The document discusses the important role that Micro, Small, and Medium Enterprises (MSMEs) play in driving India's "Make in India" initiative, contributing approximately 45% of manufacturing output, 40% of exports, and employing over 36 million people. MSMEs promote balanced regional development, generate most non-farm jobs, and contribute to sustainable development. The government supports MSMEs through various programs and policies to strengthen the sector and help realize the growth opportunities it presents.

1. MSMEs ROLE IN DRIVING THE MAKE IN INDIA INITIATIVE
Dr. N. Dharmaraj*
Abstract:
The Micro Small and Medium Enterprises (MSMEs) have always been the backbone of an
economy in general and secondary sector in particular. For a capital scarce developing country
like India, MSMEs are considered as panacea for several economic woes like unemployment,
poverty, income inequalities and regional imbalances.
This paper closely analyses the role and contributions of the Indian Micro Small and Medium
Enterprises since opening of the economy in 1991. It also looks into the present scenario of
MSMEs and the opportunities of the MSME sector. And Also examines the diversity of the
MSME sector in the Indian economy.
*Assistant Professor, PG Research Centre in Economics, Scott Christian College (Autonomous),
Nagercoil – 3. Email: nrdharmaraj@gmail.com.

2. Introduction:
The MSME sector is an essential part of “Make In India” and its growth is critical to the
success of the government initiative. The manifest capacity of Micro, Small and Medium
Enterprises (MSMEs) around the world for driving economic growth and development at
regional, national and global levels cannot be overemphasized. As India gears up to go back over
the high growth path, the MSME sector assumes a key role in driving the growth engine. The
MSME sector in India continues to demonstrate notable resilience in the face of trialing global
and domestic economic circumstances. The sector has sustained an annual growth rate of over
10% for the past few years. With its dexterity and drive, the sector has shown commendable
innovativeness and adaptability to survive economic shocks, even of the gravest nature. The
significance of MSMEs is attributable to their caliber for employment generation, low capital
and technology requirement, promotion of industrial development in rural areas, use of
traditional or inherited skill, use of local resources, mobilization of resources and exportability of
products.
The initiatives taken from the government enable the MSME to enhance their competitive
strength, address the challenges of competition and avail the benefits of global Market.
Enactment of the Micro, Small and Medium Enterprises (MSMEs) Development Act 2006,
operative from October 2006 is an important landmark in the development of the sector. It
provides the first-ever legal framework for recognition of the concept of enterprise (comprising
both manufacturing and services), and integrating the three tiers of these enterprises.
Under the Act, enterprises have been categorized broadly into those engaged in (i)
Manufacturing, and (ii) providing services. Both the categories have been further classified into
Micro, Small and Medium enterprises, based on gross investment in plant and machinery for
manufacturing enterprises, and in equipment in case of enterprises providing or rendering
services, as shown in the Exhibit 1.

3. Table 1 – Investment Limit of MSMEs
Classification Manufacturing Enterprise Service Enterprise
Micro Upto 25 Lakhs Upto 10 Lakhs
Small Upto 5 Crores Upto 2 Crores
Medium Upto 10 Crores Upto 5 Crores
Source: Ministry of MSMEs, GOI, Annual Report 2015-2016
Objectives of the Study:
The objectives of the present paper are:
• To trace out the roles and contribution of MSMEs in an Indian Economy
• To examine the Diversity of the Indian MSME Sector in Make In India
• To study the role of Government towards MSME sector in Make In India
• To analyse the opportunities of MSME sector.
Scope and Methodology of the Study
The scope of the present study has been confined to the contributions made by the MSME to
the Indian economy. The data for the present study have been collected from various Secondary
sources especially from the annual report published by Ministry of Micro, Small And Medium
Enterprises for various years.
Role of the Indian MSME
MSMEs play a pivotal role in the Indian economy which can be seen from the following facts-
• MSME sector contribute nearly 45 percent of the manufacturing output and 40 percent of the
exports.
• This sector contribute app. 8 percent of country’s GDP
• MSME sector provide the largest share of employment after agriculture and this sector has a
better record of employment generation per rupee investment as compared to large industries.

4. • Economic independence (i.e. self-reliance) can be achieved only by the growth of small
sector. Over the period myopic policies of our leadership has created such a situation that a
country of more than 1 billion population has just become a market for the big players.
• Apart from economic relevance, growth of small sector plays an important role in
maintaining the overall social & cultural structure. Development of MSMEs in dispersed
geographies reduces the rate of migration to cities and thereby reducing the burden on cities
to accommodate the large population.
Contribution of MSMEs
The MSMEs have played a great role in ensuring the socialistic goals like equality of income and
balance regional development as envisaged by the planners soon after the independence. With
the meager investment in comparison to the various large scale private and public enterprises, the
MSMEs are found to be more efficient providing more employment opportunities at relatively
lower cost. The employment intensity of MSMEs is estimated to be four times greater than that
of large enterprises. Currently, around 36 million SMEs are generating 80 million employment
opportunities, contributing 8% of the GDP, 45% of total manufacturing output and 40% of the
total exports from the country. MSMEs account for more than 80% of the total industrial
enterprises in India creating more than 8000 value added products.
The most important contribution of MSMEs in India is promoting the balanced economic
development. The trickle down effects of large enterprises is very limited in contrast to small
industries where fruits of percolation of economic growth are more visible. While the large
enterprises largely created the islands of prosperity in the ocean of poverty, small enterprises
have succeeded in fulfilling the socialistic goals of providing equitable growth. It had also helped
in industrialization of rural and backward areas, thereby, reducing regional imbalances, assuring
more equitable distribution of national income. Urban area with around 857,000 enterprises
accounted for 54.77% of the total working enterprises in Registered MSME sector whereas in
rural areas around 707,000 enterprises (45.23% of the working enterprises) are located. Small
industries also help the large in industries by supplying them ancillary products.
The Indian MSME sector provides maximum opportunities for both self-employment and wage-
employment outside the agricultural sector and contributes in building an inclusive and

5. sustainable society in innumerable ways through creation of non-farm livelihood at low cost,
balanced regional development, gender and social balance, environmentally sustainable
development, etc.
Diversity of the Indian MSMESector
The MSME sector in India boasts of multiplicity in terms of its size, level of technology
employed, range of products and services provided and target markets. MSME Tool Rooms have
been credited to provide at least ten components that were used in India’s Mangalyaan (Mars
Orbiter Mission probe), the Indian Space Research Organization’s (ISRO) most ambitious
mission till date, which is the country’s first inter-planetary space mission. The sector has also
contributed vital inputs for other space satellites such as the Chandrayan. India’s second moon
mission, Chandrayaan II, set to be launched in 2016-17, will have a soft land over a wheeled
robotic vehicle to explore the landing area. India seeks to launch other ambitious projects like a
global sea traffic monitoring system and an earth observation satellite, in cooperation with the
European Union. The projects envisage significant contributions and convergence opportunities
from the Indian MSME sector.
India is one of the world’s top ten countries in terms of military expenditure. According to the
database prepared by the Stockholm International Peace Research Institute, which has listed the
countries of the world in terms of their military expenditure at current US$ millions in 2013,
Indian ranks ninth.
With spending in Defence and Aerospace on the rise in India, it is estimated to become the third
largest market by 2020, after the US and China. Increasing passenger traffic and military
expenditures are expected to boost demand for new aircrafts. Investment opportunities of
US$110 billion are anticipated with US$80 billion in new aircraft and US$30 billion in the
development of airport infrastructure by 2020, according to the Investment Commission of India.
Many global companies are increasingly looking to Indian MSMEs for strategic partnerships of
mutual benefit due to the innovative capabilities in niche manufacturing, comparative advantages
of advanced engineering, low-cost manufacturing and overheads, ability to speedily absorb new
technologies and local skills and capabilities that set these enterprises apart from other national
and international players in the sector.

6. With its vast resource pool of engineering talent and high skill labour at competitive costs, India
has the potential to become a significant player in the global auto industry, especially in
engineering and component manufacturing. India’s close proximity to key automotive markets
like the ASEAN, Japan, Korea and Europe provide an added fillip to the sector. Exports of auto
components increased at a CAGR of 17% during 2008-13, reaching USD 9.7 Billion in 2012-13.
MSMEs assume a dominant position in the automotive and auto components sector.
Many more lucrative opportunities can be tapped by Indian MSMEs in the foundry industry,
electronics industry, chemicals, leather, textiles, agro and food processing, pharmaceuticals,
transport and tourism industries, etc. The globalization of businesses has increasingly drawn
SMEs into global value chains through different types of cross-border activities. Many
entrepreneurs are recognizing the opportunities that this advent ushers and gaining access to
global markets has become a strategic instrument for their further development. These
opportunities have arisen as a result of the government’s increased focus on the MSME sector,
larger investments in research and development, technological upgradation, thrust towards
international collaborations and measures to boost competitiveness and propel growth.
Supportive Role of Government of India
Recognizing the potential of this sector for the nation’s development, the Government of India,
through its various agencies, has taken many key steps to strengthen the MSME sector and
promote innovation and capacity building in this sector. Regular discussion is facilitated between
various stakeholders through the constitution of specific task forces and inter-ministerial
committees. The Micro and Small Enterprises-Cluster Development Programme is being
implemented by the government for the holistic and integrated development of these enterprises
in clusters through soft interventions, hard interventions and infrastructure up gradation for
enhancing their productivity and competitiveness. During the year 2014-15, 43 new clusters have
been taken up for various interventions. So far, around 966 clusters and 171 infrastructure
development programmes have been initiated by the government. Provisions are also being made
to strengthen the framework of virtual clusters with an aim to assist MSME accessibility of the
Ministry from the remote location of their operation. The Credit Linked Capital Subsidy Scheme
also assists in the technological upgradation on MSMEs. The National Manufacturing
Competitiveness Programme is another flagship programme of the Ministry of MSME which

7. endeavors to equip these enterprises with technology-based tools in the areas of quality
upgradation, productivity, design development, energy efficiency and marketing. To ensure
better flow of credit to SMEs, the Ministry has introduced a Policy Package for Stepping up
Credit to Small and Medium Enterprises (SMEs) under which it operates schemes like the Credit
Guarantee Fund Scheme and the Performance and Credit Rating Scheme.
Opportunities for MSME
Make in India is a challenge as well as opportunity for MSME sector (challenge from foreign
players and opportunity as big players will outsource some of the small items/processes to other
entities). The contribution of MSME segment to the GDP in some of the economies is in the 25-
60 per cent range. MSME in India has the potential to increase the share of contribution to GDP
from the current 8 per cent to about 15 per cent by the year 2020. With the increase in MSME
contribution to the GDP, there is a potential to increase its contribution to employment to over 50
per cent over the next decade.
Conclusion
MSMEs constitute an important and crucial segment of the industrial sector in the Indian
economy. By contributing to the overall growth of the gross domestic product, employment
generation and exports, the sector is emerged as the engine of growth for Indian economy. The
performance of MSMEs has a direct impact on the growth of overall economy. The Make in
India Strategy adopted by the Indian Prime Minister Shri Narendra Modi aims to facilitate
investment, foster innovation, enhance skill development and build a sustainable eco-system for
the manufacturing infrastructure in the country. These measures have succeeded in raising the
business assurance in India. The stage has been set through these industry and MSME
interventions for a larger share of global business in India which presents opportunities for
MSME integration in almost all industry sectors. The Indian MSME sector is balanced for rapid
growth and integration with major global value chains. Timely policy intervention and due
support have promptly resulted in rendering the Indian MSMEs globally competitive.

8. References:
• Annual Reports, Ministry of Small Scale Industries, Government of India § “Micro,
Small and Medium Enterprises Development Act – Background Paper”, Jessica Wade,
Small Enterprise Finance Centre, IFMR.
• “Ministry of Micro, Small & Medium Enterprises, 2007: Micro, Small and Medium
Enterprises in India: An Overview”, Ministry of Micro Small and Medium Enterprise,
Government of India
• Subramanyam Puli & Reddy Ramachandra, (2012), “Micro, Small and Medium
Enterprises in India – An overview”, VSRD International Journal of Business and
Management Research”, Vol 2 No.11 pp.532-539
• Govinda Rao & Apparoa (2012), “ Role of Micro, Small and Medium
Enterprises(MSMEs) and Its Economic Obstructions in India(A case study of Micro,
Small and Medium Enterprises In India) IOSR Journal of Business and Management
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• Bandeiah, C.H. (2004). Progress of MSME in India. Asian Economic Review, Vol.46.
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