form can also be downloaded from the SIDO website i.e. www.laghu- udyog.com or www.dcmsme.gov.in

• Any person who intends to establish a micro or small enterprise, at his discretion; or a medium enterprise engaged in providing or rendering of services may, at his discretion or a medium enterprise engaged in the manufacture or production of goods shall file the Memorandum of Micro, Small or as the case may be, of Medium Enterprise with District Industries Centre of its area.

• The District Industries Centre shall fill all the codes in the form of the Memorandum and issue an acknowledgement after allotting an EM number, date of issue and category of the unit within five days of the receipt of the form of Memorandum by post or same day, if the form of Memorandum is submitted in person as well as online.

• Before issuing the acknowledgement, the District Industries Centers shall make sure that the form is complete in all respect and particularly the form is signed and is accompanied with an undertaking, which is a part of the form of Entrepreneurs Memorandum.

• The District Industries Centre shall maintain record of all the Entrepreneurs Memorandum so filed in respect of micro and small enterprises and medium enterprises engaged in providing and rendering services. District Industries Centers shall forward a copy of the Entrepreneurs Memorandum so filed with EM number allotted to the Small Industries Service Institutes of their State/Jurisdiction.

• The District Industries Centre shall maintain record of all the Entrepreneurs Memorandum so filed in respect of medium enterprises engaged in

production/manufacturing of products and forward one copy each of the Entrepreneurs Memorandum with EM number allotted to Small Industries Service Institutes of their State/Jurisdiction and to Joint Development Commissioner (MSME Pol.) in the Office of the Development Commissioner (Small Scale Industries).

• The form of Memorandum is in two parts. Any person who intends to establish a micro, small or medium enterprise engaged in providing or rendering of services may file or those who want to establish medium enterprise engaged in the production or manufacture of products shall file Part 1 of the Entrepreneurs Memorandum to District Industries Centre.

• Once the above enterprises start production or start providing or rendering services, they should file Part II of the Entrepreneurs Memorandum to District Industries Centre.

• In case of non-filing of Part II of the Entrepreneurs Memorandum within two years of the filing of Part I, the Memorandum (Part I) filed by the entrepreneur will become invalid.

• In case of change in the investment in plant and machinery or in equipment, the enterprises who have already filed Entrepreneurs Memorandum should inform the District Industries Centre of the same in writing within one month of the change in investment.

• In case of change of products and that of services or addition in products or services, the enterprises who have already filed Entrepreneurs Memorandum should inform the District Industries Centre of the same in writing within one month of the change.

• The District Industries Centre shall, in addition of keeping a record, in writing, shall also maintain records electronically on computer.

  The following form basis of evaluation:

• The unit has obtained all necessary clearances whether statutory or administrative. e.g. drug license under drug control order, NOC from Pollution Control Board, if required etc.

• Unit does not violate any locational restrictions in force, at the time of evaluation.

• Value of plant and machinery is within prescribed limits.

        Unit is not owned, controlled or subsidiary of any other industrial undertaking as per notification.

6. NSIC procedures for hire purchase of machinery

- The hire purchase application is to be made on the prescribed form.

- The Director of Industries of the State under whose jurisdiction the applicant falls,

forwards the application to the head office of the NSIC at Delhi with his recommendation and comments.

• -  All applications for indigenous or imported machines are considered by acceptance

  committees comprising of the representatives of the Chief Controller of Imports, Development Commissioner, micro, small and medium enterprises and other concerned departments.

• -  Decision of these committees is conveyed to the parties concerned with copies to the regional offices of the NSIC and the concerned Directorate of Industries.

• -  Once all these formalities are completed by the hirer, instructions are sent to the suppliers to dispatch the consignment (duly insured for transit risk) to the hirer and to send the R/R or C/R as the case may be, to the regional office

• -  The NSIC after ensuring that all dues have been paid by the hirer, releases the R/R or C/R to him for taking delivery of the machines.

• -  In case of imported machines, the procedure is slightly different in as much as the shipping documents are sent to the clearing agents for clearing the consignment from the Customs and dispatching it to the hirer.

  Value of machines that can be supplied

  Rs. 7.5 Lacs, F.O.R. or landed cost as the case may be.

  Earnest Money

  5% or 10% of the value of machinery depending on whether the equipment is imported or indigenous. In the case of furnaces and a few other items of equipment, the rate of earnest money is different. Interest 9 per cent per annum with a rebate of 2 per cent on prompt payment. This interest is calculated on the value of machines outstanding after deducting payment of earnest money.

  Administrative Charge

  2 per cent on the sales value of machines and its recovery by the NSIC is spread over the total installment period.

  Period of Repayment

  The value of the machines, after deducting the earnest money received, called the Balance Value, is payable along with interest and administrative charge in 7 years.

  - The first installment is payable after one year and six months from the delivery of machines

  - The second and subsequent installment is payable half-yearly thereafter.

  Gestation Period

In case of certain type of machines which become operative immediately on installation in the service sector industries and job order establishment, a gestation period of only 6 months shall be allowed both to the new and existing units.

A rebate of 2% per annum is allowed on the interest rates, in case an installment is paid on or before the due date.

In case the payment of installment is not made within one month of the specified due date, interest @ 2% per annum over and above the normal rate is charged on the defaulted amount from the date of default to the date of actual payment. Remission in interests is allowed in case one or more than one installment is paid in advance of the due date(s).

Now the Place and Right Partner has to be selected and Project Report has to be prepared.

After deciding the issues of product and process, the next important question is where to set the unit up?

For many tiny units and service-based units, the home is perhaps the best starting point.

Setting up an establishment is much more than putting a signboard up and waiting for customers to walk in. It requires negotiating a favourable plot or shed purchase, organising for proper construction of building, design of interiors and finding good deals for equipment and machinery.

7. Construction of Building

Once an industrial plot for the unit is secured, then the next job is that of finding a suitable architect. Design of factory building has to be in consonance with the type of industry and have an appropriate plant layout.

An architect's estimate of building construction is essential for loan applications. Further, architect's certificate for money spent on building is needed for disbursement of loan.

8. Getting the Utility Connections

Among the utilities of prime importance are power and water. In many cases getting power connection causes delay in setting up of plant. Therefore it is imperative to commence work on these aspects with diligent follow up. Power connections are generally of either LT (Low Tension) or HT (High-tension) type. If connected load is upto 75 HP, LT connection is provided. For connected loads of 130 HP or higher only HT connection is provided.

A formal application needs to be made in a specified form to the state electricity board. An electrical inspector is deputed for evaluation of application to factory site,

after which the load is sanctioned. In areas of power shortage, it is advisable to augment the power supply with a captive generating set.

Water connection is also obtained likewise by applying in advance in formal forms. The water supply can be augmented by installation of tubewell.

9. Getting 3M's Right

Men

Projections for manpower and staffing are made in the project report. However it is necessary to time the induction of manpower in a planned manner. The engineers and operatives must be available before the installation of the machinery.

Machinery

Choosing and ordering of right machinery is also of paramount importance. In many cases technology or process provides us with specifications which is not provided, then an extensive techno-economic survey of machinery and equipment available must be carried out. International trade fairs and engineering fairs are good places to look at available options. The entrepreneur must also consult experts, dealers / suppliers as well as users, prior to making a selection of equipment and machinery. The advice of DIC, MSMEI and NSIC can also be sought.

Materials

Materials procurement and planning are critical to success, of a start-up with a MSME unit. Inventory management can lead to manageable cash flow situations; otherwise if too much is ordered too soon considerable amount of working capital gets locked up. On the other hand, non-availability may result in production hold-ups, and idle machine and manpower. For essential imported raw material whose lead-time is large proper planning is all the more essential.

Every SSI unit has to comply with various regulations in force. These include regulatory, taxation, environmental and certain product specific clearances. This section looks into the methodology of obtaining these approvals and clearances.

10. Exemption from Compulsory Licence

Licensing in the Industries sector is governed by the licensing exemption notification issued by Govt. of India in July 25 1991 under the Industries (Development and Regulation) Act, 1951. In SSI, there are virtually no licensing restrictions. No industrial license is required except in case of 6 product groups included in compulsory licensing (these products groups mainly cover products that can only be made in large sector.)

But if a small-scale unit employs less than 50/100 workers with/without power then it would not require a license from the Govt. of India even for the 6 product groups covered in licensing under Schedule II of the notification.

Subject to this, an entrepreneur can set up a SSI unit anywhere in the country without any restriction. The units are, of course, subject to the locational/land use and zoning restrictions in force under the local laws.

MSME: Micro, Small and Medium Enterprise

 Micro, Small and Medium Enterprise

The Micro, Small, and Medium Enterprise (MSME) sector play a prominent role in the economic growth of a developing country like India. This sector has been established with an underlying aim of nurturing the micro, small, and medium enterprises in India. MSME sector in India also provides a significant contribution towards manufacturing, exports, employment, and industrial units in India. In short, the economic growth of India also relies on MSME sector development. MSME sector is also popularly known as the Small Scale Industry (SSI) in India.

Small Company Definition Changes

The ministry of corporate affairs stated that the small company definition is bound to change with the proposal by finance minister Nirmala Sitharaman as per the union budget 2021. In the proposal, there was paid-up capital increase to 2Cr while there is turnover increase to 20Cr. It is going to come into effect from 1st April 2021

Two distinct categories of MSME exist in India, whose eligibility depends upon the investment in machinery and plant by the businesses. These two categories include:

Manufacturing Enterprises

• The micro-enterprises having income less than INR 25 lakh, small enterprises having income below INR 5 crore, and medium enterprises having total income less than INR 10 crore fall in this category

Service Enterprises:

• The micro business with income less than INR 10 lakh, small enterprises with revenue less than INR 2 crores and lastly the medium enterprises with income less than INR 5 crore are considered as service enterprises in MSME sector

The enterprises of both categories can register themselves as the MSME under the MSME act.

Necessary Documents Required for MSME Registration in India

The important documents that are mandatory for MSME registration are given below:

• Address Proof (of Business)
• Rented Property: NOC from the landlord, Rent receipt, and a utility bill or its equivalent are mandatory as a proof of landlord’s ownership
• Self-owned Office: For self-owned offices, one must have allotment letter, possession letter, property tax receipt, or lease deed. If a municipal license exists against the business name or its proprietor, director or partner, then no need of a possession document
• Receipts/copies of every sale and purchase bills
• Bills of machinery purchased and the copy of important licences
• Articles of Association (AoA) and Memorandum of Association (MoA)/Partnership Deed along with the copy of board resolution and incorporation certificate

How to Register as an MSME (Udyam)?

In this fast-moving phase of the economy and technology-driven processes, things are getting more organized and are paving ways to ease of doing business. The Indian Government too is taking various initiatives to encourage small-sized enterprises to exist and grow efficiently.

To register as an MSME (Udyam) all it takes is to file a web-based online form wherein the applicant is required to have an Aadhaar card along with a linked mobile number to get it certified. The process has been so simplified that the certificate is generated while making an application itself and the fields of the e-form for MSME registration are listed out below:

• Aadhaar Number: Fill 12-digit Aadhaar number issued to the applicant.
• Name of Applicant: Fill in the name of the applicant strictly as mentioned on the Aadhaar Card issued by UIDAI.
• Social Category: Fill the Social Category (General, Scheduled Caste, Scheduled Tribe or Other Backward Castes (OBC)
• Gender: Fill in the gender of the applicant
• Physically Handicapped: Select the status from provided options
• Name of Enterprise / Business: Fill in the name of Business / Enterprise which will get printed on the MSME Certificate
• Type of Organization: Select the type of organization from the given options which will get printed on the MSME Certificate.
• PAN: Fill 10 Digit PAN Number in case of Co-Operative, Private Limited, Public Limited, and Limited Liability Partnership It. Will be optional in the remaining type of Organization.
• Location of Plant: Fill in the address of the plant. In the case of multiple plant locations, the applicant can click on the add plant button.
• Office Address: Fill in the office address, if the office address is different from the plant address.
• Date of Commencement of Business: Fill in the date of Commencement of Business, the same shall be mentioned in the MSME Certificate.
• Previous Registration Details(if any): If Applicant’s enterprise, for which the Udyog Aadhaar is being applied, is already issued a valid EM-I/II by the concerned GM (DIC) as per the MSMED Act 2006 or the SSI registration prevailing prior to the said Act, such number may be mentioned in the appropriate place.
• Bank Details: Fill in the applicant’s bank account number and bank IFSC Code.
• Major Activity: The major activity i.e. either “Manufacturing” or “Service” may be chosen by the enterprise for Udyog Aadhaar.
• National Industry Classification Code (NIC Code): Fill in the NIC Code of the business activity.
• The person employed: Fill in the total number of persons employed who are directly been paid salary/ wages by the enterprise.
• Investment in Plant & Machinery / Equipment: Fill in the total investment made in the plant & Machinery/Equipment.
• DIC: The Applicant, based on the location of the Enterprise, has to fill in the location of DIC. This Column will be active and show the option only when there is more than one DIC in the district.
• Submit: Click on the submit button and enter the OTP that will be shared on the registered/linked mobile number

Any changes in the investment: If there are any changes in the investment in plant & Machinery or the equipment and the enterprises have already filed Udyog Aadhaar Memorandum (UAM) shall inform the District Industries Centre of the same in writing within three months of the change.

Benefits of MSME Registration for Businesses in India

• Businesses can avail cheaper bank loans with lower interest rates (around 1 to 1.5 per cent) in comparison to regular loans
• Tax rebate availability
• Unlike the regular Minimum Alternate Tax (MAT) duration of 10 years for credit, MSMEs are allowed to carry forward this limit to 15 years for credit against MAT
• Special government tenders catering MSMEs mainly
• Easy credit accessibility Low-cost for industry set-up, patents, and so no due to special tax rebates and other concessions
• High preference from the government  in terms of licencing and certification
• One time settlement option for the unpaid amount.

Indian Government Schemes Catering MSMEs

A variety of MSME schemes have been launched by the Indian government for MSME businesses, such as:

Zero Defect Scheme

• MSMEs are required to manufacture the export category goods as per the prescribed standards to be a part of this scheme. Compliance with such standards ensures export goods acceptance in foreign nations. The entities, who are a part of this scheme are also given varied tax rebates and concessions for the export goods.

Udyog Aadhaar Memorandum Scheme

• To be a part of this scheme, having an Aadhaar number is mandatory for the MSMEs to enjoy easily available loans, credit, and government subsidies offered under the scheme.

Incubation Scheme

• Under this scheme, the government promotes and encourages the innovative MSMEs to come up with new ideas, design, and products as well as launch them in the market. The government manages approximately 75% to 80% of the costs of innovative projects developed by MSMEs.

Quality Management Standards and Quality Technology Tools

• Enrollment under this scheme allows the MSMEs to maintain the required quality standards along with the new technology. Under this scheme, the government conduct a number of seminars and expert sessions with the new MSMEs to increase awareness among them about new technology available in the market.

Grievance Monitoring System Scheme

• MSMEs registered under this scheme can make complaints about their business to the government as well as check the status of their complaints, and keep them open if they feel the outcomes are not praiseworthy.

Women Entrepreneurship Scheme

• Women entrepreneurs are encouraged and supported by the government under this scheme by offering capital, training, counselling, and teaching of delivery techniques to women. This makes women capable of running their own MSMEs. It also aims to encourage women to expand and manage their business successfully.

Credit-linked Capital Subsidy Scheme

• MSMEs are offered with the latest technology as a replacement to their old and obsolete technology by the government under this scheme. To achieve this capability, the MSMEs are also offered with the capital subsidy in order to upgrade their business. MSMEs enrolled under this scheme can knock the bank doors directly to avail such services.

The Indian government has also launched a variety of other schemes to provide support to these MSMEs. However, MSME registration is not yet mandatory in India. Despite this, it is beneficial for emerging MSMEs to get registered as it helps them enjoy tax rebates, credit facilities, loans, business set-up, and so on.

Key Challenges faced by the MSME Sector:

• Lack of availability of adequate and timely credit
  
• High cost of credit
  
• Collateral requirements
  
• Limited access to equity capital
  
• Procurement of raw material at a competitive cost 
• Problems of storage, designing, packaging and product display
• Lack of access to global markets
  
• Inadequate infrastructure facilities, including power, water, roads
• Low technology levels and lack of access to modern technology
• Lack of skilled manpower for manufacturing, services, marketing, etc
• Multiplicity of labour laws and complicated procedures associated with compliance of such laws.

Despite the various challenges it has been facing, the MSME sector has shown admirable innovativeness, adaptability and resilience to survive the recent economic downturn and contribute significantly to India’s industrial growth. Considering the importance of the MSMEs in supporting the Indian economy’s growth, the MSME sector needs to have timely, adequate and affordable funds to upgrade its technological competencies and plug financial gaps, so as to move up the value chain.

The Importance and role of MSMEs in Indian Economy

1. To generate large scale employment In India, capital is scarce and labour abundant. MSMEs are thought to have lower capital-output and capital-labour ratios than large-scale industries, and therefore, better serve growth and employment objectives. The MSME sector in India has grown significantly since 1960 – with an average annual growth rate of 4.4% in the number of units and 4.62% in employment (currently employing 30 million). Not only do MSMEs generate the highest employment per capita investment, they also go a long way in checking rural-urban migration by providing people living in isolated areas with a sustainable source of employment.

2. To sustain economic growth and increase exports Non- traditional products account for more than 95% of the MSME exports (dominating in the export of sports goods, readymade garments, plastic products etc.). Since these products are mostly handcrafted and hence eco-friendly, there exists a tremendous potential to expand the quantum of MSME led exports. Also, MSMEs act as ancillary industries for Large Scale Industries providing them with raw materials, vital components and backward linkages e.g. large scale cycle manufacturers of Ludhiana rely heavily on the MSMEs of Malerkotla which produce cycle parts.

3. Making Growth Inclusive The inclusive growth is at the top of the agenda of Ministry for Medium, and small and Medium- sized enterprises for several years. On the other hand, poverty and deprivation are a deterrent to the development of India. Besides, it includes marginalized sections of a society which is a key challenge lying before the Ministry of MSME.MSMEs are instruments of inclusive growth which touch upon the lives of the most vulnerable and marginalized. For many families, it is the only source of livelihood. Thus, instead of taking a welfare approach, this sector seeks to empower people to break the cycle of poverty and deprivation. It focuses on people’s skills and agency. However, different segments of the MSME sector are dominated by different social groups. The Twelfth Plan has listed the following as the objectives for the MSME sector 

• Promoting competitiveness and productivity in the MSME space. 

• Making the MSME sector innovative, improving technology and depth. 

• Enabling environment for promotion and development of MSMEs. 

• Strong presence in exports. 

• Improved managerial processes in MSMEs.

4. Economic stability in terms of Growth and leverage Exports: It is the most significant driver in India contributing to the tune of 8% to GDP. Considering the contribution of MSME to manufacturing, exports, and employment, other sectors are also benefitting from it. Nowadays, MNCs are buying semi- finished, and auxiliary products from small enterprises, for example, buying of clutches and brakes by automobile companies. It is helpful in creating a linkage between MSME and big companies even after the implementation of the GST 40% MSME sector also applied GST Registration that plays an important role to increase the government revenue by 11%.

5. Cheap Labour and minimum overhead: While in the large-scale organizations, one of the main challenge is to retain the human resource through an effective human resource management professional manager. But, when it comes to MSME, the requirement of labour is less and it does not need a highly skilled labourer. Therefore, the indirect expenses incurred by the owner is also low.

6. Simple Management Structure for Enterprises: MSME can start with limited resources within the control of the owner. From this decision making gets easy and efficient. On the contrary, a large corporation requires a specialist for every departmental functioning as it has a complex organizational structure. Whereas a small enterprise does not need to hire an external specialist for its management. The owner can manage himself. Hence, it could run single-handedly.

7. The main role in the mission of “Make in India”: The signature initiative by the Prime Minister of India “Make in India” has been made easy with MSME. It is taken as a backbone in making this dream a possibility. In addition, the government has directed the financial institution to lend more credit to enterprises in the MSME sector.