KredX Blog KredX Blog
  • HOME
  • PRODUCTS
    logo

    FOR BUSINESS logo

    logo

    FOR INVESTORS logo

    Invoice Discounting

    Unlock money tied up in unpaid invoices

    KNOW MORE

    KredX Pay Later

    A closed loop financing for your dealers/distributors/Retailers

    KNOW MORE

    KredX Cash Management Solutions (CMS)

    Get real-time analytics. Manage disputes. Minimise risks. Get risk-free returns

    KNOW MORE

    KredX Global Trade

    Get Quick Finance To Fund Your Import-Export Requirements

    KNOW MORE

    Invoice Discounting

    Diversify your portfolio with alternative short-term investments

    KNOW MORE
  • PARTNER WITH US

    Business Partner Program

    Accelerate your client’s business growth and get attractive payouts on time

    KNOW MORE

    Financial Advisor Program

    Grow your credibility and clients’ investment portfolio

    KNOW MORE
  • KNOWLEDGE CENTER

    FAQs

    Blog

    Knowledge Base

    Webinars

    Reports

    WhitePapers

    Podcasts

  • COMPANY
  • LOGIN / SIGNUP
  1. Home
  2. Business
  3. MSMED Act – Is it really helping SMEs in India?
 MSMED Act – Is it really helping SMEs in India?
Business

MSMED Act – Is it really helping SMEs in India?

by KredX Editorial Team September 11, 2018 0 Comment

In a country riddled with bureaucracy and corruption, a move by the government in 2006 that promised support to the MSME industry was a breath of fresh air. The Micro, Small and Medium Enterprises Development Act (MSMED Act) of 2006 was enacted with great hope and promise. Its primary aim was to promote and develop this nascent industry while increasing competitiveness within it. It’s been a decade since, but has the act really benefitted SMEs in India?

MSMED Act – The Good, the bad and the ugly

MSME’s being the backbone of India, had been neglected and suffered for decades with no growth. When the MSMED Act was enacted in 2006, a National Board of Micro, Small and Medium Enterprises was also established. The Board had decided to implement the Act by helping employees, the management and entrepreneurs in this industry improve their skills and assist these enterprises with the required technological and infrastructural upgradations. According to the Act, the classification of enterprises that are eligible for the MSMED Act benefits are as follows:

Manufacturing Enterprises Investment Range
Micro Enterprises ₹25 Lakh
Small Enterprises ₹25 Lakh – ₹5 Crore
Medium Enterprises ₹5 Crore – ₹10 Crore
Service Enterprises Investment Upto
Micro Enterprises ₹10 Lakh
Small Enterprises ₹10 Lakh – ₹2 Crore
Medium Enterprises ₹2 Crore – ₹5 Crore

The enterprises that fall under any of the categories mentioned above are required to procure an MSME registration. An important point to note is that, before the MSMED Act was introduced, registering a firm was not mandatory. With the introduction of this Act, any firm that wants to avail its benefits such as lower rates of interest, power tariff subsidies, tax subsidies, excise exemption scheme, capital investment subsidies, etc. needs to obtain an MSME registration, thereby enabling maintenance of records. A salient feature of the Act is that it cuts down the unnecessary bureaucracy and red tapes Indian businesses are used to. This makes the process faster and seamless. This helps firms in the MSME sector to operate in a relatively free environment sans the intervention of governments.

Since the introduction of the Act, this sector has contributed to 10% of India’s GDP. It has also generated jobs for many in rural India and helping them become self-sufficient and enabling skills training. This thereby translated into utilization of local resources which then contributed to increased exports.

The advent of the Act has brought about a significant increase in productivity but is yet to pick up its pace in exports. However, with increased globalization comes easy access to global markets. Recently, the Federation of Indian Export Organizations (FIEO) announced that small and medium-sized enterprises (SMEs) will have free access to certain market zones so as to facilitate entry into the African and European markets. This much-needed move will encourage SME’s to explore the export industry with more fervour.

On the flip side, there still seems to be some disconnect in the implementation of the MSMED Act. MSME’s fall under Priority Sector wherein banks are required to lend at least 40% of their total portfolio. As the investment range has grown, smaller units have been sidelined due to overcrowding of the investment range since small and medium enterprises are clubbed together. These small enterprises pay a heavy price because they are not eligible to raise funds in the stock market unless their net worth is over ₹100 million.

Another area that the MSMED Act nearly missed out on is women entrepreneurs in the MSME sector. There is an urgent need for a reform in the Act wherein women entrepreneurs get some sort of a leverage like a reservation in infrastructural or procurement policies. Currently, the Act has a scheme running for women in the coir industry alone; this needs to be extended to other industries as well.

There is no doubt that the MSMED Act of 2006 has been a step in the right direction. It has also helped casteism-ridden India’s, “lower class”, get an equal opportunity to run successful businesses. The potential of this sector is tremendous. However, the time has come to reform the Act and take into account the learnings of the past decade to further improve the MSME sector.

To read about the role of Indian SMEs in Economic Development, click here.

Share This:
Previous post
Next post

KredX Editorial Team (Website)

administrator

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Enquire now

  • Invalid value

  • Invalid value

  • Invalid value

The Best Of Alternative Investments, Now On Your Phone

Download App:

KredX Blog KredX Blog

Wing ‘A’, Ground Floor, Office-1 Block-‘A’, Salarpuria Softzone, Bellandur Village, Varthur Hobli, Bangalore South Taluk, Outer Ring Road, Bangalore – 560103

+1 212-602-9641

info@example.com

Get More Location

Follow us:

Download app:

Company

Home
About Us
Careers
Contact Us
Our Offices

Resources

Blog
Reports
Whitepapers
Knowledge Base
Podcasts
Webinars

Support

FAQs
Talk To Our Advisor
Chat With Us
Sign Up
Login

Legal

Nodal Officer Name: Amrutha A / Ph: 08061799200, IVR-9 / Email: Amrutha@Kredx.Com
Terms And Conditions
Privacy Policy

Investor Products

Invoice Discounting
Bonds
Digital Gold/Silver
KredX Assured

Business Products

Invoice Discounting
Buy Now Pay Later
KredX Cash Management Solutions
KredX Global Trade

Quick Links

Business Partner Program
Financial Advisor Program
Business Suite
©2022 Minions Ventures Pvt Ltd