Why Exclusive Emphasis on Manufacturing Firms in MSME Sector is Imperative to Transform Indian Economy

MSME manufacturing firms have been imperative to the growth of the Indian economy. These small to medium-sized ventures have always contributed largely to the country’s GDP, hence contributing to different aspects of its development. 

The Indian MSME sector contributes to about 29 percent of the GDP through its national and international trade. As per the MSME Ministry data, as of May 16, 2021, India has approximately 6.3 crore MSMEs (including both service and manufacturing firms). It is to be noted that this sector still has a lot of unexplored territories for growth. It won’t be wrong to say that with so much growth potential, emphasizing the development of MSME manufacturing firms can work as a long-term development tool for India.

Low Capita Requirements 

One of the plus points of the MSME manufacturing units is their low capital-intensive setups. These organizational units work with the manpower and raw material which are easily available in particular geographical regions. Such setups can also absorb semi-skilled and unskilled graduates into their workforce. Thus, solving the issues like unemployment, seasonal unemployment, and disguised unemployment for the youth of the country. In short MSME units operate on fewer business overheads.

Another edge that the MSME manufacturing businesses have over the other businesses is its fast output. With the ready availability of labor and a small managerial hierarchy, decisions can be taken and implemented faster than the organizational units with large structures. With optimal output in less time, it further reduces the cost of production. 

Increased Per Capita Income

The MSME manufacturing sectors which give livelihood to so many families are a driving factor for the per capita income of the country. With more MSMEs more and more households’ per capita income increases which leads to the general increase in the lifestyle and overall development in the economy. 

Especially in these uncertain times when the world has been hit by COVID- 19, India just like other countries would like to depend less and less on exports.  In such changing scenarios MSME manufacturing firms can prove to be the pillars of the changing economy. 

As per a study by the Centre for Civil Society, the manufacturing sector among MSMEs, which is a little larger than the services sector, constitutes 90 percent of the total industrial units that spread all over India. Only 55 percent of the total MSMEs units are located in urban areas rest 45 percent of the units are located in rural areas of states like Uttar Pradesh, Maharashtra, Tamil Nadu, West Bengal, etc. This leads to an equitable distribution of national income, poverty alleviation, and inclusive economic growth. Thus, growth in MSMEs can surely predict an increased GDP of the country. 

Digital and Entrepreneur Boom in the Country

All over the world, small and medium enterprises have always been considered the engines of growth. The advantage of bringing ahead the latent entrepreneur talent and providing an opportunity to different sectors of society is something that is key to only MSMEs. 

Also, the young entrepreneur talent of the country is keen on making digital deals. After major events such as demonetization and the current pandemic, there is a rise in digital transactions. According, to a survey by web hosting solutions provider, Bluehost, Indian Micro, Small and Medium Enterprises (MSMEs) are prioritizing payments digitally over cash. The survey further revealed that out of 400 MSMEs who participated in the survey, 72 percent transacted digitally as compared to 28 percent who chose cash.  

This is one such sphere that can help the youth channelize the country’s resources towards a common goal of growth.   

Infrastructure Development

The rise in demand for machinery and raw materials for setting up MSME units leads to not just the B2C trade but also the B2B trade. This leads to inter-industry trade generation too. 

More production by MSMEs will lead to more demand for manufacturing machinery. Which further requires large-scale industries for the production of machinery. Thus, helping the infrastructure grow. 

It won’t be wrong to say that focusing on the development of MSME manufacturing firms will not just help in the economic growth but will also accelerate the rate of its growth.