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Role of MSME sector in Indian Economy

Role of MSME sector in Indian Economy.

The MSME sector playing a very pivotal role in Indian Economy by increasing manufacturing, creating jobs and enhancing country's export.

The MSME sector has been proved very crucial for enhancing the Indian economy. It is providing jobs to unemployed people, developing the backward and rural areas and decreasing the income inequality by distributing the national income to rural and semi urban areas. Let's, first understand the MSME new definition. MSME stands for micro, small and medium enterprises. The classification is based on investment in plants and machinery or equipments and annual turnover. 

So micro enterprises are those enterprises having investment in plants and machinery or equipments is not more than 1 crore and annual turnover is not more than 5 crores. The small enterprises are those enterprises having investment in plants and machinery or equipments is not more than 10 crores and annual turnover is not more than 50 crores. The medium enterprises are those enterprises having investment in plants and machinery or equipments is not more than 50 crores and annual turnover is not more than 250 crores. 

There are around 64 mn total MSMEs in India which are enhancing the manufacturing and service sector tremendously. This sector operating very well in terms of manufacturing, job creation, export promotion and enhancing country GDP. Let's look at all these facts. The sector has 23% of India's total labour force which make it the second largest labour force involving sector after the agriculture sector.

It contributes 38% of India's total manufacturing output. It not only  contributes to manufacturing but also tremendously contributing to the country export. It contributes 45% of India's total export. And moreover, its share in enhancing India's GDP is around 27%.

Thus, this sector has playing important role in all the parameters which make it one of the significant sectors of Indian economy. Access to finance was the main bottleneck for years. But, the Government has providing good platform and backing the the sector by providing incentives through various schemes. The Export Credit Guarantee scheme is there for improving working capital availablity for the MSME sector. 

Moreover, in 2020 the Government announced a 50 thousand crore Self Reliant India (SRI) equity fund in public private partnership ( PPP) mode to ensure capital for the MSME sector. Further, there is a PLI scheme also but the Government need to make the regulation easy for MSMEs so that this sector also can avail the benefits of this government scheme and enhance its performance more to contribute more in India's GDP.




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