(JKPSC) Explain how MSMEs (Micro, Small and Medium Enterprises) are major drivers of economic growth in India but much neglected in receiving production-linked incentives. [250 Words] (15)

MSMEs are characterized by their smaller size and limited resources compared to large corporations. Despite their smaller scale, MSMEs contribute significantly to the overall economy, making them an important focus for policymakers and development agencies.

Key Contributions of MSMEs to India economy

  1. Employment Generation: MSMEs provide millions of jobs in varied industries in India, accounting for nearly 90% of total employment.
  2. GDP Growth: MSMEs are expected to account for 50% of India’s GDP growth by 2025.
  3. Inclusive Development: MSMEs empower entrepreneurs, create opportunity for marginalized people, and boost regional prosperity.

MSMEs’ PLI Neglect: Reasons

  1. Limited Awareness: Many MSMEs are unaware of PLI schemes and their qualifying requirements, preventing them from participating.
  2. Complex Application Process: PLI applications can be complicated and time-consuming for MSMEs with limited resources and experience.
  3. Financial constraints: MSMEs generally lack the funds to invest in PLI-compliant infrastructure and technology.
  4. Capital Inaccessibility: MSMEs generally lack appropriate capital, which hinders their expansion and PLI eligibility.
  5. Focus on Large Industries: PLIs have traditionally ignored MSMEs due to their smaller size and lesser export potential.

Impact of PLI Neglect on MSMEs

  1. Limited Growth Opportunities: MSMEs’ absence from PLIs limits their financial incentives and technical support, limiting their growth and competitiveness.
  2. Reduced worldwide Competitiveness: MSMEs’ inability to use PLIs can hurt their worldwide competitiveness and export potential.
  3. Employment Potential Loss: Underutilization of MSMEs’ potential owing to PLI neglect might lead to missed job and economic growth prospects.

Strategies to Improve MSMEs’ PLI Access

  1. Greater Awareness and Outreach: Government agencies and industry groups should work together to educate MSMEs on PLI eligibility and application procedures.
  2. Simplified Application Process: Reducing administrative costs and simplifying the application process can make PLIs more accessible to MSMEs with limited resources.
  3. Targeted Support for MSMEs: PLI plans should include provisions and support mechanisms targeted to MSMEs’ needs and concerns.
  4. Improved Financing Access: MSMEs can invest in PLI-qualifying infrastructure and technology with better financing.
  5. Supporting Cluster Development: MSME clusters can collaborate, share knowledge, and collectively bargain, boosting their PLI participation.

The government and industry partners must collaborate to promote MSMEs’ access to PLIs through focused awareness campaigns, simpler application processes, specialized support mechanisms, enhanced financing availability, and cluster growth. India can improve manufacturing, exports, and economic growth by empowering MSMEs to engage in PLIs.

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