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, and to different aspects of its development. 

The Indian MSME sector contributes about 29 percent towards the GDP through national and international trade. As per MSME Ministry data, as of May 16, 2021, India has approximately 6.3 crore MSMEs (including both service and manufacturing firms). It must 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, emphasising 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 organisational units work with 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 labour and a small managerial hierarchy, decisions can be taken and implemented faster than the organisational units with large structures. With optimal output in less time, it further reduces the cost of production. 

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Increased per capita income

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

In these uncertain times, when the world has been hit by COVID 19, India, 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 are spread all over India.

Only 55 percent of the total MSMEs units are located in urban areas; the remaining 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 

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

Also, young entrepreneurial talent in India is keen to make digital deals. After major events such as demonetisation 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 prioritising 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 channelise the country’s resources towards a common goal of growth. 

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Infrastructure development

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

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

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

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)