Concept of MSME

What are the enterprises that are covered under MSME? How MSME operates? Which department is responsible for facilitating support to MSME? Everybody might not be aware of these questions but nowadays everybody is acquainted with the general idea that there is a body of Government that is engaged in the development and promotion of MSME.

Micro, Small and Medium Enterprises (MSME) Act has gained immense popularity in recent decades as it provides platform to support the interest of small entrepreneurs/artisans which is much needed to reduce the disparity in an economy like India.

This article will cover the very concept and idea of MSME and how the government departments are structured to support MSME.

Origin of MSME

The Micro; Small and Medium Enterprises Development (MSMED) Act was notified in 2006, prior to this Act, these sectors were not specifically categorized under specific heads as they are now structured . They were regulated through different ministry which is “The Ministry of Small Scale Industries and Agro and Rural Industries” that was created in October 1999.

As name suggests this Ministry administers in two different zones i.e. Small Scale Industries and Agro and Rural Industries. The Government soon realizes to segregate the responsibilities under different roof and to streamline the operations, in September 2001 this Ministry got split in two separate ministries a) Ministry of Small Scale Industries b) Ministry of Agro and Rural Industries.

Further Government has notified The Micro; Small and Medium Enterprises Development (MSMED) Act  notified in 2006 to facilitate and administer small enterprises under one Ministry.

On 9 May 2007, subsequent to an amendment of the Government of India (Allocation of Business) Rules, 1961, erstwhile Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries were merged into the Ministry of Micro, Small and Medium Enterprises (M/o MSME).

And now MSME operates as an apex body to develop, assist, manage, regulate, support these small enterprises in alignment with various other government bodies which are working toward same objective.

Importance of MSME

For an economy to thrive it is necessary that each sector of the economy develop and grows parallelly. Ministry of MSME mission is to achieve objective of upliftment of sectors/ start ups/artisan/agriculturist who are not financial and technically empowered as compared to other big industrial sector. Below given are some highlights for MSME as captured in the Annual Report 2019-20 of Ministry of MSME.

• Larger employment opportunity at lower cost than large industries
• MSME has created about 11.10 crore jobs in the country as per National Sample Survey 73rd round (2015-16)
• Credit Support  through prime Minister’s Employment Generation programme (pMEGp), Credit linked capital subsidy scheme
• Promotion for skill development: 2,69,005 people trained under these schemes/organizations

Organizational Structure

MSME covers various areas under its ambit including rural development, khadi promotion, coir industry. small business development, agri-based industrial development etc.

These areas are by large managed through below given organizational structure

M/o MSME

• Division 
  • Small & Medium Enterprises (SME) Division
  • Agro & Rural Industry (ARI) Division
• Attached Offices
  • Office of the Development Commissioner (DC)
  •  National Small Industries Corporation (NSIC)
  •   Khadi and Village Industries Commission (KVIC)
  •   The Coir Board
•  Training Institutes
  • National Institute for Entrepreneurship and Small Business Development (NIESBUD), Noida
  • National Institute for Micro, Small and Medium Enterprises (NI-MSME), Hyderabad
  • Indian Institute of Entrepreneurship (lIE), Guwahati
  • Mahatma Gandhi Institute for Rural Industrialization (MGIRI)
  • Wardha a society registered under Societies Registration Act, 1860.
•     Board
  • The National Board for Micro, Small and Medium Enterprises (NBMSME)

Each division, institute, board has its own set of working and objectives through which they regulate MSME sector. Brief of such functions are given below:

1. Small & Medium Enterprises (SME) Division:

• • SME Division of MSME is entrusted with responsibility to monitor the National Small Industries Corporation (NSIC) Ltd., which is a Mini Ratna public sector undertaking established by the Government of India in 1955. NSIC operates through countrywide network of offices and Technical Centres in the Country.
  • Besides administration of NSIC, SME also supervise three autonomous national level entrepreneurship development/training organisations.

2. Agro & Rural Industry (ARI) Division

• • Khadi and coir two major focus area of MSME are handled through ARI division.
  • This division look after Khadi and Village Industries Commission and The Coir Board
  • It also administers a new organisation Mahatma Gandhi Institute for Rural Industrialization (MGIRI)
  • It also supervise implementation of programme like Prime Minister’s Employment Generation Programme (PMEGP).

3.Office of the Development Commissioner [MSME]

• • The major responsibility of office of DC lies in formulating, drafting, implementing various policies and programmes for the betterment of MSME sector.
  • This office also provides technical assistance as required for MSME industries
  • Its network includes:

• • • 30 Micro, Small and Medium Enterprises-Development Institutes (MSME-Dls);
    • 28 Branch MSME-Dls;
    • 4 MSME Testing Centres (MSME-TCs);
    • 7 MSME-Testing Stations (MSME-TSs);
    • 2 MSME-Training Institutes (MSME-Tls); and
    • 1 MSME-Technology Development Center-Hand Tools (MSME-TDC-Hand Tools).

4.Khadi & Village Industries Commission

• • As name suggests this commission aims particularly towards promotion, development and upgradation of Khadi and other Village based Industries.
  • It is a statutory organization established under the Khadi and Village Industries Commission Act, 1956.
  • It implements various projects, programmes to generate employment at ground level and provide them necessary financial and technical assistance.

5. The Coir Board

• Coir are fibre extracted from coconuts and used in production of various products like mats, brush, floor covering, ropes, nets etc.
• The Coir Board works towards development of Coir industry in India , providing better life to workers of coir industries, conducting outreach programmes to increase the awareness about this traditional industry.
• Two research institutes of coir are promoted by the Coir Board which is Central Coir Research Institute (CCRI), Kalavoor, Alleppey, and Central Institute of Coir Technology (CICT), Bengaluru

6.National Small Industries Corporation Limited (NSIC)

• • NSIC is a Mini Ratna public sector undertaking established by the Government of India in 1955.
  • NSIC  is ISO 9001-2008 certified Government of India Enterprise under Ministry of Micro, Small and Medium Enterprises (MSME).
  • It provides services to MSME’s like:
    • Marketing support
    • Consortia and tender marketing
    • Web portals for MSME
    • Conducting exhibition and fairs
    • Credit support
    • Consultancy etc.

MSME Concept: Essential FAQs

1. What is the definition and origin of MSME?

MSME stands for Micro, Small, and Medium Enterprises. The sector is governed by the MSMED Act, 2006. Before this Act, these businesses were managed by the Ministry of Small Scale Industries and Agro and Rural Industries. In May 2007, these were merged to create the current Ministry of Micro, Small and Medium Enterprises.

2. How is the Ministry of MSME structured?

The Ministry functions through a specific hierarchy of divisions and offices:

• SME Division: Monitors the National Small Industries Corporation (NSIC).

• ARI Division: Handles Agro and Rural Industries, specifically Khadi and Coir.

• Office of the Development Commissioner (DC): The lead office for drafting and implementing MSME policies and providing technical assistance.

3. What are the key statutory bodies under the Ministry?

• Khadi and Village Industries Commission (KVIC): Established under the KVIC Act, 1956, to promote rural employment through village industries.

• The Coir Board: Dedicated to the development of the coir industry and the welfare of its workers.

• National Small Industries Corporation (NSIC): A Mini Ratna PSU that provides marketing, credit, and consultancy support to MSMEs.

4. What impact does the MSME sector have on the Indian economy?

According to the Ministry’s 2019-20 Annual Report:

• Employment: The sector created approximately 11.10 crore jobs.

• Cost Efficiency: It provides higher employment opportunities at a lower capital cost compared to large-scale industries.

• Skill Development: Over 2.69 lakh people have been trained under various MSME schemes.

5. Which major schemes are administered by MSME divisions?

The ARI Division is responsible for the Prime Minister’s Employment Generation Programme (PMEGP). The SME Division supervises training through institutes like NIESBUD (Noida) and NI-MSME (Hyderabad).

For providing strong support to the MSME sector and for overall development of MSME’s these Boards, Divisions, Institutes play vital role. They work in coordination of each other while fulfilling the objectives assigned under each structuring.