Boosting Business: Advantages of MSME Registration for Indian Enterprises

Heard of HCL Technologies, Serum Institute of India or Dr. Reddy’s Laboratories? All of these have one thing in common, they are all MSMEs. The Micro, Small and Medium Enterprises (MSME) sector is a booming industry with monetary improvement and innovation being the primary goals. With the rise in government initiatives, evolving customer possibilities and elevated right of entry to era and assets, registering as an MSME is exponentially beneficial. On World MSME Day, we are talking about the MSME industry in India, its impact on the economy, the benefits of registering your venture as one and the projected future.

Key Statistics we All should Know

The Government of India introduced the term Micro, Small and Medium Enterprise (MSME) in agreement with the MSMED (Micro, Small and Medium Enterprises Development) Act, 2006. 

• With over 63 million strong, MSMEs contribute around 30% to the GDP, constitute 48% of the exports, and provide livelihoods to more than 120 million people.
• The number of MSMEs in the country is expected to grow from 6.3 crore to ~ 7.5 crore in the coming times. The growth is projected at a CAGR (Compound Annual Growth Rate) of 2.5%. 
• As of March 2024, The number of MSMEs registered on the Udyam portal and the Udyam Assist Platform (UAP) has hit 4,00,42,875.
• In October 2023, the gross bank credit deployed to MSMEs under priority sector lending amounted to US$ 279.18 billion. This marked a 22.8% increase from the previous year and an 11.8% rise from September 2023, according to the latest RBI data on sectoral deployment.

MSME and Small Business Jobs Generation

The easiest way to classify enterprises is via the number of people employed. In the Indian economy, small businesses are the second largest employment providers. Less than 250 individuals are working in small and medium-sized enterprises. Less than 10 employees work for micro-enterprises, small businesses have a range of 10 to 49 employees and medium-sized businesses with a range of 50 to 249 employees. 250-plus people are employed by large enterprises. 

• Small companies also offer various opportunities in the rural and urban areas of the country. The Indian economy generally experiences unemployment and small firms have helped increase the employment chances for the people. 
• MSMEs created 120 million jobs across all industries in India.
• As of 02.08.2023, as per the Udyam Registration Portal, the total number of persons employed in MSMEs that were registered from 01.07.2020 to 01.08.2023 in India was 12,36,15,681.
• 96% of the industrial units belong to small companies in the Indian economy. The small companies account for 40% of the nation’s overall industrial production and 42% of all Indian exports. 
• In India, 7.56 lakh employment was created, home to 75,000 recognized start-ups, 12% cater to Information Technology services, 9% of the healthcare and life sciences, 7% to education, 5% to commercial and professional services and 5% to agriculture. 
• Over the last six years, there has been a 110% yearly increase in the creation of jobs.

Impact on the Indian Economy

Medium businesses, small companies and corporations are the spine of the Indian economy.

• MSMEs provide almost 45% of industrial output and 40% of exports.
• According to the Ministry of Commerce and Industry, the recent start-ups of around 10,000 were approved in 156 days in opposition to the initial 10,000 which got approved in 808 days. 
• Also, the Tier-2 and Tier-3 cities are said to account for 49% of the start-ups.
• The GDP is significantly raised by overall manufacturing output which contributes to 33.4% and manufacturing itself sums to 6.11%. 
• The share of MSME Gross Value Added (GVA) in All India Gross Domestic Product (GDP) is around 30%.
• The share of MSME manufacturing output in All India manufacturing output is around 36%. 
• The share of MSME-related product exports in All India exports is around 45%.

Government Policies and Schemes for MSMEs

The MSME term, initiated and run by the Ministry of MSME, refers to bodies engaged in the manufacturing, production, processing, and preservation of goods and commodities.

MSME Ministry heads five statutory bodies; KVIC, Coir Board, NSIC, NI-MSME and the MGIRI.

• Pradhan Mantri Mudra Yojana (PMMY): This is a scheme launched by the Prime Minister on April 8, 2015, for providing loans up to 10 lahks to non-corporate, non-farm small or micro-enterprises. These loans are classified as MUDRA loans under PMMY.
• Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE): This is a trust established by the Government of India, under the Ministry of Micro, Small and Medium Enterprises (MoMSME) and Small Industries Development Bank of India (SIDBI). Launched in 2000, the CGTMSE scheme offers credit guarantees to financial institutions that offer credit facilities up to Rs. 2 crores and has now been raised to Rs. 5 crores.
• Animal Husbandry Infrastructure Development Fund (AHIDF): This fund incentivises investments by individual entrepreneurs, private companies, MSME, Farmers' Producers Organizations (FPOs) and Section 8 companies to establish the dairy processing and value addition infrastructure, meat processing and value addition infrastructure and Animal Feed Plant.
• PM Vishwakarma Scheme: Launched on 17th September 2023 by the Prime Minister, it provides end-to-end support to artisans and craftspeople who work with their hands and tools. The Scheme covers artisans and craftspeople engaged in 18 trades including Carpenters, Boat Makers, Armourers, Blacksmith, Locksmith, Goldsmith and more.
• Prime Minister’s Employment Generation Programme: Launched in August 2008, this programme is a credit-linked subsidy scheme, administered by the Ministry of Micro, Small and Medium Enterprises (MSME). PMEGP aims to generate employment opportunities through the establishment of micro-enterprises in the non-farm sector for rural as well as urban areas. 
• Scheme for Micro & Small Enterprises Cluster Development Programme (MSE-CDP): The MSME Ministry has adopted the Cluster Development approach as a key strategy for enhancing the productivity and competitiveness as well as capacity building of Micro and Small Enterprises (MSEs) and their collectives in the country. A cluster is a group of enterprises located within an identifiable and as far as practicable, contiguous area or a value chain that goes beyond a geographical area and produces the same or similar products or complementary products or services, which can be linked together by common physical infrastructure facilities that help address their common challenges.
• Vivad se Vishwas I-Relief to MSMEs: This scheme offers relief to MSMEs by refunding performance and bid securities forfeited during the pandemic, revoking debarment, and more.
• Interim budget 2024-2025 inclusion: In the interim budget 2024-2025, it was announced the establishment of a corpus totalling Rs. 1 lakh crore (US$ 11.99 billion), offering 50-year interest-free loans. This initiative aims to incentivise the private sector, particularly MSMEs, to enhance research and innovation in emerging sunrise domains. 

Benefits of MSME Registration in India

With access to numerous government policies and schemes, the MSME sector is witnessing substantial growth. The Ministry of MSME is also working diligently to encourage MSM enterprises engaged in the manufacturing, production, processing, or preservation of goods, to help entrepreneurs realize that starting up no longer costs an arm and a leg.

But first, let’s understand the definition of micro, small and medium enterprises.

To register as an MSME, all you need to do is follow an online process. It requires your Aadhar number to get it certified. You can avail of the certificate online without the need for a physical copy. Also, the process has been simplified even further for the enterprises having the MSME Certificate to obtain licences, approvals and registrations in any field for their business from their respective authorities. Such that they can produce the Certificate of MSME Registration while making an application itself. Not just that, applicants can reimburse the ISO Certificate Expenses by making an application to the respective authority supported by MSME Certificates.

We learnt about the various government schemes and policies for MSMEs. What other benefits are there?

• Your enterprise may avail of the Bar Code Registration subsidy. This 50% subsidy is for the patent registration by making an application to its respective authority; and also for Trademark registration for selected categories.
• There’s a subsidy on the expenditure for obtaining product certification licences from National or International standardisation bodies. Under this, a subsidy to an extent of 75% of the actual expenditure is granted towards licensing of the product to National or International Standards. The maximum GOI assistance allowed per MSME is Rs.1.5 lakh for obtaining product licensing or marking to National Standards and Rs. 2.0 lakh for obtaining product licensing or marking to International Standards.
• As per RBI Master Circular on lending to the MSME sector dated July 1, 2010, a composite loan limit of Rs.1 crore can be availed from banks.
• Under the Support for Entrepreneurial and Managerial Development of SMEs scheme, financial assistance falling in 75% to 85% of the project cost, up to a maximum of Rs.6.25 Lakh per idea is provided which is limited to 10 ideas for the Business Incubators (BIs) or the host institute. The BIs are also eligible to avail Rs. 3.78 lakh for infrastructure and training expenses for incubating 10 ideas (Rs. 37,800 per idea).

With the support from the Government and the younger generation’s interest in starting a new business, the MSMEs are growing rapidly.