MSME sector contributes “nearly one-third to India’s GDP” and is a “key pillar” of growth. However, the share of manufacturing in GDP has remained stagnant at 17% since the last 3 decades.
Importance of increasing the manufacturing share (especially MSMEs)
Strong employment multiplier: MMSME employes over 20Cr people
Better capital-output ratio than large heavy industries.
Inclusive industrialisation: Eg- 20% are MSMEs are owned by women
Global value-chain linkages: MSMEs account for 45.7% of India’s total exports
Structural transformation: A higher manufacturing share signals shift towards higher-productivity sectors.
Present policies of government to boost MSME manufacturing
Improve infrastructure and logistics – Gati Shakti Program, National Logistics Policy
Production Linked Incentive (PLI) Scheme to attract investment and boost domestic manufacturing.
Ease of doing business through labour reforms. Eg- 4 labour courts
Over 2.5 lakh MSMEs onboarded on GeM for direct government procurement.
MSME SAMADHAAN portal for grievance redressal related to delayed payments.
Udyam Registration system to access government benefits and schemes.
Issues
Missing middle problem – 95% Micro Businesses
Slow to transition to advanced technology. (Ficci-Mckinsey Report)
Infrastructure Deficiencies –
Multimodal connectivity gaps.
Power outages, weak water supply, and poor transport networks.
Regulatory & Policy Bottlenecks
Land acquisition delays
Manufacturing MSMEs face 1,450+ compliances annually
High compliance cost per MSME
Limited Access to Finance (only 14% out of 64 million)
Recommendations of UK Sinha Committee must be implemented to make India the global manufacturing hub