MSME: Why micro enterprises are to be a separate sector?

Micro, Small and Medium Enterprises (MSMEs) form a crucial part of the Indian economy. As per the latest data, there are 63 million MSMEs in India contributing around 30% to India’s GDP, nearly 50% of the country's exports and around 120 million jobs across the nation. It is a well-known fact that despite the sector's significance, the MSME sector faces many challenges.

Particularly these challenges are more acute for micro enterprises which constitute 99% of the MSME sector. Hence, experts & economists feel it is high time micro industries have a separate sector enabling tailored policies, regulatory support and other initiatives from both union and state governments.

According to a Government notification the following criteria applies for classification of micro, small and medium enterprises:

A micro enterprise - investment in Plant and Machinery or Equipment does not exceed Rs one crore and turnover does not exceed Rs five crore; a small enterprise - investment in Plant and Machinery or Equipment does not exceed Rs ten crore and turnover does not exceed Rs fifty crore rupees; a medium enterprise - investment in Plant and Machinery or Equipment does not exceed Rs. 50 crores and turnover does not exceed Rs. 250 crores.

The above shows micro industries that have less than Rs. 5 crores in turnover, however, over half of micro industries have less than Rs. 50 lakhs turnover with just 2-3 workers, often family members. These types of enterprises must have unique policies and regulations that do not equate them to industries with multi-crore business. The challenges faced vary a lot between them. The scale of operations, resource constraints, and growth potential of micro enterprises differ significantly from small and medium enterprises mandating tailored support that addresses their specific requirements. Hence the need for a separate sector for micro industries.

The MSME parliamentary panel has suggested establishing a separate division for micro-enterprises within the MSME ministry which is a welcome development. This division is to focus on the unique needs required by micro-enterprises & enabling them to access specialised support and services. The panel emphasised the need for targeted support and policies to help micro enterprises grow and eventual transition into small and medium enterprises, contributing to the overall strengthening of the MSME sector.

In this regard, the proposed division shall facilitate:

Access to formal credit, technology, marketing, etc.; improve ease of doing business; assist in effective participation of government schemes; special support to women owned enterprises; targeted initiatives for further sub-categories like manufacturers, ancillary units, exporters, service providers, etc.; increased formalization like Udyam Registration (over 90% of MSMEs are in the informal category) and other similar customized support and services.

The micro-enterprises sector with tailored support can be a crucial segment in the country's socio-economic development.