Is Starting An MSME A Boon Or Curse? | SupportBiz

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Is Starting An MSME A Boon Or Curse?

 
The MSMEs play a pivotal role in the overall industrial economy of the country.
With new policies in place, the ministry of micro, small and medium industries is engaged in partnerships and collaboration activities to address critical challenges faced by MSMEs.
 
Worldwide, the micro, Small and Medium enterprises (MSMEs) are playing a significant role in propelling economic growth and in promoting equitable regional development. The MSMEs constitute over 90% of total enterprises in most of the developing economies and credited with generating highest number of employments and accounting for a major share of industrial production and exports. In India too, the sector accounts for about 39% of the manufacturing output and around 33% of the total export of the country.
 
In order to boost the sector's performance, there is a need to overcome some major hurdles.
 
Despite commendable contribution to the nation's economy, it is said that the MSME sector does not get the required support from the concerned Government Departments, Banks, Financial Institutions and Corporate, which cut down the pace of growth and hinder competitiveness in the national and international markets. The main problems of MSMEs in India are:

Finance: All kinds of business enterprises require sufficient funds in order to meet the fixed capital as well as working capital requirements. Finance is one of the critical inputs for growth and development of MSMEs. The organizations need credit support from banks not only for running the enterprises but also for diversification, modernization/upgradation of facilities, capacity expansion etc. 
· Absence of adequate and timely availability of bank finance
· Limited capital and knowledge
As said by Avinash Dalal National President of AIMA Association "that Finance is the major problems of MSME Sector. MSMEs are facing very hard for getting Finance either for their existing or for the expansion plan/activity from PSU as well as Private Banks. Abnormal delay in sanctioning the Credit Proposal, the general opinion of the MSMEs that, Banks giving Red Carpet treatment to Corporate Sector; while, Step Mother treatment to MSME Sector and this is the main cause of sickness of MSME Units." He further added  Delayed Payment Act is proved non-effective; it is on the paper only that to pay MSME’s within 45 days on the contrary MSMEs are indirect financing Corporate Sector for their working Capital.

Infrastructure and Transport:
Proper infrastructure and transport help a  company to increase productivity and to connect more people. But MSME faces a serious challenge for unavailability of the power supply which in results slow-production. Therefore  in the absence of the proper  delivery mechanism, efficient labourers and resources, the supply will be hit.

 Technology:
Due to lack of capital, MSMEs are unable to adopt modern technologies to make the production faster and save time for marketing their products. This holds them back from being competitive and identifying the right market and analyze the demand pattern. 

 Lack of adequate warehousing: 
According to the study of 'Agri Infrastructure in India: The Value Chain Perspective,’ jointly conducted by The Associated Chambers of Commerce and Industry of India (ASSOCHAM) and Yes Bank, "There is an urgent need to develop a strong warehousing system equipped with modern and scientific storage facilities like warehouses, silos, silo bags and others as the grain storage capacity in India has not been keeping pace with the marketable surplus” 

 Ineffective marketing strategies: If the product branding or marketing is not done properly the demand for the product will not increase. And this will result in a loss. “Recently Ministry of MSME has announced Procurement Policy i.e. It is mandatory to procure 20% from MSME and out of that 4% from SC/ST MSMEs. AIMA MSME suggested that 2% to 4% out of 20% to be kept/provided for the women entrepreneurs. The said Procurement Policy at State level to be implemented as per Central Government Policy. Moreover, preferences for state MSME to be given in the State Government /Municipal Corporation / U.T," Dalal added on the marketing strategies of MSMEs.
 
There is another serious issue that India is facing is the rise in number of cheap Chinese goods. Avinash K. Dalal, National president of AIMA MSME, said in a recent interview that, “China exporting goods/material to India is a threat for the survival of the MSME sector as the material of Chinese goods imported is below the cost of raw material of production (RMC). Hence, Indian MSME Units' survival is in danger. This has resulted many manufacturing units has closed down their units and many more are in the process of closing.”
 
He also further added that the Government has to either impose the dumping duty or ban import of the Goods Manufactured by MSME Sector. If the immediate Step is not taken then unemployment situation of Unskilled to Semi-Skilled Workers will arise. Even though there are plenty of challenges, I would like to highlight the key challenges faced by the MSMEs across the country.
 
To empower the MSME sector to take its rightful place as the growth engine of Indian economy, it is necessary to support the MSMEs, educate and empower them to make optimum utilization of the resources, both human and economic, to achieve success. According to experts, it is the high time, the MSMEs need to be educated and informed of the latest developments taking place globally and helped to acquire skills necessary to keep pace with the global developments and implement it locally.
 
How government is encouraging MSMEs
Make in India is an initiative program of the Government of India to encourage companies to manufacture their products in India. It was launched by Prime Minister Narendra Modi on 25 September 2014.
 
 As per the BCG release on the Make in India : turning vision into reality “The global manufacturing landscape  is evolving at a fast pace. With continuous change in energy cost ,wages productivity and currency rates are shifting the global standing on cost competitiveness factor other than cost are becoming more and more for companies to decide the location for sources and manufacturing “.
 
This Program is designed to facilitate investment, foster innovation, to enhance skill development, protect intellectual property and build best in class manufacturing infrastructure where there's never been a better time to make in India . 
 
Khadi and Village Industries Commission Act, 1956 The Khadi and Village Industries Commission Act, 1956 has been comprehensively amended in 2006, introducing several new features to facilitate professionalism in the operations of the Commission as well as field-level formal and structured consultations with all segments of stakeholders. A new Commission has also been constituted in Nov. 2011.
 
A national level credit linked subsidy scheme, namely, Prime Minister‘s Employment Generation Programme (PMEGP) was introduced in August 2008 by merging erstwhile PMRY and REGP schemes of this Ministry. Under this programme, financial assistance is provided for setting up of micro enterprises each costing upto Rs.10 lakh in service sector and Rs.25 lakh in the manufacturing sector. The assistance is provided in the form of subsidy upto 25 per cent (35 per cent for Special category including weaker sections) of the project cost in rural areas while it is 15 per cent (25 per cent for Special category including weaker sections) for urban areas. 
 
National Manufacturing Competitiveness Programme Ensuring the growth of Small Scale Sector at a healthy rate is crucial for the overall growth of Manufacturing Sector as also the National Economy. For this to happen the small scale sector has to become competitive. In the 2005-06 Budget, the Government announced formulation of a National Competitiveness Programme, particularly to support the Small and Medium Enterprises (SMEs) in their endeavor to become competitive. Accordingly, the National Manufacturing Competitiveness Council (NMCP) has finalized a five year National Manufacturing Competitiveness Programme (NMCP). The National Manufacturing Competitiveness Programme (NMCP) highlights the needs for enhancing the competitiveness of Indian Manufacturing sector. This is determined by measuring the productivity vis-à-vis the use of its human capital and natural resources. The NMCP is the nodal programme of the Government to develop global competitiveness among Indian MSMEs. The Programme was initiated in 2007-08. The programme targets at enhancing the entire value chain of the MSME sector through the following schemes: 
 
  • Lean Manufacturing Competitiveness Schemes for MSMEs;
  • Promotion of Information & Communication Tools (ICT) in MSME sector; 
  • Technology and Quality Upgradation Support to MSMEs;
  • Design Clinic scheme for MSMEs; 
  • Enabling Manufacturing Sector to be Competitive through Quality Management Standards (QMS) and Quality Technology Tools (QMSQTT); 
  • Marketing Assistance and Technology Upgradation Scheme for MSMEs; and 
  • National campaign for buildings awareness on Intellectual Property Rights (IPR). 
  •  Support for Entrepreneurial and Managerial Development of SMEs through Incubators. 
  •  Bar Code under Market Development Assistance (MDA) Scheme.
 
Filing of Entrepreneurs’ Memorandum by Enterprises - In pursuance of Section 8 of the MSMED Act, 2006, an entirely new process of filing of Entrepreneurs’ Memorandum (EM) by Micro, Small and Medium Enterprises (MSMEs) has been put in place. The erstwhile process of SSI registration has since been done away with. This process of filing of EM is voluntary for micro and small enterprises and medium service enterprises and is mandatory for medium manufacturing enterprises. Under the Act, the authority for receiving and acknowledging the EM has been notified. The format for Entrepreneurs’ Memorandum (EM) and procedure of its filing has also been notified and placed on the website for easy access to all concerned.
 
For more schemes on MSME Sector click here