Context

• India’s manufacturing sector is largely dominated by micro and small enterprises which play a critical role in achieving the objectives of faster and more inclusive growth in India due to its vast employment potential and its contribution to total industrial output and exports. 

Contribution of the MSME Sector

• According to the Economic Survey 2022-23, the contribution of the MSME sector to overall Gross Value Added (GVA) increased from 29.3 per cent in 2018-19 to 30.5 per cent in 2019-20. But, due to the economic impact of the pandemic, the sector’s share fell to 26.8 per cent in 2020-21. 
• The MSME sector accounts for over 90 per cent of industrial units, 40 per cent of the total manufacturing output and nearly 35 per cent of India’s exports. 
• Moreover, a significantly large proportion of the MSME sector operates in rural areas and after agriculture, this sector is the biggest employment provider in rural areas and hence crucial for socio-economic wellbeing of rural populace. 

Challenges

• However, the MSME sector continues to grapple with various challenges such as 
  • low level of technology-in-use, 
  • limited access to inputs and credits, 
  • unfavourable market environment, 
  • falling outside the ambit of formal business and 
  • labour regulations. 

Key Provisions Under the Union Budget 2023-24

• One of the key highlights of this budget is the revamping of the MSME credit guarantee scheme. The budget made a provision of infusing Rs. 9,000 crore in the corpus of the Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), which will enable additional collateral free credit of Rs. 2 lakh crore to MSMEs.
• A National Financial Information Registry has been announced which will serve as the central repository of financial and ancillary information and enable an efficient flow of credit. 
• The five-year rollout of the Rs. 6,000 crore World Bank-assisted Raising and Accelerating MSME Performance (RAMP) programme was announced in the budget to help the MSME sector become more resilient, competitive and efficient. About 6.35 lakh MSMEs are likely to benefit from better access to market, finance and credit under the scheme. 
• To ease the access to government data on registration of MSMEs, unorganised workers, availability of skilled workforce, etc. four portals viz., Udyam (an online system for registering MSMEs), e-Shram (creating national database of unorganised workers), National Career Service (catering to employment-related services like job search, job matching, career counselling, etc), and Atmanirbhar Skilled Employee-Employer Mapping (ASEEM – matching supply of skilled workforce with the market demand) will be interlinked. 
• A special package for traditional artisans and craftsmen under the PM Vishwa Karma Kaushal Samman was announced to integrate them with the MSME value chain and enable them to improve quality, scale and reach of their products. 
• The setting up of Entity DigiLocker for MSMEs will allow storing and sharing documents online securely, whenever needed, with various authorities, regulators, banks, and business entities. 

Way Forward

• Due to inadequate and poor extension machinery, especially in the rural areas, a majority of MSME entrepreneurs are not aware of various announcements and provisions made in the budget. 
• A robust mechanism should be designed to aggressively sensitise these entrepreneurs about budgetary provisions which are meant for them and how they can access these provisions. 
• Special Gram Sabhas may be conducted at panchayat level to sensitise both existing and aspiring entrepreneurs about budgetary provisions and announcements.