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What Is MSME & its importance in India?

What Is MSME & its importance in India - [A]

MSME stands for Micro, Small and Medium Enterprises. Under the notification dated 9 May 2007, the Ministry of Micro Small and Medium Enterprises was formed pursuant to the amendment of the Allocation of business rules 1961 with a merger of the Ministry of agro and rural industries and ministry of Small-Scale Industries. Ministry of Micro Small and Medium Enterprises is thus an apex body of the government of India that formulates all the laws, rules, and regulations related to micro, small and medium enterprises.

The importance of Micro Small & Medium Enterprises (MSME).

The primary focus of the Government of India presently is to develop, promote, and help MSMEs as this sector contributes a major portion to the growth of the Indian economy due to the following reasons.

  1. MSMEs contribute approximately 10% of the total Gross Development Product (GDP) of the country.
  2. About 50% of the total export of India is generated through Micro, Small & Medium Enterprises.
  3. About 90% of the total manufacturing units in India fall under the category of MSME and approximately 6500 products are manufactured by MSME.
  4. About 45% of the total employment in India is generated from the category of Micro, Small & Medium Enterprises.

 What all businesses are included in Micro Small & Medium Enterprises (MSME).

There are about 6500 products listed under the MSME category by the Government of India. Some of the businesses that are classified as Micro, Small and Medium Enterprises are fruits & vegetables, milk and milk products, poultry, fish farming, and animal breeding, etc, grocery stores, packaged food items, hotels and restaurants, small mills like oil mills, flour mills, etc, cosmetics and beauty products, beauty parlors, fitness and yoga centers, etc, furniture and fixtures, books and stationery items, labs and medical test units, tailoring, photocopy, etc, hardware and carpenter items, leather goods, etc.

Udyog Aadhar Certificate and its benefits

The Ministry of Micro Small & Medium Enterprises (MSME) grants Udyog Aadhaar Certificate to MSME’s which would help them in availing various benefits for the promotion and growth of their business across the world. Some of the major benefits of the MSME Certificate or Udyog Aadhaar Certificate are listed below.

  1. The MSME’s get a reduction or rebate in the interest rates charged by the banks.
  2. MSMEs can also avail exemption on interest rate up to 1% on bank overdraft.
  3. MSME’s can avail 100% collateral-free loans from the Banks without any hassles.
  4. The MSMEs get concession in the electricity bills etc.
  5. MSME’s get Waiver of security deposit charges for all central and state government tenders.
  6. MSME’s get special consideration on the International Trade Fairs.
  7. Subsidy in the registration of bar code is granted to MSMEs.
  8. For patent registration, MSMEs are granted a 50% subsidy.
  9. Credit ratings and NSIC performance.

The benefits of Udyog Aadhar Certificate or MSME certificate from state governments

The MSMEs also get entry to state-run industrial estates and subsides of power and taxes from the state government. Apart from this, MSMEs also avail exemption in sales tax on sales and purchase of raw materials and finished products.

The state governments also provide several other support services to the MSMEs such as support for the industrial extension, support, and assistance in raising capital and funds, training and development services, extension in credit facilities, a grant of technical advice, facilitating and providing developed sites for warehousing and construction, assistance is purchase and hire of machinery and equipment for the use is MSME, support in construction and development of manufacturing and industrial unit in underdeveloped areas, support, and assistance in marketing and growth of the business across the world, etc.

The Credit Guarantee Scheme for MSME’s

The central government of India also introduced the credit guarantee scheme for micro, small, and medium enterprises.

The scheme includes the following silent features

  1. The extent of guarantee to MSME’s was increased to 80% from 70%.
  2. The optimal loan eligibility was enhanced to Rs. 50 lakhs from the previous Rs. 25 lakhs.
  3. Loans up to 5 lakhs for micro-enterprises.
  4. Benefits to women operated medium and small scale enterprises
  5. The one-time guarantee for loans availed by MSME’s in northeastern India was reduced to 0.75% from 1.5%


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