- *Dr. S. Vijay Kumar
Micro, Small and Medium Enterprises
have been accepted as the engine of economic growth and for promoting equitable development all over
the world, especially in India in view of second highly populated country in
the world. Micro and small scale enterprises
have existed in rural India since ages in the form of traditional skills.
Recently, rural entrepreneurship has emerged as a dynamic concept. There is lot of scope for rural entrepreneurship in SMEs
(Small and Medium Enterprises) sector economy which plays a vital role in
providing employment and income for the poor and unemployed in rural areas. As
the population grows there will be pressure on land and the growth in the
agricultural production cannot absorb the ever increasing rural labor force in
agricultural employment. This leaves the rural non-farm sector in the form of
rural SMEs to absorb those released from agriculture but not absorbed in the
urban industries. The scope of
rural industries is considered basically a question of properly
utilizing the unexploited natural and human resources and tapping vast material
existing in the countryside. The features of rural industrialization are low
investment of capital, labour intensity and use of simple technology by
employing local human and material resources. Thus, a judicious mix of local
manpower with the local resource is necessary to bring about a viable
development in these areas. In
the era of globalization, entrepreneurship development in the rural
context is a challenge. According to 2011 Census 68.84% people are living in
rural areas of India. People in rural
areas suffer with unemployment, poor infrastructure facilities which may be
solved with the development of the rural entrepreneurs. “Rural
Entrepreneurship can be defined as entrepreneurship
emerging at village level which can take place in a variety of
fields of endeavor such as business, industry, agriculture and acts as a potent
factor for economic development”. But,
these rural entrepreneurs are suffering with various problems like fear of
risk, lack of finance, illiteracy, and competition from the urban
entrepreneurs. Rural entrepreneurs increase the standard of living and
purchasing power of the people by offering employment opportunity to the people
in villages. This paper is an attempt to understand the problems and
challenges of rural entrepreneurship in the context of rural development in
India and possible suggestions are
given to overcome the problems.
The
MSME became operational on October 02, 2006. As per MSME Act-2006, MSMEs are classified into two
categories. They are:
1. Manufacturing
Enterprises-The enterprises engaged
in the manufacture or production of goods (as per Development and regulation)
Act, 1951 or employing plant and machinery in the process of value addition to
the final product having a distinct name or character or use.
2.
Service Enterprises:-The enterprises
engaged in providing or rendering of services and are defined in terms of
investment in equipment.
Head & Professor (Associate) of
Economics (Retd.), Kakatiya Government (UG&PG) College (NAAC “A” Grade),
Hanamkonda, Warangal District (Telangana State). Ex - Member Board of Studies,
Kakatiya University, Warangal – 506 009 (India).
In February, 2018, the Union Cabinet chaired by
the Prime Minister Shri Narendra Modi has approved changes in the definition of
the MSMEs. Now, MSMEs will be defined on the basis of ‘annual turnover’
instead of earlier definition of investment in plant & machinery/equipment.
It is expected that the changes made in the definition of the MSMEs will
enhance the ease of doing business and very soon the contribution of
manufacturing sector in the Indian GDP will touch to 25 percent. The revised classification of MSMEs is based
on turnover has made it easier for both the government and industries to
recognize a business as an MSME. The following table reveals the new definition
of the MSMEs in India:
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Goods & Services
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Micro Enterprises
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Annual turnover is less than Rs.5 Crores.
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Small Enterprises
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Annual turnover is between Rs. 5 Crores to Rs. 75 Crores.
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Medium Enterprises
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Annual turnover is between Rs. 75 Crores to Rs. 250 Crores.
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2019-20 Budget
Highlights for MSMEs:
1. An all-time high allocation of Rs.7011.29
crore has been made in the Budget of 2019-20.
2. The flagship scheme for employment generation
of the Ministry, namely Prime Minister Employment Generation Programme (PMEGP)
got an all-time high allocation of Rs.2327 crore. This reiterates Government’s
focus on creation of sustainable employment in the non-farm micro enterprise
sector.
3. For ensuring seamless credit guarantee to
Micro and Small enterprises, Rs.597 crore has been provided under the Credit
Support Programme.
4. To provide funding for the 2% interest rebate
on incremental loan up to Rs.1 Crore for GST-registered MSME units, Rs. 350
crore has been provided under ‘Interest Subvention Scheme for Incremental
Credit to MSMEs’.
5. Under the recent announcements made on 2nd November
2018, encompassing multiple initiatives and interventions for the MSME sector,
20 large and 100 small Technology Centres are going to be set up with a support
of Rs.6000 Crore. This Budget has made allocation for this initiative.
6. For setting up clusters in the manufacturing
and artisan sectors, Rs.450 crore has been allocated. Allocation under National
SCST-Hub has been increased substantially.
7. Mission Solar Charkha has been launched in the
current financial year, for which Rs.143 crore has been allocated under the BE
2019-20. The scheme envisages setting up production clusters, each employing
2000 youth in the rural area, at least 50% of which would be women.
8. “Make in India”, with
particular emphasis on Micro, Small and Medium Enterprises, is one of the major
focus areas of the Union Budget this year.
9. For the MSME sector, Rs 350 crore
has been allocated for FY 2019-20 under the Interest Subvention Scheme, for 2%
interest subvention for all GST registered MSMEs, on fresh or incremental
loans.
10. Lower rate of 25 % Corporate
Tax extended to companies with annual turnover up to Rs 400 crore from earlier
cap of up to Rs 250 crore.
11. Under the Scheme of Fund for Up
gradation and Regeneration of Traditional Industries’ (SFURTI) 100 new clusters
will be set up during 2019-20 enabling 50,000 artisans to join the economic
value chain. Focused sectors are Bamboo,
Honey and Khadi clusters.
12. The Scheme for Promotion of
Innovation, Rural Industry and Entrepreneurship’ (ASPIRE) would be consolidated
for setting up of 80 Livelihood Business Incubators (LBIs) and 20 Technology
Business Incubators (TBIs)in 2019-20 to develop 75,000 skilled entrepreneurs in
agro-rural industry sectors.
Role of MSMEs in India’s Rural Economic
Development: The scope of
rural industries is considered basically a question of properly
utilizing the unexploited natural and human resources and tapping vast material
existing in the countryside. The features of rural industrialization are low
investment of capital, labour intensity and use of simple technology by
employing local human and material resources. Thus, a judicious mix of local
manpower with the local resource is necessary to bring about a viable
development in these areas. MSME
are the backbone, vibrant and dynamic sector of the Indian economy. The
estimated contribution of MSME sector (including service segment) to GDP during 2010-11, 2011-12 & 2012-13 are 36.69
per cent, 37.97 per cent and 37.54 per cent respectively. Based on the export
data maintained by Director General of Commercial Intelligence &
Statistics, Ministry of Commerce about the
share of MSMEs in India’s total export, for the year 2012-13, 2013-14 and
2014-15, has been estimated as 43.00 per cent, 42.38 per cent and 44.70 per
cent respectively. According to the assessments of the Ministry of MSME, Government
of India, the sector generates around 100 million jobs through over 46 million
units situated throughout the country
and contributes to 45% of India’s total
industrial employment, 45% of India’s total exports and 95% of all industrial
units of the country and more than 6000 types of products are manufactured in
these industries (As per msme.gov.in). MSMEs contribute around 6.11% of the
manufacturing GDP and 24.63% of the GDP from service activities. MSME sector
has consistently growing at the
average rate of 10% annually. The contribution of this sector to
the country's Gross Domestic Product is about 8%. A study done by the
Confederation of Indian Industries (CII) on the Indian MSMEs ministry reveals
that the MSME's contribution will be around 50% in the India's GDP by 2025.
Many units of MSMEs are located in rural areas, which are checking the
migration from rural areas to urban areas. MSMEs are transforming into a new business
environment characterized by the emergence of national and global supply chains
where they share a symbiotic relationship with hefty corporations.
Factors which led to
growth of MSMEs:
Campaigns like
Skill India, Startup India, Digital India and Make in India aim to provide MSME
players with a level playing field and a definitive push towards enhanced
productivity.
Digitization: Increasing internet penetration, customer’s
familiarization with digital payments fuelled by B2C ecommerce players
facilitate MSME sector growth.
Tie-ups
with new-age non-banking finance (Fin. Tech) companies allowed
access to timely collateral free finance to MSMEs.
Changing employment patterns: Younger generation shifting from agriculture towards
entrepreneurial activities creating job prospects for others.
Advantages of MSMEs:
Inclusive growth: MSMEs promote inclusive growth by
providing employment opportunities in rural areas especially to people
belonging to weaker sections of the society.
Financial inclusion: Small industries and retail businesses in tier-II and
tier-III cities create opportunities for people to use banking services and
products.
Promote innovation: It provides opportunity for budding entrepreneurs to build
creative products boosting business competition and fuels growth.
Boosting Economic Growth and Development: MSMEs are boosting
economic growth and development at regional, national and global levels. With
its dexterity and dynamism, the sector has shown venerable innovativeness and
malleability to survive economic shocks, even of the gravest nature.
Maximum Opportunities
for both Self-employment and Wage-employment: Indian MSME sector offers maximum
opportunities for both self-employment and wage-employment outside the
agricultural sector and contributes in constructing an inclusive and
sustainable society in numerous ways through making of non-farm livelihood at
meager cost, balanced regional development, gender and social balance,
environmentally sustainable development etc. As MSMEs are usually
labour-intensive, they have the ability to create more jobs. Further, in view
of the on-going implications of climate change, it is necessary that the MSME sector
is prepared to absorb millions who may be rendered unemployed in the
agriculture sector. Many more rewarding opportunities can be tapped by Indian
MSMEs in the foundry industry, electronics industry, chemicals, leather,
textiles, agro and food processing, pharmaceuticals, transport and tourism
industries, etc. The globalization of industries has gradually drawn SMEs into
global value chains through diverse types of cross-border activities.
MSMEs in India is of
diversity: MSME sector in India
claims diversity in terms of its size, level of technology employed, range of
products and services provided and target markets. MSMEs have been credited to
provide at least ten components that were used in India’s Mangalyaan (Mars
Orbiter Mission probe) and in ISRO’s most ambitious mission like Chandrayaan I
& II.
Decentralized Industrial
Development, Better Distribution of Wealth and Investment: MSMEs expansion,
especially in rural play imperative role in the economic expansion of the
country and results in decentralized industrial development, better
distribution of wealth and investment.
Reduction of Poverty and Unemployment: Most of the MSMEs are of labour intensive and creates large scale
employment opportunities for the rural people. MSMEs provides a solution to the
growing problem of large-scale unemployment and underemployment of rural India.
Through rural entrepreneurship development programme, unemployed people can opt
for self-employment. In this respect, several programmes like National Rural
Employment Programme (NREP), Integrated Rural Development Programme (IRDP),
etc. are in operation in India to help the potential entrepreneurs.
Check
on migration of rural population: Rural population moves towards urban for
various reasons like income generation, searching good job, utilize various
facilities etc. MSMEs will bring in or develop infrastructural facilities like
roads, power, bridges etc. It reduces the gaps and disparities in income
between rural and urban areas. Rural MSMEs can avoid the migration of people
from rural to urban areas in search of jobs.
Formation
of Capital: MSMEs by placing profitable business
proposition attract investment to ensure private participation in the
industrialization process. The otherwise idle savings are channelized for
investment in business ventures which in turn provides return. Again the
savings are invested giving a multiplier effect to the process of capital
formation.
Balanced
regional development: MSMEs in rural areas controls
the concentration of industry in urban areas by setting small scale units in
remote areas, successful entrepreneurship development programmes can help in
achieving balanced regional development.
Promotion
of artistic activities: Rural industries also help protect and promote the
art and handicrafts, i.e. the age-old rich heritage of the country.
Check
on social evils: The
growth of MSMEs in rural areas reduces the social evils like poverty, social
tensions, atmospheric pollution, the growth of slums and ignorance of
inhabitants etc.
Awaken
the rural youth: MSMEs in rural areas encourages young and
promising entrepreneurs to develop and carry out entrepreneurial activities in
the rural sector.
Improves
standard of living: MSMEs
in rural will also increase the literacy rate of rural people. Their education
and self-employment will prosper the community, thus improving their standard
of living.
Proper
utilization of local resources: MSMEs in rural will help in the maximum utilization of local
resources like raw materials and labour for productive purposes and thus
increase productivity. Efficient and effective use of limited resources by the
entrepreneurs leads to overall economic development of an area.
Improvement
in per capita income: MSMEs generates more output, employment and wealth
by exploiting new opportunities, thereby helping to improve the per capita
income of rural people.
General
Employment: MSMEs
are not the job seekers but job creators
and job providers. With the globalization process the government jobs are
shrinking leaving many unemployed. In the circumstances, the entrepreneurs and
their enterprises are the only hope and source of direct and indirect
employment generation. Employment is generated directly by the requirement of
the large enterprises and indirectly by ancilliariation and consequential
development activities.
National
Self-reliance: They
are the corner stores of national self-reliance. They help to manufacture
indigenous substitutes to imported products which reduce the dependence on
foreign countries. There is also a possibility of exporting goods and services
to earn foreign exchange for the country. Hence, the import substitution and
export promotion ensure economic independence and the country becomes
self-reliance.
Planned
Production: MSMEs
are considered as economic agents since they unite all means of production. All
the factors of production i.e., land, labour, Capital and enterprise are
brought together to get the desired production. This will help to make use all
the factors of production with proper judgment, perseverance and knowledge of
the world of business. The least combination of factors is possible avoiding
unnecessary wastages of resources.
Promote prosperity: Improvements in local productivity
can promote prosperity.
Earnings
of foreign exchange: MSMEs
plays significant role in increasing the foreign exchange earnings of the
country through export of their produce.
Challenges of
MSMEs: Fiscal discipline, Support from Government
Departments, Capital, Modern technology, Market Strategy, Skilled labour,
Regulatory burden and Annual filings etc.
Problems of
MSMEs: Lack of adequate capital and timely finance. Non-availability of
suitable technology. Competition from MNCs. Low production capacity. Ineffective
marketing strategy. Constraints on modernization & expansions. Inferior
quality impact export competitiveness. Cumbersome government procedures and
rules for establishing new units. Bureaucratic delays in getting clearances.
Poor litigation system in the country. Non availability of skilled labour at
affordable cost. Lack of training and skill development
programmes. Complex labor laws and
red-tapism. Poor infrastructure. Access
to modern technology. Getting statutory clearances related to power, environment,
labour etc. Problem of quality raw material. Use of traditional machines
results in low productivity. Under-utilization of
installed capacities. Technological obsolescence. Lack of organized market channels. Imperfect
knowledge of market conditions. Unorganized nature of operations. Deficient
managerial and technical skills. Government schemes to
promote MSMEs
- Udyami Mitra Portal : launched
by SIDBI to improve accessibility of credit and handholding services to
MSMEs.
- MSME Sambandh : To monitor
the implementation of the public procurement from MSMEs by Central Public
Sector Enterprises.
- MSME Samadhaan -MSME
Delayed Payment Portal –– will empower Micro and Small entrepreneurs
across the country to directly register their cases relating to delayed
payments by Central Ministries/Departments/CPSEs/State Governments.
- Digital MSME Scheme : It
involves usage of Cloud Computing where MSMEs use the internet to access
common as well as tailor-made IT infrastructure
- Prime Minister Employment Generation Programme : It
is a credit linked subsidy program under Ministry of MSME.
- Revamped Scheme of Fund for Regeneration Of
Traditional Industries (SFURTI) : organizes
traditional industries and artisans into clusters and make them
competitive by enhancing their marketability & equipping them with
improved skills.
- A Scheme for Promoting Innovation, Rural Industry
& Entrepreneurship (ASPIRE) : creates new jobs
& reduce unemployment, promotes entrepreneurship culture, facilitates
innovative business solution etc.
- National Manufacturing Competitiveness Programme
(NMCP) :
to develop global competitiveness among Indian MSMEs by improving their
processes, designs, technology and market access.
- Micro & Small Enterprises Cluster Development
Programme (MSE-CDP) - adopts cluster development
approach for enhancing the productivity and competitiveness as well as
capacity building of MSMEs.
- Credit Linked Capital Subsidy Scheme (CLCSS) is
operational for upgradation of technology for MSMEs.
Other
recent initiatives to promote MSMEs:
- In June
2019, RBI committee headed by former SEBI
Chairman UK Sinha suggested a Rs 5,000 crore
stressed asset fund for the MSME sector to provide relief to
small businesses hurt by demonetization, GST, and
an ongoing liquidity crisis.
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It has also recommended doubling the cap on
collateral-free loans to Rs 20 lakh from the current Rs 10 lakh
extended to borrowers falling under the Mudra scheme, self-help groups, and
MSMEs.
- MSME
Ministry announced in June 2019 to lift the ban on entry of corporates
and private players in the MSME sector to pave way for the
formation of 700 clusters to reduce dependence
on imports as well as for job creation.
- MSME Ministry
is also planning to set up enterprise facilitation centres across
the country to make smaller businesses more competitive and help them
integrate with big enterprises.
Therefore,
the government should continue to put concerted efforts for holistic development
of MSMEs in key areas like human capacity development, knowledge
services, access to finance, technology, infrastructure, market access, and
ease of doing business.
International Experiences:
- According
to World Bank, formal SMEs contribute up to 60% of total employment and up
to 40% of national income (GDP) in emerging economies.
- 600 million
jobs will be needed in the next 15 years to absorb the growing global
workforce, mainly in Asia and Sub-Saharan Africa. In emerging markets,
most formal jobs are generated by SMEs, which also create 4 out of 5 new
positions.
- However,
access to credit remains a major problem to the MSME sector globally.
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In globalised world,
it is imperative to enable MSMEs to adapt and thrive in a more open environment
and participate more actively in the digital transformation, to boost economic
growth and deliver a more inclusive globalization.
Way Forward:
·
Today enterprises need to adopt best practices and follow
international standards to go forward for offering innovative solutions.
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Focus should be on transfer of information and skill development
to effectively use the transferred technology.
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There is an urgent need to upgrade infrastructure utilities
(like water, power supply, road/rail) for any enterprise to run its operations
successfully.
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Entrepreneurs need to develop quality conscious mindsets
embedded in the organisational culture.
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Sensitization and handholding of MSMEs at different and upgraded
level of certification is the need of the hour.
Finally,
as recommended by India MSME Report 2018, we need an
entitlement approach that can have the potential of compelling all related
stakeholders to work on a common national agenda and solutions under a
scientifically structured framework. This approach demands the identification
and analysis of major security threats to the MSMEs, and entrepreneurship at
the grass root level.
Solutions:
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Utilization of limited resources (Human &
Economic) in optimum manner.
·
Need to be educated and informed about the
latest developments taking place globally.
·
Acquire necessary
skills to keep pace with the global developments.
·
Grab the market
opportunities and various key strategies need to be adopted to promote and
support the MSMEs.
·
Appropriate
technologies for the MSME sector
should be developed and made available to them.
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Technological
advancement and guidance
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Panel
of experts and consultants should be prepared
to help MSMEs.
·
There
should be detailed surveys to assess the
technical and financial needs of the
MSME.
·
Training and development, awareness programs should
be provided to MSMEs.
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Sufficient credit facility should be made available.
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Relaxation in labor laws and eradication of red
tapism.
·
Proper Research and Development should be developed
for innovative
method of production, service rendering
and marketing.
Conclusion: MSMEs plays a vital
role in the economic development of India, particularly in the rural economy.
It helps in generating employment opportunities in the rural areas with low
capital, raising the real income of the people, contributing to the development
of agriculture by reducing disguised unemployment, reducing poverty, migration,
economic disparity, unemployment. Government should go for periodical appraisal
of MSMEs development schemes and programmes in order to uplift rural areas.
MSMEs finds it difficult to take off is due to lack of capital, risk taking and
innovation. They are the way of converting developing country into developed
nation. Promotion of MSMEs are extremely important in the context of producing
gainful employment and reducing the widening disparities between the rural and
urban. MSME’s provide self dependency and it is the only way to solve the
problem of unemployment in a populous country like India. MSME’s are boon for reducing
regional imbalances and a means to
utilize the natural and abundant human
resources available in India.
