5 KEY BENEFITS FOR MSME SECTOR

 

Are you planning to start your own business?

Are you worried about competition from large manufacturers?

Are you worried about availability of funds to finance your business?

If you have answered "YES" to these questions, then you must consider the various MSME Scheme’s that are made available to this sector by the Government. You also need to check out if your products are covered by the sector. If you are not aware of the various schemes for MSME Sector, then this blog is for you, so read on. 

MSME means Micro, Small and Medium Enterprises. These industries are considered to be the backbone of any country’s economic growth. MSMEs are very important for the economic development of a country as they contribute immensely towards job creation, sustained progress and overall improvement in earning capacity of the citizens of the country thus reducing poverty. Because of the socio-economic advantages that this sector offer, Government too invests heavily in this sector. Government offers them protection from larger companies and supports them as companies in this sector don’t have enough resources or access to latest technologies that the big companies have. This is done by Government by offering several schemes, tax benefits and imposing regulations thus provides these companies with a level playing field in the market.

I am Milind Sahanie, 10X Productivity Coach and founder of "New Skills for the New World" Platform. My goal is to increase the revenues of 30000 Entrepreneurs by 10X in next 5 years.

As per the Notification issued Ministry of MSME from 1.07.2020 below is the classification for MSME Companies:

27th June is celebrated as World MSME Day by United Nations. India is the fastest growing economy and there is no doubt that MSME’s have contributed greatly to this progress. There are over 6 Crore small and midsize units in India and more that 50% of these are in Rural Areas thus helping to bridge that Rural and Urban divide. MSME’s contribute to over 28% of India’s GDP and account of 49% of India’s Exports and providing Employment to over 11 Crore people second only to the Agriculture Sector. 16 MSMEs have already entered Stock Market to raise capital and this number is expected to hit 60 in next 1 Year. It is no wonder that Government is looking at this sector very closely and is supporting it in every Financial Budget with various Schemes so that this sector grows even further. In the Budget of FY22, Government more than doubled its allocation to MSME Sector to Rs. 15700 Crores, such is the seriousness and attention that Government is giving this Sector . As per MSME Development Act, Promotion and Development of MSMEs is a primary responsibility of the State Government which is supplemented by Central Government. Though Registration of an MSME is not legally mandatory but registering your company has a several advantages, 5 of which are listed below:

1. Protection for Certain Product Categories:

This is one of the most important benefits. Certain products such as Jute, Bread, Pickles, Umbrellas, Buckets  are reserved for manufacturing by MSMEs only. There are over 300 products that are reserved for this sector. Government is obliged to buy these products only from MSME sector. This policy provides a protective cushion to the Resource strained MSME’s from the stiff competition in the market that may come from larger companies with huge resources at their disposal. Central government has given exclusive rights to manufacture these products only to this sector.

 2. Incubation Scheme:

Under this scheme, opportunity is available to innovators towards development of innovative ideas for production of innovative products. Financial assistance of up-to Rs 1 Cr is made available as capital to these innovators so that they can convert their ideas into innovative products. Objective is to tap the creativity of an individual and also to promote induction of latest technologies in manufacturing. Along with financial assistance, support is also provided on networking with other businesses, mentoring in business and technology and professional assistance. Incubation Centers like STEP at IIT Kharagpur, CIIE at IIM Ahmedabad and many others have been instrumental in launching Start-Ups like Glass, iKure and others.

3. Credit Guarantee Fund Trust

MSMEs are generally run by the Entrepreneurs with their self generated capital, which is limited. For them to grow they need capital and security. Banks and other Finance companies are reluctant to offer loans to these small companies as they don't have collateral to offer.  To address this challenge, Government of India has launched a Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) whereby financial assistance is made available to these industries without any Collateral or Third Party Guarantee. This scheme assures the lenders that in case of any default by the beneficiary, trust provides a Guarantee Cover in the ratio of 50%/75%/80%/85% of the amount given. Under this scheme there is a Loan Available of up-to Rs. 2 Crores with Special Preference for Eligible Women Entrepreneurs.

There are also benefits available on Overdrafts from the Bank, Concessions on Electricity Bills and protection against Delayed Payments from buyers who buy from MSME Sector.

4. Support for Technological Upgradation:

Because of limited financial resources, MSMEs generally struggle to deploy latest technologies available for efficient manufacturing which results either a high cost product or a product which is lower in quality. To address this problem, under Credit Linked Capital Subsidy Scheme (CLCSS) Government provides 15% subsidy for additional investment up-to Rs. 1 Crore for technological upgradation in specified Sectors and products. This helps MSMEs induct state of the art technologies and improve their manufacturing processes and improve product quality and thus making them competitive. Under this scheme Entrepreneurs can get support on Lean Manufacturing Techniques, Design Expertise, ISO Certification and many others.

5. Assistance for Market Development:

Under MSME-MDA Scheme, assistance is provided to this sector by supporting the individual enterprises towards participation in International Trade Fairs by funding a portion of Air Fare, cost of publicity materials and others. They also have access to the various Trade Shows, Exhibitions, Seminars that the Government organizes, locally as well as internationally. Government also provides assistance with Sector Specific Studies, contesting Anti Dumping Cases and financial assistance for adopting International Standard Barcodes. Many other benefits such as Free Tender Documents, exemption from Earnest Money and Security Deposits are available for all Registered MSMEs. Reimbursement of ISO Certification Charges, Subsidy on Patent Registrations are some of the many other benefits that are available for Entrepreneurs in this sector which they can exploit to make a high quality and competitive product.

For India to see exponential economic growth, these MSMEs need to grow and convert into Large Companies in next few years. In one of the reports, Mckinsey states that there is a huge productivity gap between MSME Sector and Large Industries. Even though MSME Sector is growing at 18% Y-o-Y, almost 99% are Micro Enterprises. The conversion of Industries in MSME Sector into Large Corporations, in fact even from Micro to Medium Scale Industries, is low in India and this is a big concern area as productivity suffers and with that growth takes a hit. There are several reasons for it which I will cover in my next blog. 

If you wish to to know more about the advantages and benefits available for MSME Sector and wish to discuss the subject further, you can connect with me by emailing directly at NewSkills4NewWorld@gmail.com

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