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Q1. Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. (Answer in 150 words) 10

 

 

Introduction

 

Micro, Small and medium enterprises (MSME) termed as “engines of growth “for India, have played a prominent role in the development of the country in terms of creating employment opportunities. The MSME sector in India contributes around 30% to the country’s GDP. The MSME sector also contributes:

  • Over 40% of India’s exports
  • 45% to manufacturing
  • 110 million job opportunities (2nd largest employer after agriculture)

 

 

Body:

 

The connection between faster economic growth, manufacturing, and MSMEs; –

  • Employment generation; – Since the enterprises falling in this sector require low capital to start the business, it creates huge employment opportunities for many unemployed youths.
  • Economic stability in terms of Growth and leverage Exports: Micro, small and medium Enterprises (MSMEs) are the growth accelerators of the Indian economy, contributing significantly to the country’s gross domestic product (GDP).
  • Reducing regional imbalance: it helps in the industrialization of rural & backward areas, thereby, reducing regional imbalances, and assuring a more equitable distribution of national income and wealth.
  • Complementary to large industries as ancillary units: MNCs today are buying semi-finished, and auxiliary products from small enterprises, for example, buying clutches, and brakes by automobile companies.
  • Innovation: MSMEs promote innovation by providing an opportunity for budding entrepreneurs to help them build creative products hey and thereby boost competition in business and fuel growth.

 

Present policies of the Government to boost the manufacturing sector:

  • Make in India Initiative: The Government of India launched the “Make in India” campaign to boost manufacturing. This initiative aims to promote domestic manufacturing across various sectors and encourage foreign direct investment (FDI).
    • g. recent ban on Laptop imports to promote laptop manufacturing in India.
  • Ease of doing business: Initiatives such as the implementation of the Goods and Services Tax (GST), Insolvency and Bankruptcy Code (IBC) and digital platforms like the Single Window Interface for Facilitating Trade (SWIFT) have streamlined processes, making it easier for MSMEs to operate.
  • Infrastructure development: The government has initiated infrastructure development projects such as the Bharatmala and Sagarmala programs, which focus on road and port connectivity.
    • Also, the development of various industrial corridors like the Delhi-Mumbai Industrial Corridor (DMIC).
  • Policies such as the Production-Linked Incentive (PLI) scheme for various sectors, including electronics and pharmaceuticals, attract global manufacturers to set up production units in India.
  • Raising and Accelerating MSME Performance (RAMP) program: launched in 2023-24, this initiative has a budget allocation of Rs. 6,000 crores and aims to offer both financial and technical assistance to MSMEs.
    • Its primary goal is to enhance the quality, technology adoption, innovation capabilities, and market reach of these enterprises.
  • Export promotion: Promoting the engagement of MSMEs in global trade through the provision of export incentives and simplification of export-related procedures.
    • For instance, facilitating duty-free import of capital goods for export production via schemes like the Export Promotion Capital Goods (EPCG)

Way forward:

  • Access to credit: The Government of India and banks should design plans and measures to widen easy, hassle-free access to credit. E.g. The establishment of the MUDRA (Micro Units Development & Refinance Agency Ltd.) bank
  • Regulatory reforms: The RBI should bring stringent norms for Non-Performing Assets (NPA) and it will help curb loan defaulters and motivate potential good debts.
  • Promoting Research and Development: There should be proper research and development in respect of innovative methods of production and service rendering.
  • Public procurement: The government should encourage procurement programmes, credit and performance ratings and extensive marketing support to revive the growth of sick units.
  • Human capital: Skill development and imparting training to MSME workers is a crucial step to increase the productivity of the sector.

 

Conclusion

 

The MSME sector is the backbone of the Indian economic structure and has a very important role in buffering it from global economic shocks and adversities. It is imperative to recognise and give impetus to these home-grown businesses and enterprises.