Empowering MSMEs: Overcoming Challenges and Fostering Growth

FAQs on MSMEs in India

Micro, Small, and Medium Enterprises (MSMEs) play a pivotal role in shaping India’s economy. Here are some frequently asked questions regarding their significance and the challenges they encounter.

1. Why are MSMEs critical for India’s economy?

MSMEs are vital for India's economic landscape as they employ approximately 23.24 crore people and contribute significantly to overall economic growth. Their ability to generate employment, foster innovation, and promote inclusive development with relatively low capital costs makes them essential, second only to agriculture.

2. What regulatory challenges are faced by MSMEs?

Despite their importance, MSMEs face several hurdles:

• Complex Compliance Framework: High regulatory burdens can hinder formalization and raise operational costs.
• Restrictive Labor and Safety Laws: While protective, these laws may inadvertently prevent scalability and stifle innovation.
• Limited Institutional Access: Many MSMEs operate informally, leading to a parallel economy that diminishes productivity and market reach.
• Market Entry Barriers: Limited access to finance, technological support, and markets restrict their ability to compete on a global scale.

3. Why do many MSMEs remain small and informal?

The tendency to remain small can be attributed to the regulatory challenges associated with formalization. Many MSMEs prefer to operate below the radar to avoid complex legal requirements, which ironically results in lost opportunities for employment and welfare.

4. What initiatives has the government taken to address these challenges?

To support MSMEs, the government has introduced several initiatives, including:

• Self-Reliant India (SRI) Fund: A ₹50,000 crore equity fund aimed at supporting scalable MSMEs through both government and private equity funding.
• Udyam Assist Platform (UAP): Launched in 2023, this platform has successfully formalized over 2.39 crore informal enterprises.
• RAMP Program: This program focuses on enhancing MSME performance by improving access to markets and credit.
• TReDS Platform: Designed to facilitate timely payments and ensure liquidity for MSMEs at reduced costs.

5. How have states like Tamil Nadu and Goa supported MSMEs?

• Goa: During the COVID-19 pandemic, Goa utilized the TReDS platform to boost supplier liquidity, benefiting over 250 MSMEs since October 2020.
• Tamil Nadu: The state adopted TReDS in 2022 under the RAMP program, aiding MSMEs with invoice discounts and improved access to liquidity.

6. What is the role of the MSE-CDP in supporting MSMEs?

The Micro and Small Enterprises Cluster Development Programme (MSE-CDP) addresses several fundamental issues, such as:

• Skill development and workforce training.
• Quality improvement through technology adoption.
• Infrastructure development with Common Facility Centres (CFCs).

7. How does formalization benefit MSMEs?

Formalization grants MSMEs access to institutional funding, broader markets, and government support. It also ensures compliance with labor and safety standards, thereby enhancing productivity, worker welfare, and competitiveness.

8. What more can be done to address MSME regulatory challenges?

• Simplifying regulatory compliance to alleviate operational burdens.
• Providing targeted incentives for formalization.
• Strengthening digital platforms like TReDS for seamless payment systems.
• Expanding access to finance, technology, and export markets through collaborations with private and public stakeholders.

“A nation prospers when its small enterprises are unshackled from barriers and empowered to grow into global contributors.”