MSMEs in India: Overview and Future Outlook

India's economic growth is set to soar in the coming years, with the Micro, Small & Medium Enterprises (MSME) sector playing a pivotal role in driving this transformation. The MSME sector's development aligns with national priorities like financial inclusion, job creation, and fostering new-age entrepreneurs.

Historically, the MSME sector operated informally under the Ministry of Small-Scale Industries and the Ministry of Agro and Rural Industries. Despite its contributions to enterprises, employment, and exports, increased competition in the post-liberalization era led to a decline in its performance. To address this, the Micro, Small and Medium Enterprises Development (MSMED) Act was enacted in 2006, merging the relevant ministries into the Ministry of Micro, Small and Medium Enterprises (M/o MSME).

This ministry is responsible for policy design, program promotion, and implementation oversight through various offices and agencies. The MSME sector is a significant contributor to India's economy, boasting around 6.5 crore units, employing nearly 110 million people, and contributing to industrial output, exports, and GDP. Its adaptability, technical expertise, and role as ancillary units to larger enterprises have fueled its growth.

However, challenges such as limited access to funding, trust issues with financial institutions, labor practices, and resistance to digital transformation hinder its potential. External factors like the COVID-19 pandemic and rapid technological changes further add to the sector's challenges.

1. The government has been working hard in the past decade to remove obstacles and make doing business easier. They've increased budget allocations, launched initiatives like Atma Nirbhar Bharat and Make in India, and provided financial support through MSME loans and credit guarantee schemes.
2. On the qualitative side, they've supported the sector with entrepreneurial skills, technology upgrades, technical support groups, and cluster development schemes. They've also created digital platforms and the Udyam registration system to bring more units into the formal sector, giving them access to government initiatives and protection.
3. The recent expansion of the MSME definition is a significant step that will greatly improve the ease of doing business. While the government's efforts are crucial, MSMEs need to look within, adapt to a changing business environment, and form strategic partnerships.

Professionals like Chartered Accountants (CAs) play a vital role in this process. MSMEs must think differently, identify and bridge gaps in their business systematically, and break free from the "small business" mindset. The government aims to make India a $5 trillion economy, with MSMEs serving as the backbone and driving force behind this growth.

By embracing innovation, digitization, and financial inclusion, with support from professionals and government initiatives, MSMEs can lead the economy toward this goal.