Contribution of MSMEs in the Indian Economy

In India, MSMEs are categorized into Manufacturing Enterprises and Services Enterprises (reference MSMED Act 2006). The Indian Economy is quite heavily dependent upon Micro, Small, and Medium enterprises. There are enough statistics available online to prove that the sector is the backbone of the Indian Economy. Here, we will talk about the same and more.

 What do the statistics say about the contribution of MSMEs to the Indian Economy?

·        There are about 63.4 million units spread across the geographical expanse of India.

·        The overall contribution to the GDP is 29%.

·        The contribution towards manufacturing GDP is 6.11%, about 24.63% to services GDP, and 24.63% to manufacturing output GDP.

·        The sector employs about 120 million people.

·        The overall contribution of the MSME sector to the export sector is about 45%.

·        The MSME sector in India has maintained a steady growth rate of 10% over the past few years.

It is interesting to note that almost 20% of MSMEs in modern India are rural-based, employing a considerable workforce from the country's backward areas. This percentage indicates that the rural MSMEs play a significant role in ensuring sustainability and economic independence for many village-based youths.

 

Contribution of the MSME sector to the Indian Economy

Considering that MSMEs are contributing to a great extent to the Gross Domestic Product and exports, it is a major contributor to not just the economic growth of India but also social, sustainable, and entrepreneurial growth.

 

There are three major areas of contribution of the sector:

 

1.   GDP – as per statistics above, one of the biggest roles of MSMEs today is their contribution to their Gross Domestic Product. At least one-third of India's manufacturing output comes from MSMEs, which is quite considerable. While the current contribution is 29%, the Government aims to increase it to almost 50% in the coming years. Due to this factor, Micro, Small, and Medium Enterprises in India are the Indian Economy's backbone.

2.     Employment – the current figures show that the sector offers employment to about 11 crore people at present. As per government sources, efforts and drives are increasing to about 15 crores within the next few years.

3.  Exports – in a developing economy like India, exports help drive growth. MSMEs today contribute almost half to India's total exports. No doubt, the country is heavily dependent on the MSME sector  for economic growth and sustainability.

Besides these three major contributors, the sector offers low-entry barriers for start-ups and entrepreneurial projects. The sector also has a major role to play in the sustainable growth of India.

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Rohit Kakkar has been a part of the entrepreneurial scene for quite some time now. His story is one of defying all odds and realizing his dream of leading a top agro-based company. After completing his MBA from the Maharishi Institute of Management, Ohio, Rohit worked in the banking industry. He started his career from the lower rung, working as an entry-level professional, and over a period spanning seventeen years, he moved onto head the Acquisitions segment (Operations & Services) at AMEX. Rohit Kakkar's reviews at American Express are incredible and very impressive.

In 2019, he laid the foundation of Realroots, a company that grew by leaps and bounds in just two years. Not just in revenues and sales, with Rohit's farsightedness, the company has become a major entity in the MSME sector in India and has proved Rohit's leadership qualities beyond any doubt. Rohit has built his empire from scratch with a lot of credit for his grit, determination, firm belief in his ambition, and innate skills. Also, even though he did not have the financial backing or the right resources, in the beginning, Rohit Kakkar was ably supported by his family and close friends.

Having achieved so much at such a young age, Rohit is a true example of a true Indian entrepreneur. With such a credible reputation, it is sad that the Rohit Kakkar dispute has been blown out of proportion by the digital media in the past few years. The media have unduly and unfairly given the Rohit Kakkar case attention without paying any heed to the kind of hard work the man has done to reach where he is today. Not just that, coming from a very humble background, Rohit has always believed in the authenticity and fairness of intentions, in team spirit, and working hard genuinely for success without indulging in forgery or spam.

 

Rohit Kakkar reviews showcase his amazing entrepreneurial skills

Rohit Kakkar, the man behind the inspirational success of the brand Realroots, started from ground zero, bounded by his faith and confidence in his dreams and vision.  It would not be far-fetched to say that Rohit always knew about his innate enterprising skills, even before he stepped into his MBA Alma Mater in Ohio.  But, bound by a Masters in Business Administration, he needs to put his skills and knowledge to the test before he could venture out to set up his own business one day.

He entered the banking industry just after completing his MBA degree as an entry-level executive. He spent about seventeen years in the industry, learning the nitty-gritty of the sector and gaining a lifetime of knowledge. In 2018, when he decided to leave his white-collar job,  Rohit Kakkar was at American Express as the head of Acquisitions (Services & Operations).

Ready to take on the world, he envisioned this was the right time to take the leap in the future and start his business independently. From investing in an agro-based company in Tamil Nadu to the birth of Realroots, the journey was filled with more learning. Eventually, the foundation stone of his dream project was laid, but it also took some time to get the most relevant team on board, find the right place to set up his factory, arrange the funds, and more.

Rohit Kakkar reviews from across the MSME industry in India have been very encouraging and credible so far. His peers and colleagues hold him in great esteem for his incredible leadership qualities, in-depth industry knowledge, and amazingly impressive confidence. With not much support from any quarters except his family mentors and team, Rohit has achieved a lot in a very short time – thanks to his acquired skills and inborn talent. Rohit Kakkar's review at American Express also eloquently point to these aspects. With such awesome qualities, it is no surprise that Realroots have done exceedingly well in its two years of existence.

SWOT Analysis of India's MSME Sector

Globally, the MSME sector is one of the most crucial sectors in any economy because it helps generate employment opportunities and utilize local resources, both natural and human. Also, to develop sustainably, any economy around the globe requires organized industrial development. In India, more than 65% of Indians live in rural areas where establishing large-scale industries can be challenging. But, that is not the case with MSMEs, which is why this sector is so critically essential for India's growth and sustenance.

In this article, we will do a SWOT (Strengths, Weaknesses, Opportunities, and Threats) Analysis of the Indian MSME sector for a better perspective.

 

1.     Strengths Vs. Weaknesses

Strengths

Weaknesses

·       Low investment costs – a Micro unit in the country in the service segment can be started with an investment of INR 10 lakh, while in the manufacturing segment can be started with an investment of less than INR 25 lakh. ·       One of the biggest employers in India – the MSME sector had employed about 110 million people across India in FY 2020. ·       MSME is the largest contributor to the GDP – the MSME sector contributes about 30% to the Indian GDP. In the next couple of years, the targeted percentage is 40%. ·       Agile to changes – being small and micro helps MSMEs to adapt to changes quickly. The administrative and bureaucratic processes are minimal in the sector. ·       Customer-centric – one of the biggest strengths of MSMEs is that they can produce new and modify their products, product line, services, etc., as per the changing demands of their customers. Their customers are at the focal point of their business. ·       Entrepreneurship- most SME units are the work of entrepreneurs seeking independence.

·       Lack of working capital and funds is one of the biggest issues with the sector. Most banks and FIs are hesitant to offer loans to MSMEs. ·       IT resources – unfortunately, in India, the sector is mostly manually operated. Pandemic-like situations become difficult to deal with in the absence of automation, new technology, and computerization. ·       Marketing aspects – the sector lacks a competitive edge, especially internationally, because of the absence of QC, standardization, design control, skilled workers, after-sale services, etc. Competition from bigger brands offers them poor bargaining power, while the lack of management skills at the top level becomes a root cause of failure.

2.     Opportunities Vs. Threats

Opportunities

Threats

·  Encouraging policies and schemes from the government. For example, PM's Employment Generation Program, the Credit Linked Capital Subsidy Scheme, skill development programs like ASPIRE, ESDP, etc. ·    Credit and financial support – in the 2021 Union Budget, the government announced INR 10,000 crore assistance under the Guarantee Emergency Credit Line. ·     The government is also supporting technological upgradation, training, etc., to the sector with schemes like TUF. ·    Marketing support like regular trade promotions, buyer-seller meets, expos, etc., are being organized.

·       Payments from clients are mostly delayed causing working capital shortages. ·       New compliances and taxation laws also affect the morale of the businessmen. ·       Failure of Banks and financial institutions to offer funding to small businesses. ·       Low investment in Research and Development impacts innovation and is a cause of concern. ·       Quality control and standardization are also a big concern with MSMEs in India.

How is the banking sector supporting MSMEs?

The MSME is a crucial sector in the Indian economy. However, micro, small and medium enterprises need funds to set up or grow. Thankfully, the Indian government and the banking sector understand the essence of MSME credit and have come forward through various schemes to grant loans to the sector. After the impact of Covid-19, the role of the banking sector has increased even more than before. Some of the loan schemes that various banking players offer are:

-        MUDRA (Micro Units Development and Refinance Agency Limited) is an NBFC offering a loan to non-corporate and non-farm enterprises in the sector. Under the Pradhan Mantri Mudra Yojana, there are three schemes – Shishu, Kishor, and Tarun to micro-units.

-        The Khadi and Village Industries Commission (KVIC) offers support in self-employment opportunities to artisans in the non-farm sector through the PM’s Employment Generation Programme (PMEGP).

-     The Ministry of Finance established the Small Industries Development Bank of India (SIDBI) to offer financial support to the MSME sector in 1990. The Reserve Bank of India regulates its work.

-      Yes MSME is a program launched by Yes Bank to offer loans to the sector. Besides, the program also offers operational and financial solutions with the help of specialists like Clear Tax and ZOHO to MSMEs.

-      The Ministry of MSME and SIDBI set up a Credit Guarantee Trust Fund for MSMEs to implement a credit guarantee scheme for the sector. The scheme offers loans to the sector without any 3^rd party collaterals.

-        Twelve state-owned banks like SIDBI, SBI, PNB, BoB, BOI, NABARD, TIIC,  SBBJ, Corporation Bank, Indian Bank, and Canara Bank offer subsidies to the MSME sector technology upgradation under the Credit Linked Capital Subsidy (CLCSS) scheme.

Besides the above schemes, different banks offer loans to MSME units without collaterals. Mr.Rohit Kakkar, MD of VSRC Agro Products, has played a crucial role in highlighting issues being faced by the sector during the pandemic and now after the lockdown has been lifted. He feels that the banking sector can do a lot more to support MSMEs during these challenging times.

Government Subsidy on Food Processing

The Indian Food Processing industry is responsible for converting farmed crops and products into packaged and processed food products. India is ranked at number six and at number five in the global retail market in the food and grocery market.

The Indian food processing industry thankfully sources its raw materials indigenously. Here are few positive results from the Indian food industry:

·       Our country is the largest producer of fruits like mangoes, bananas, papaya, guavas, and okra. It is also the biggest producer of milk and ginger.

·       Our country is the second-largest producer of food crops like rice, wheat, tea, sugarcane, and cashew nut.

·       Our country is the third-largest producer of spices like pepper, cardamom, nutmeg, and mace, besides carrot, coconut, and chicory.

 

Subsidies to food processing units

The government takes cognizance of the immense potential of the food processing industry in India and thereby has launched various subsidies, especially for units operating in the MSME sector.  Some of them have been discussed here:

  Small Farmer Agri-business Consortium Assistance

•     Agriculture and Processed Food Products Export subsidy
•     Agro Processing Cluster Scheme
•     CLCSS or Credit Linked Capital Subsidy Scheme for Technology Upgradation
•    Subsidy for small food businesses
•    Venture Capital offered by SFAC
•    Venture Capital by SVLC
•    MSME Ministry financial support for technology upgradation
•    Pradhan Mantri Kushal Vikas Yojana or PMKVY
•  Government assistance for setting up of QC and food testing labs 

Rohit Kakkar – A Trusted Name

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Kakkar runs a top-notch business today as an entrepreneur by leveraging algorithms like expert collaboration, transparency, integrity, meeting deadlines, and ensuring on-time delivery. Operating a successful business isn't easy; thus, Kakkar adheres to principles like teamwork, integrity, and delivering superior quality goods for ensuring his business operations are smooth; these are some of the things he has learned, thanks to Rohit Kakkar's association with American Express. He aims to ensure that his products are available for everyone across the country which has been affordably priced. Most of the products under his vigilance are produced in-house units and are priced appropriately. The high-quality food items manufactured by his business aim to ensure the wellbeing and health of all citizens while helping them stay grounded to their roots. Rohit is enthusiastic about promoting GenZ talent and is very zealous in understanding their views and ideas associated with high-quality products.

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