Last updated: March 14th, 2020 3:13 PM

Government Schemes for MSME

The government has undertaken numerous measures to obtain a solution to the problems faced by Micro, Small and Medium enterprises (MSME) and permit them to play an efficient and capable role in the country's economy. These measures may be generally classified as the following:

• Protection Measures: These include measures that are designed to protect small scale industries from the competition of existing large firms.
• Promotional Measures: These include measures which have been undertaken for the promotion of the growth related to the small scale sector in the country such as programs, guidelines, procurement of goods and services and government grants.
• Institutional Measures: These are inclusive of measures which have been undertaken by the government by setting up of several institutions or related agencies for the provision of liberal and multifaceted assistance to the small scale industry sector.

The article studies major initiatives taken by the government to develop the Micro, Small and Medium Enterprises (MSME) sector, Credit Guarantee Scheme (CGTMSE Scheme) and development of Micro, Small and Medium Enterprises, list of items and development of MSME framework of institutional support services and incentives for small scale sector, promotional measures by State Government for the development of MSME sector and suggestions for the development of MSMEs.

CGTMSE Scheme

In order to make the Credit Guarantee Scheme more beneficial the following modifications have been made namely:

1. Increasing for optimal reasons eligible loan limit from the amount of Rs. 25 lakh to Rs. 50 lakh.
2. Raising the extent of guarantee cover from 75 % to 80 % for the following categories:
   1. Micro enterprises for loans up to the limit of Rs. 5 lakh
   2. Medium and Small Scale Enterprises that are operated or owned by women
   3. All loans availed in the North Eastern Region of India
3. Reduction of the one-time guarantee fee from 1.5 % to 0.75 % for all loans availed in the North-Eastern Region of India.

List of Items and development of Micro, Small and Medium Enterprises The deletion by a phased process of products from the items list that is reserved for manufacture by MSME is followed on a continued basis. One hundred and twenty five items that were removed from the reserved category on March 13, 2007 contributing to the reduction of the number of items reserved for exclusive manufacture in micro as well as small enterprise sector to one hundred and fourteen. Furthermore, seventy nine items were removed from the reserved category on February 5, 2008, fourteen items in the month of October 2008 that was followed by a revision in the month of July 2010.

Institutional Support Services

The small scale industry sector creates almost 40% of the gross industrial value added output and 45% of the total exports from India with reference to direct as well as indirect exports. The sector is the second largest employer of manpower after the agricultural sector. The development of Small Scale Sector has hence been assigned a significant role in India's national plans. For the purpose of protecting, supporting and promoting small enterprises and also to aid them to become self-supporting, numerous protective as well as promotional measures have been undertaken by the Government. While the majority of the institutional support services and a few incentives are provided by the Central Government, others are instituted by the state governments in various degrees to encourage investments and support small industries in varying degrees to attract investments and support small industries with an intention to improve industrial production and to create employment opportunities in the respective States.

Promotional Measures by State Government

The various promotional measures undertaken by State Government for the development of micro, small and medium scale industry sector include:

• • Industrial extension services
  • Institutional support with reference to credit facilities
  • Providing developed sites for the construction of sheds
  • Providing training facilities
  • Supply of machinery on the basis of hire-purchase terms
  • Enabling Assistance for domestic marketing and exports
  • Offering special incentives for creating enterprises in backward areas and so on
  • Offering technical consultancy and financial assistance for the purpose of technological enhancement

Development of MSMEs

• Arrangements may be ensured by the government to enable the supply of trained and professional managers related to the small scale sector.
• It would be essential to consider policy initiatives to incentivize MSMEs in achieving economies of scale by the process of expanding production.
• To smooth the progress of the MSME sector to acquire resources, it is essential that a separate trading exchange be created exclusively for the MSME sector.
• Providing special incentives to channelize larger flow of venture capital and private equity funds related to the small scale sector.
• There is a vital need to create measures to manage the problem of loss of fiscal benefits in the case of the micro and small scale units that evolve into larger units and so on.

Read more about benefits of obtaining Udyog Aadhaar or MSME.