International Journal of Business and Management Invention
ISSN (Online): 2319 – 8028, ISSN (Print): 2319 – 801X
www.ijbmi.org || Volume 6 Issue 9 || September. 2017 || PP—28-31
Msme Sector: Challenges and Opportunities
*
Neha Singh, Dr. Sneh P. Daniel,
Research Scholar, SHUATS, Joseph School of Business Studies, Allahabad, U.P.
Assistant Proffesor, SHUATS, Joseph School of Business Studies, Allahabad, U.P.
Corresponding Author: Neha Singh
Abstract: The Micro, Small and Medium Enterprises (MSMEs) play a vital role in the economic and social
development of India. It plays a key role in the development of the economy with their effective, efficient,
flexible and innovative entrepreneurial spirit. It is expected that Indian economy will grow by over 8% per
annum until 2020. MSMEs contributes about 45% of India’s manufacturing output. ) The importance of MSMEs
and its various socio-economic contribution like employment generation, fostering new entrepreneurship,
providing volume to the industry base and contribution to national output and exports of our country was
identified. They contribute in GDP and GNP of India. It acts as a breeding ground for entrepreneurs to grow
from small to big. MSME Sector are increasing enormously in India. MSMEs are very important in the
economic growth of India but this sector is not getting sufficient support from the concerned Government
Departments, banks, financial institutions and corporate. Presently, the Indian MSMEs are facing different
types of problems. . If the Government, Bank and Financial Institutions will take proper initiatives in the sector
of MSME and they will take pride while servicing the MSMEs, these challenges can be solved and the economic
growth rate of India will be 8-10% for the next decades.
Keywords: MSMEs, economic growth rate, employment generation, Government Departments, Bank and
Financial Institutions, exports
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Date of Submission: 13-09-2017 Date of acceptance: 02-10-2017
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I. INTRODUCTION
The Micro, Small and Medium Enterprises (MSMEs) play a vital role in the economic and social
development of India. The MSME sector contributes in the manufacturing output, employment and exports. It
plays a key role in the development of the economy with their effective, efficient, flexible and innovative
entrepreneurial spirit. MSME sector has emerged as a dynamic and vibrant sector of the economy. It is expected
that Indian economy will grow by over 8% per annum until 2020. MSME are the engines of growth of any
country‟s economy.According to the provision of Micro, Small and Medium Enterprises Development Act 2006
the micro, small and medium enterprises are classified into two classes
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Msme Sector: Challenges and Opportunities
The most advantage of this sector is its generating employment at low cost. The MSME sector is highly
heterogeneous. There are different size of the enterprises, variety of products and services and level of
technology. It helps in the industrialization of rural and backward areas. It reduces regional imbalances. It
provides equitable distribution of national income and wealth.
Small and large scale enterprises are two legs of industrialization process of a country. Hence, MSMEs
are found in existence in every country. MSMEs have been given an important place in the framework of
Indian planning since beginning both for economic and ideological reasons.
SOME HIGHLIGHTS OF THE MSME SECTOR
a) MSMEs contributes about 40% of India‟s total exports.
b) MSMEs contributes about 45% of India‟s manufacturing output.
c) This sector has given employment to 73 million people.
d) MSME manufacture more than 6,000 products.
OBJECTIVES OF THE STUDY
The following are the objectives of the study-
a) To study the contribution of MSMEs in India.
b) To review the challenges and opportunities faced by MSMEs in India
II. RESEARCH METHODOLOGY
The descriptive methodology has been used to collect data Secondary data has been collected from various
published sources and websites. The explanation of the data is more qualitative than on quantitative terms.
REVIEW OF LITRATURE
Raghurama [I991] tries to analyse the problems faced by small-scale units while availing themselves of bark
finance. The problems faced by the bankers and the procedures adopted by the bank in extending finance are
also examined.
Pillai (1994) in his study analysed the future role of small-scale sector in the evolving economic setting and the
challenges it may have to face to sustain its place as an important contributor to the development process.
MSMEs are considered as a driving force of innovation and employment, and thus they are an important factor
in fostering general economic performance (Carree and Thurik, 2008).
Thiripurasundari, K and V.Gurumurthy (2009)The study highlights the challenges of micro, small
andmedium enterprises of India. One side the globalization is an opportunity as well as another side it is a
challenge forthe indigenous MSMEs. The Indian MSMEs are facinga great problem due to larger production of
foreign manufacturing concern. The financially strong MSMEs will survive strongly at globalized platform.
Nalabala Kalyan,Kumar. Sardar, Gugloth. (2011) This study reveals that how the all aspects of the MSMEs
(Employment, Leading sector of MSMEs, Investment in fixed assets) being change in modern perspective. The
technological advancement and protection of MSMEs through various subsidy schemes and liberal availability
of credit will be a great help.
Dixit and Pandey (2011)applied cointegration analysis to examine the causal relationship between SMEs
output, exports, employment, number of SMEs and their fixed investmentand India‟s GDP, total exports and
employment (public and private) for the period 1973-74 to 2006-07. Their study revealed the positive causality
between SMEs output and India‟s GDP.
Venkatesh and Muthiah (2012)found that the role of small & medium enterprises (SMEs) in the industrial
sector is growing rapidly and they have become a thrust area for future growth. They emphasized that nurturing
SME sector is essential for the economic well-being of the nation.
Srinivas K T, (2013) has studied the performance of micro, small and medium enterprises, and their
contribution in India‟s economic growth and concluded that MSMEs play a significant role in inclusive growth
of Indian economy.
Samta Chaudhary and Shweta Ahalawat(2014) The importance of MSMEs and its various socio-economic
contribution like employment generation, fostering new entrepreneurship, providing volume to the industry base
and contribution to national output and exports of our country was identified. On this background, the study
further highlighted hurdles faced by SME sector and analyzed existing credit flow
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Msme Sector: Challenges and Opportunities
CONTRIBUTION TO ECONOMY
MSMEs are the backbone of the Indian economy. They contribute in GDP and GNP of India. It acts as a
breeding ground for entrepreneurs to grow from small to big. MSME Sector are increasing enormously in India.
India has nearly 12 million MSMEs,which is almost 50% of industrial output and 42% of India‟s total export.
The reasons are as follows:-
a) Investment of less capital.
b) High contribution to domestic products.
c) Extensive promotion and support by Government.
d) Significant export earnings.
e) Operational flexibility.
f) Man power training, machinery procurement.
g) Capacity to develop appropriate indigenous technology.
h) Technology- oriented industries.
CHALLENGES FACED BY MSMES
MSMEs are very important in the economic growth of India but this sector is not getting sufficient
support from the concerned Government Departments, banks, financial institutions and corporate. Presently, the
Indian MSMEs are facing different types of problems. Most of the problems are controllable while rests are
uncontrollable. This proves hurdle in the growth path of the MSMEs.MSMEs problems can explain as follows:-
1. Lack of credit from banks- The MSME`S are presently facing the problems of credit from the banks.
The banks are not providing the adequate amount of loan to the MSMEs. The loan providing process of the
banks is very long and formalistic. The owners of the MSME`S has to produce different types of documents
to prove their worthiness.
2. Competition from multinational companies- In present era of globalization, the MSME`S are facing the
great from the international manufacturing companies who are proving quality goods at cheapest price.
Therefore, it is very difficult to compete with the multinational companies.
3. Poor infrastructure-Though, MSME`S are developing so rapidly but their infrastructure is very poor. With
poor infrastructure, their production capacity is very low while production cost is very high.
4. Unavailability of raw material and other inputs- For MSME‟s required raw material skilled work force
and other inputs, which are not available in the market. Due to unavailability of these essentials, it is very
difficult to produce the products at affordable prices.
5. Lack of advanced technology- The owners of MSMEs are not aware of advanced technologies of
production. Their methodology of production is outdated. The owners are using older method in the field of
fabricated metal and textile.
6. Lack of distribution of marketing channels- The MSMEs are not adopting the innovative channels of
marketing. Their advertisement and sales promotion are comparatively weaker than the multinational
companies.The ineffective advertisement and poor marketing channels leads to a very poor selling.
7. Lack of training and skill development program-The training and development programs in respect of
MSME`S development concern is very low .So,skilled manpower is not being available to MSMEs.The
owners are aware of the innovative methods of production. The skill developmental schemes conducted by
the government are not sufficient.
8. Complex labor laws and red-tape- All the laws related to the all aspects of manufacturing and service
concern are very complex and compliance with these laws are practically difficult .The various decisions of
factory‟ are depend upon the factory commissioner and inspector, so there are so many chances of red tape
in the operation of MSMEs.
9. Problems of storage, designing, packing and product display.
OPPORTUNITIES IN MSME
1. Less capital intensive.
2. Most important employment generating sector. It provides 50% of private sector employment.
3. Effective tool for promotion of balanced regional development.
4. It is extensively promoted and supported by the Government.
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Msme Sector: Challenges and Opportunities
5. Finance and subsidies are provided by the government.
6. Produced goods are purchased by the Government.
7. 40% exports in India are through MSME channel.
8. Procurement of machinery and raw material.
9. Globalization has offered new opportunities for the MSMEs.
10. Trade fares and exhibitions played a vital role in the economic growth of the countries
III. CONCLUSION
The Micro, Small and Medium Enterprise (MSMEs are an important sector and plays a critical role in
the Indian economy. MSMEs will continue to play a very important and vital role in our economy where the
twin problems of unemployment and poverty constitute a major development challenge. There are several
challenges in the sector of MSMEs. If the Government, Bank and Financial Institutions will take proper
initiatives in the sector of MSME and they will take pride while servicing the MSMEs, these challenges can be
solved and the economic growth rate of India will be 8-10% for the next decades.
REFERENCES
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[3]. K.R. Pillai, The India11 Small-scale Sector in the New Economic Setting, Productivity, July - September 1994, P. 258 - 265.
[4]. Carree, M. A., & Thurik, A. R. (2008),“The Lag Structure of the Impact of Business Ownership on Economic Performance in OECD Countries”,Small
Business Economics, 30(1), 101-110.
[5]. Thiripurasundari, K and V. Gurumurthy (2009), “Challenges for Small Scale Industries in the Era ofGlobalization” in “Small and Medium Enterprises
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[6]. Nalabala Kalyan,Kumar. Sardar,Gugloth.(2011).Competitive performance of micro,small and mediumenterprises in India. Asia pacific journal of
social sciences,pp.128-146.
[7]. Dixit, A. and Pandey, A.K. (2011), „SMEs and Economic Growth in India: Cointegration Analysis‟, The IUP Journal of Financial Economics, Vol. IX,
No. 2, PP. 41-59
[8]. Venkatesh, S. and Muthiah, K. (2012), „SMEs in India: Importance and Contribution‟, Asian Journal of Management Research, Vol. 2, No. 2.
[9]. Srinivas K T (2013): International Journal of Engineering and Management Research.3 (4) August 2013 ISSN No.: 2250-0758.
[10]. Credit Flow of SMEs in India: A Study Conducted at Bank of Baroda by Samta Chaudhary and Shweta Ahalawat published in IRACST –International
Journal of Commerce, Business and Management (IJCBM),ISSN: 2319–2828 Vol. 3, No. 3, June 2014
International Journal of Business and Management Invention (IJBMI) is UGC approved
Journal with Sl. No. 4485, Journal no. 46889.
Neha Singh “Msme Sector: Challenges and Opportunities.” International Journal of Business
and Management Invention(IJBMI), vol. 6, no. 9, 2017, pp. 28-31.
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