A Performance Analysis of Indian MSMEs

Abstract

Purpose: Over the decades MSMEs have been reckoned as the driving force of the Indian economy and they have geared up the industrialization process to a large extent. This sector contributes about 40 percent towards the export of the country and attracts Foreign Direct Investment. India is privileged as a global manufacturing corridor by encouraging and supporting MSMEs to create employment opportunities, especially in rural areas, and to increase the purchasing power of individuals at the bottom of the pyramid. In this scenario, efforts have been made: one, to study the role of MSMEs in the Indian economy, and two, to do the Strengths, Weaknesses, Opportunities, and Challenges (SWOC) analysis, for understanding the internal and external factors which influence the MSMEs. Design/Methodology/Approach: Present paper adopted conceptual research, based on the secondary data gathered from various statutory bodies like RBI and annual reports of the Government Ministry of MSME, research papers published in refereed journals and websites. Findings/Results: MSMEs contribute to generating employment, by mitigating regional imbalances through the development of business in economically backward areas. Likewise, they generate a significant contribution to improving the Gross Domestic Product of India. During the recent pandemic period, it contributed 30% towards GDP. Within the MSME sector, while 630.52 lakh enterprises are operating in a micro-sector, 3.3 lakh and 0.05 lakh enterprises are operating in the small and medium sectors respectively. More than 51% of MSMEs are established in rural regions and 49% in urban regions. The study observes that there is parity between rural and urban areas. At present, MSMEs provide 110 million employments, out of which 76% are male and 24% female based on gender. This sector has many strengths and weaknesses. Likewise, it also provides greater opportunities to uplift the Indian Economy by initiating the activities like Atmanirbhar Bharat and Production Linked Scheme (PLC), incentives, subsidies, and funding support. These policy changes will push the MSMEs to face global competition and facilitate India as the manufacturing hub of the world. Value: Apart from providing a broad view of MSMEs’ performance in India, this paper attempts to analyze such performance within the Strengths, Weaknesses, Opportunities, and Challenges (SWOC) framework. Researchers, who would like to have an impressionistic view of the MSME sector in the Indian economy during the recent past, can make the best use of this paper. Paper Type: Case study.