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The contribution of MSMEs in Employment generation and GDP growth of India

During last five years, a total of 1,98,736 MSME units were set up and started production with a total investment of Rs. 109.75 crore and employment generation of 6.28 lakh persons in Odisha. Food and Allied sectors follow the Repairing services in terms of units, investment and employment generation.

The Micro, Small and medium enterprises (MSMEs) of India are very important driving factors for the growth of Indian Economy. These MSMEs  not  only  provide  the  employment  opportunities  but  helps  in  the  process  of  industrialization  in  rural  areas simultaneously reducing the unequal income distribution among the residents.

The MSMEs contribute significantly in the development of Indian economy through export production, domestic production, low investment requirements, operational flexibility and technology oriented enterprises etc. The SMEs are complimentary to large industries operating in the economy & contribute significantly in the development of the country. On an average this sector has almost 36 million units that provide employment to about 80 million individuals. This sector through the production of 6000 products contributes 8% to GDP of the country. It constitutes the 45% portion of the total manufacturing output and 40% of the total exports of the country. Hence, we have to understand the role of MSMEs in providing employment opportunities & push towards the inclusive development of the country.

The Ministry of Micro, Small & Medium Enterprises of Government of India has the responsibility of designing policies, projects & schemes for the development and promotion of these MSM enterprises. The successful implementation of these schemes  is  also  assured  by  the  monitoring  responsibility  of  Ministry  of  MSMEs. Primarily, the State Govt. has the responsibility of promotion & development of the MSMEs and their efforts are supplemented by the Central Government.

The primary responsibility of the promotion and development of these MSMEs rests on the State Government; but the Central government also assists the state govt. through number of its initiatives. The schemes & various initiatives of Ministry of MSMEs & other organisations seek to provide the following facilities:

  • Adequate flow of credit from financial institutions/banks,
  • Support for technology up-gradation and modernization,
  • Integrated infrastructural facilities,
  • Modern testing facilities and quality certification,
  • Access to modern management practices,
  • Entrepreneurship development and skill up-gradation through appropriate training facilities,
  • Support for product development, design intervention and packaging,
  • Welfare of artisans and workers,
  • Assistance for better access to domestic and export markets and
  • Cluster-wise measures to promote capacity-building and empowerment of the units and their collectives.

The various commissions, institutions, organisations & acts have been set-up by the concerned Ministry to promote & develop the various industries at micro, small and medium levels. Some of the important institutional setups are as: Micro, Small and Medium Enterprises Development (MSMED) Act 2006, Khadi & Village Industries Commission (KVIC), Coir Board, National Small Industries Corporation (NSIC) Ltd., Mahatma Gandhi Institute for Rural Industrialisation (MGIRI), National Board for Micro, Small and Medium Enterprises (NB MSME), and National Institute for Micro, Small and Medium Enterprises.

MSMEs in India face a good number of problems, which include both perennial and day-to-day problems as follows:

  • Lack of technical support,
  • Lack of training initiatives for the entrepreneurs,
  • Difficulty in getting the financial support,
  • Inadequate infrastructure support,
  • Lack of expertise in marketing of the products,
  • Absence & non-affordability of advanced technology,
  • Severe competition from the national &International Players,
  • Absence of target markets for the products produced,
  • Inadequate support from the banking system for credit facility,
  • Scarcity of skilled labour and
  • Inadequate information etc.

The MSME sector has great potential for employment generation in Odisha, from where both skilled and unskilled workforce has migrated to other Indian states in search of employment. Therefore, it has remained a focus for the State government as indicated in the Industrial Policy Resolution 2015 and MSME Development Policy 2015. During 2017-18, 50,158 MSME units were set up with an investment of Rs. 2,324.46 crore, leading to employment generation for 1.47 lakh persons. Altogether 3,91,697 MSMEs are established with an investment of Rs. 19,068 crore and employment to 15,27,373 persons till March,2019.

During last five years, a total of 1,98,736 MSME units were set up and started production with a total investment of Rs. 109.75 crore and employment generation of 6.28 lakh persons in the State of Odisha.

Sector-wise disaggregation indicates that repairing services account for the majority share in MSMEs, with almost 60% share of total MSMEs setup in the State and generating 43.1% of the total employment opportunities created through MSME units. A possible reason for the high concentration of MSMEs in the repairing services can be attributed to challenges related to literacy, skills, opportunities, marketing, credit facility etc., pushing young entrepreneurs to engage themselves in repairing services units. Food and Allied sectors follow the Repairing services in terms of units, investment and employment generation. It is observed that maximum number of MSME units were located in Sundargarh district (4,462) followed by Cuttack (3,357) and Khurda (3,085) during 2017-18.

Entrepreneurship Development:

To inculcate entrepreneurship culture, the State has initiated Entrepreneurship Development Programmes (EDP) organised by Regional Industries Centres (RICs) / District Industries Centres (DICs) across the State. These are held for two weeks’ duration. During 2018-19, 426 Micro enterprises established by EDP trainees were generating employment opportunity for 1740 youth. 865 Sensitisation programmes were organised across the State against proposed 855 Sensitisation Programmes. The youth participating in Sensitisation Programmes are encouraged to undergo ‘online L&D programme’ of four week duration available in the Start-up portal.

Apart from conducting entrepreneurial development programmes, the State government also provides financial support to youth in setting up MSMEs under the Prime Minister’s Employment Generation Programme (PMEGP). The Scheme is implemented through Khadi and Village Industries Commission (KVIC) and State/UT Khadi & V.I. Boards (KVIB) in Rural areas and through District Industries Centres (DICs) in Urban and Rural areas. 15% and 35% of the project cost is provided as Margin Money Assistance to General and Special category applicants, respectively.

Startup Odisha

Odisha has been recognised as ‘Top Performer” by DIPP, Government of India in States’ Start-up Ranking 2018.

The Government of Odisha recognises the fact that the seeds of entrepreneurship and the instinctive ability to innovate must be nurtured through an enabling ecosystem, such as:

  • Creation of world class physical infrastructure to support Start ups;
  • Promoting the culture of innovation through academic interventions;
  • Institutionalizing the culture of entrepreneurship by providing training for the requisite Skills

The Odisha Startup Policy was launched on 26th August 2016, with an objective of developing a world class ‘Startup Hub’ in Odisha by 2020 and to create an enabling environment and supporting eco-system that facilitates at least 1,000 Startups. Highest monetary benefits are given to Startups Incubators:

  • Monthly Allowance of Rs. 20,000 (Rs. 22,000 for women/transgender/SC/ST/SEBC/PH led Startups)
  • One-time capital grant up to a maximum of Rs. 1 Crore
  • Product development and marketing/publicity assistance up to Rs. 15 lakhs (Rs. 16 lakhs for Women/Transgender/SC/ST/SEBC/PH led Startups)
  • Unique provision of matching Grant of Rs. 5 crore
  • Need based assistance for equipment/raw material purchase
  • Performance capital grant of Rs. five lakhs per incubate
  • Subsidized incubation (50% of monthly rental up to Rs. 5000 per month) for one year
  • Reimbursement of utility expenses of Rs. 1 lakh p.a. for 3 years

Till March 2019, 423 Startups could be recognised in the State and 70 benefits were given to 55 Startups, out of which, 16 are women-led. The assisted startups are providing employment to more than 1200 individuals.

12 incubators are registered with total incubation area of 4.5 lakh sq ft. For effective monitoring, screening & evaluation, 12 Nodal Agencies have been empanelled. Mentorship support is also provided to startups with a network of 110 mentors. Odisha has also registered its first angel network ‘Bhubaneswar Angels’.

Odisha Youth Innovation Fund has been setup to support grassroots innovations, which are essentially technological solutions and development successful business models by youths in different sectors. The fund provides Rs. 50,000 for any new idea, Rs 1,00,000 for any demonstrative product, prototypes, patents, incubated products/services, Rs. 3,00,000 for development of any enterprise/Startup based on eligible innovative idea/products/services.

As a number of Small and Medium enterprises, both in public and private sector, have been closed in Odisha, the state is required to reopen them. Besides, many industries require modernization and renovation. A good number of farm-product based processing industries, beginning from food processing industries to Sugar and Spinning Mills are required to be established in Odisha, taking the pro-MSME initiatives of the state and union governments. It will help generating both direct and indirect employment in the state and utilizing the resources meaningfully. There is vast scope for export of the artifacts, folk art & crafts and the innovative fast moving consumer goods of good quality and competitive prices.

The MSME sector in India is growing at good pace & even is providing employment opportunities to masses of the people. The contribution of Manufacturing Sector as well as Service Sector of MSMEs in significant to the total GDP of the Country. The Govt. of India has taken number of initiatives & is in the process of gearing up the growth of the Micro, Small & Medium Enterprises in the entire country, including Odisha. The government of India is also making number of tie-ups & agreements with the NGOs, Governmental agencies as well as with the Universities for ensuring proper implementation of Governmental policies for setting up of MSMEs & equipping entrepreneurs with proper guidance for starting their ventures.




About Janakish Badapanda,

Columnist & Journalist

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