Note4Students
From UPSC perspective, the following things are important :
Prelims level: MSMEs;
Mains level: Reviewing the Category of Micro-Enterprises
Why in the News?
A parliamentary panel suggested separating micro-enterprises from the broader MSME category and recommended revising definitions every five years.
- A government order for timely MSME payments has exposed knowledge gaps and unintentionally marginalized smaller enterprises, highlighting issues in understanding their structure and operations.
Present Status:
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What are the Categories of Micro-Enterprises?
- Category 1 – Micro: More than 98% of the MSMEs are within this category, with reporting annual revenue of Rs 50 lakh and less.
- Category 2 – Small: The MSMEs that are reporting annual revenue of Rs 50 lakh to Rs 5 crore.
Present Ambiguity and structural Gap in defining MSMEs
- Lack of Clarity and Consistency in defination: In India, the MSMED Act of 2006 categorized MSMEs based on investment in plants and machinery, which led to industries keeping their plants small to maintain MSME advantages.
- However, the MSMED Amendment Bill, 2018 proposed defining MSMEs solely based on yearly turnover, which has been criticized for under-reporting of qualifying enterprises.
- Quantitative vs. Qualitative Approaches: There are two main techniques for defining MSMEs: quantitative and qualitative, with MSMEs typically defined using a quantitative approach. Quantitative criteria like number of employees, total assets, and yearly revenue have limitations as they vary by industry and sector.
- Impact on Micro Enterprises: The ambiguity in defining MSMEs negatively impacts micro-enterprises, leading to issues like delayed payments and limited access to benefits and support schemes.
- Moreover, the unregistered micro-enterprises have been worse hit by the COVID-19 pandemic than small and medium enterprises, with micro-enterprises accounting for more than two-thirds of all MSMEs and having a higher rate of informality.
Way forward:
- Enhanced Data Collection: Conduct regular and comprehensive surveys to gather detailed data on MSMEs, particularly focusing on micro-enterprises.
- Further Classification within Micro-Enterprises: Establish sub-categories within the micro-enterprise category based on revenue thresholds (e.g., below Rs 10 lakh, Rs 10-25 lakh, Rs 25-50 lakh).
- Revenue Diversity: Significant variation in revenue among micro-enterprises necessitates further classification.
- Targeted Policies: Addressing classification gaps can enhance policy effectiveness, supporting micro-enterprise growth and sustainability.
BACK2BASICS |
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| Program and Policies | Explanation |
| MSME Development Act, 2006 | Provides the legal framework for defining MSMEs and their classification into micro, small, and medium enterprises. |
| Credit Guarantee Fund Scheme for Micro and Small Enterprises | Provides credit guarantee cover of up to 75% of the credit to micro and small enterprises. |
| Udyog Aadhaar | A simple online process for MSME registration, requiring only the Aadhaar number and a self-declaration. |
| MSME Samadhaan | Mechanism to facilitate the promotion and development of MSMEs, including Khadi, Village, and Coir Industries. |
| Mudra Yojana | Provides loans up to 10 lakh to non-corporate, non-farm small/micro enterprises. |
| ZED Scheme | Aims to enhance the manufacturing capabilities and competitiveness of MSMEs through Zero Defect Zero Effect (ZED) certification. |
| Stand-Up India | Facilitates bank loans between 10 lakh and 1 crore to at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower per bank branch |
Make in India: Focuses on making India a global manufacturing hub, with MSMEs playing a crucial role.
Stand-Up India: Facilitates bank loans between 10 lakh and 1 crore to at least one Scheduled Caste (SC) or Scheduled Tribe (ST) borrower and at least one woman borrower per bank branch
Mains PYQ:
Q Account for the failure of manufacturing sector in achieving the goal of labour-intensive exports. Suggest measures for more labour-intensive rather than capital-intensive exports. (UPSC IAS/2017)
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