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.