Micro, small and medium enterprises (MSMEs) play a significant role in inclusive growth of Indian economy. Comment.

 Micro, small and medium enterprises (MSMEs) play a significant role in inclusive growth of Indian economy. Comment.
• Introduce with the important role of MSMEs in the growth of Indian economy
• Explain how MSMEs play an important role in inclusive growth in India
• Conclude appropriately

Model Answer :

Micro, small and medium enterprises (MSMEs) sector occupies a position of strategic importance in Indian economy. Nearly 90 percent of the industrial units belong to this sector, employing 40 percent of India’s workforce. In 2014/15, MSMEs accounted for just over 30 percent of the GDP. Not only that, MSMEs are instruments of inclusive growth which touch upon the lives of the most vulnerable and marginalized.

MSME role in inclusive growth:

  • Employment – It is labour intensive and creates more employment per unit of capital employed. For many families, it is the only source of livelihood.
  • Equality – The income generated in a large number of small enterprises is dispersed more widely in the community than income generated in few large enterprises. The relation between workers and the employers are more harmonious in small enterprises, thereby giving a sense of ownership to the workers.
  • Tapping Latent Resources – Small enterprises are able to tap latent resources like entrepreneurial ability and hoarded wealth. It also encourages growth of a class of small entrepreneurs which introduces a dynamic element in the economy.
  • Decentralization – It promotes regional dispersal of industries in comparison to the large industries, which are mostly concentrated in cities.

The principle of self-employment is at least as important to a successful democracy as that of self-government. Thus, instead of taking a welfare approach, this sector seeks to empower people to break the cycle of poverty and deprivation. It focuses on people’s skills and agency and plays an important role in inclusive development.

Way forward:

However, besides facing several infrastructural deficiencies and challenges like flow of institutional credit and inadequate market linkages, this sector also suffers from caste and gender dynamics. It makes the situation vulnerable for women, children and people from lower castes. We need to overcome these challenges so as to realise the full potential of MSME in inclusive development of the country.

Subjects : Yojna summary