General Studies Paper 3 (Indian Economy)
Question:- 203. The progress of MSME sector has been the focus of government lately. How does MSME sector help in achieving inclusive growth? What are the recent steps taken by government to boost the growth of MSMEs in India? Answer in 250 words.
Mar 01, 2023


MSMEs in India account for one-third of the country’s GDP, 48% of exports, and create 111 million jobs. Their role is absolutely indispensable as India aims to become a $5 trillion economy by 2025. The following are the ways in which MSMEs can help in achieving inclusive growth:



  1. 1. Employment: As MSMEs are usually labour-intensive, they have the ability to create more jobs especially for people belonging to weaker sections of the society.
  2. 2. Rural entrepreneurship: People in rural areas suffer with unemployment, poor infrastructure facilities which may be solved with the development of the rural entrepreneurship in MSMEs sector. Rural MSMEs can avoid the migration of people from rural to urban areas in search of jobs.
  3. 3. Non-agricultural livelihood: Indian MSME sector offers maximum opportunities for both self-employment and wage-employment outside the agricultural sector and contributes in constructing an inclusive and sustainable society. The rural non-farm sector in the form of rural SMEs absorb those released from agriculture but not absorbed in the urban industries.
  4. 4. Female participation: MSMEs provide a platform for female participation, especially being informal in nature. Women-owned entrepreneurs form 20 percent of all MSME businesses in the country.
  5. 5. Better salaries: In addition, evidence suggests that small enterprises provide better stability, higher pay and better benefits to their employees than large enterprises and informal firms especially to unskilled labour force. This enables poor to earn more and save more for their welfare.
  6. 6. Inexpensive products: MSMEs comprise the majority of firms which have much deeper and market penetration than foreign firms. Local SMEs are often the principal provider of goods and services in lower and middle income communities. Thus, they provide affordable products to poor and middle income families leading to more savings.




The government has taken various steps to protect the interests of MSMEs viz.

  1. 1. The modification of the definition of MSMEs; the provision of Rs 20,000 crore subordinate debt for stressed MSMEs, Rs 50,000 crore equity infusion through Self Reliant India fund; the waiving of the global tender requirement for procurement of up to Rs. 200 crore.
  2. 2. Samadhaan Portal has been set up under the Micro, Small and Medium Enterprises Development (MSMED) Act to monitor the outstanding dues to the MSME sector.
  3. 3. AtmaNirbhar Bharat package has extended adequate support to their ilk.
  4. 4. Launching of the Udyam portal for MSME registration, a paperless, zero-cost registration portal that is based on self-declaration and only requires Aadhaar.
  5. 5. CHAMPIONS, the single-window grievance redressal portal for MSMEs was launched by the Ministry of MSME in June 2020. The portal continues to be improved through initiatives such as the localisation of the portal in 11 regional languages and the introduction of a Chatbot.
  6. 6. The government has initiated the ‘Raising and Accelerating MSME Performance’ scheme (RAMP) in FY23. “The World Bank-supported scheme aims at strengthening institutions and governance at the Centre and State, improving Centre-State linkages and partnerships and improving access of MSMEs to market and credit, technology upgradation and addressing issues of delayed payments and greening of MSMEs. The RAMP programme will be implemented over a period of five years.
  7. 7. The Emergency Credit Line Guarantee Scheme was announced in FY21 to support small businesses, which were facing financial difficulties because of Covid and other economic disruptions. These companies do not have deep pockets and were facing financial distress. 83 per cent of the borrowers who availed of the ECLGS were micro-enterprises, and more than half of these borrowers had an exposure of less than Rs. 10 lakh. 


The micro, small and medium enterprises (MSME) sector has posted smart recovery from pandemic-induced shock, with the goods and services tax (GST) paid by the sector in fiscal year 2022 exceeding the pre-pandemic level in FY20. Despite a difficult economic environment, the sector demonstrated resilience as Centre took numerous cushioning steps to improve access to market and credit. To promote inclusive growth, it’s imperative that the government must protect the interest of MSMEs.