Share of MSME In Manufacturing Output Stands At 35.4 Per Cent: Economic Survey

Production linked incentive (PLI) Scheme for 14 key sectors gives fillip to MSMEs, states would be encouraged to set up unity mall to promote one district one product (ODOP), says the Economic Survey 2024 tabled by the Union Minister of Finance and Corporate Affairs Nirmala Sitharaman in Parliament today

The Gross Value Added (GVA) per worker increased from ₹,38,207 to ₹1,41,769 and Gross Value of Output (GVO) per establishment increased from ₹3,98,304 to ₹4,63,389 as on July 5, 2024, says the Economic Survey 2024. The Survey shows increased productivity and labour efficiency. The Survey, tabled in the Parliament ahead of Union Budget to be presented very next day, highlights the success of the Udyam Registration portal that has received 4.69 Crore registrations as of 5 July, 2024, playing an instrumental role in formalizing MSMEs by providing a simple, online, and free registration process based on self-declaration.

The Survey mentions that MSMEs are the backbone of the Indian economy, contributing approximately 30 per cent of the country’s GDP, 45 per cent of manufacturing output, and providing employment to 11 crore of India’s population. It notes that there has been significant growth between Financial Year (FY) 2019-20 to FY2023-24 in the amount and number of guarantees for MSMEs with Union Budget 2023-24 allocating ₹9,000 Crore to the Credit Guarantee Fund Trust, aiming to enable an additional ₹2 Lakh Crore in credit with reduced costs.

PLI A Great Success

According to Survey, keeping in view India’s vision of becoming ‘Aatmanirbhar’, Production Linked Incentive (PLI) Schemes for 14 key sectors were announced with an outlay of ₹1.97 Lakh Crore to enhance India’s manufacturing capabilities and exports. Further survey states that over ₹1.28 Lakh Crore of investment was reported until May 2024, which has led to production/sales of ₹10.8 Lakh Crore and employment generation (direct & indirect) of over 8.5 Lakh. Survey states export boosted by ₹4 Lakh Crore, with significant contributions from sectors such as large-scale electronics manufacturing, pharmaceuticals, food processing, and telecom & networking products.

Survey highlights, to give an impetus to the One District One Product (ODOP) initiative, the Union Budget of FY2023-24 announced that states would be encouraged to set up a “Unity Mall” in their capitals or most prominent tourism centre or the financial capital for the promotion and sale of their ODOPs. Survey also states that “PM-Ekta Malls” aims to link the artisans of ODOP and consumers. Survey states that these malls are creating a vibrant marketplace for the nation’s unique products, aiming at both domestic and foreign markets.

ODOP Sampark Brings Changes

In addition to this survey ‘ODOP Sampark’ workshops were conducted in 15 States to facilitate collaboration between the Centre and local sellers and revive indigenous industries. According to the survey, ODOP showcased India to the world at the G20 events organised across the country during India’s G20 Presidency, where the artisans, sellers and weavers got visibility on the global stage.

Reacting on the Economic Survey outcomes, Chairman, Indian Small Business and Franchise Asociation (IFSA), Gaurav Marya said, “We are optimistic that Finance Minister will recognize the contribution of MSME sector of India. In recent years, MSMEs have been finding loans less accessible and expensive. MSME industry would be benefitted by  increase in the limits of loan under MUDRA Yojana, as well as in credit guarantee cover for unsecured loans. Current limit of loan for MSMEs under Pradhan Mantri MUDRA Yojana is Rs 10 lakh which the industry is expecting to be doubled to Rs 20 lakh. Similarly the sector would benefit if  Finance Minister could increase credit guarantee cover by Rs 3 Crore  for unsecured loans to the MSME sector and take it to Rs 5 Crore from Rs 2 Crore at present. ISFA strongly feels that such changes would help MSMEs to maintain their cash flow at crucial times and unburden themselves from loans available through other sources which have very high and unrealistic rates of interest."

"For Bharat's journey to become a 5 trillion US$ economy ,will be marked by digital advancements and Ease of doing business specially for MSME sector, and a robust trade ecosystem. A special Package for skill development & technology up-gradation for MSME’s is the order for the day but here MSME owners are crippled by both capital and knowledge. Incentivising the MSME to adopt technological practices and shift towards digital will be better for the economy in the long run. Launch of New Schemes ,tax incentives, regulatory clarity, and promoting financial literacy will empower MSME's . Additionally, ensuring sustainable growth through environmental, social, and governance (ESG) investments can further strengthen the sector,” he added.

Deregulation of MSME Sector Crucial

The Survey also says that bridging the credit gap for MSMEs remains a crucial element. At the same time, the focus also needs to be on deregulation, enhancing physical and digital connectivity, and putting in place an export strategy that enables MSMEs to broaden their market exposure and scale up.

Noting that the MSME sector occupies the centrestage in India’s economic story, the Survey says the sector continues to face extensive regulation and compliance requirements and faces significant bottlenecks with access to affordable and timely funding being one of the core concerns. It says Licensing, Inspection, and Compliance requirements that MSMEs have to deal with, imposed particularly by sub-national governments, hold them back from growing to their potential and being job creators of substance. The Survey says threshold-based concessions and exemptions create the unintended effect of incentivising enterprises to cap their sizes below the thresholds and therefore, calls that threshold-based incentives must have sunset clauses.

Calling for deregulation as a vital policy contribution, the Survey says revival or creation of institutional mechanisms for dialogue with states on required policy changes is essential. It adds that much of the action has to happen at the level of sub-national (state and local) governments. MSME entrepreneurs also need training in critical areas of enterprise management, such as human resource management, financial management, and technology. The productivity of owner-entrepreneurs unleashed by such training will be immense, says the survey.

It says the Government of India has been proactive in boosting the growth of the MSME sector, through initiatives such as the allocation of 5 lakh crore Emergency Credit Line Guarantee Scheme for businesses, including MSMEs; equity infusion of 50,000 crore through the MSME Self-Reliant India Fund; New revised criteria for the classification of MSMEs; rollout of Raising and Accelerating MSME Performance programme with an outlay of 6,000 crores over 5 years; Launch of Udyam Assist Platform on 11.01.2023 to bring the Informal Micro Enterprises under the formal ambit for availing the benefit under Priority Sector Lending. The Survey says these initiatives have been formulated keeping in mind the key challenges the sector faces, primarily for access to timely and affordable credit.