Entrepreneruship

UNIT 13 ENTREPRENERUSHIP Development and

MSMEs
DEVELOPMENT AND MSMEs

Structure
13.0 Objectives
13.1 Introduction
13.2 Micro Small and Medium Enterprises (MSMEs)
13.2.1 Role of MSMEs in Economic Development
13.2.2 Definition of MSMEs
13.2.3 Key Highlights of the New Classification
13.3 MSMED Act, 2006
13.3.1 National Board for Micro, Small & Medium Enterprises(NBMSME)
13.3.2 Advisory Committee
13.3.3 Promotion, Development and Enhancement of Competitiveness of MSME
13.3.4 Some Other Provisions
13.4 Role of Government in Development of MSMEs
13.4.1 Statutory Bodies, and Other Attached Offices under the Ministry of Micro,
Small and Medium Enterprises
13.4.2 Major Programmes and Schemes of the Ministry of MSME
13.4.3 Some Recent Initiatives by the Government for the Development of MSMEs
13.5 Role of MSMEs in Entrepreneurship Development
13.6 Let us Sum up
13.7 Keywords
13.8 Answers to Check Your Progress
13.9 Terminal Questions

13.0 OBJECTIVES
After completion of this unit, you will be able to:
x describe the meaning and scope of Micro, Small and Medium
enterprises;
x discuss the importance of MSMEs in the economic development of a
nation;
x analyse the MSME development Act;
x acquaint with the government’s concern and role in promoting MSMEs;
x explore various institutions that facilitate the growth and development of
MSMEs; and
x describe the importance of MSMEs in entrepreneurship development of a
nation.

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Entrepreneurship and
Micro, Small and 13.1 INTRODUCTION
Medium Enterprises
(MSMEs)
Micro, Small and Medium enterprises are crucial for growth and
development of an economy, especially for developing economies like ours.
Contribution of MSMEs in the Gross Domestic Product (GDP) of our
country is 30 percent. They contribute about 40 percent in the overall exports
of India.

In any country like ours, MSMEs play very important role in socio-economic
development. Whatever funds are available with the government is mostly
used for infrastructure development of the country. For socio-economic
development, government relies heavily on MSMEs. They make adequate
utilisation of the resources available in the society and pay for them. They are
great employment generators. They also contribute immensely in rural
development as more than half of the MSMEs operate in rural India. Thus the
MSMEs are crucial for reducing regional imbalances and assuring more
equitable distribution of National Income and wealth.This provides a spin to
entrepreneurship development also as the MSMEs are Innovative and
responsive to changing market dynamics. Their existence is crucial for large
industries too as they are complimentary to the large industries.

Ever since the Industrial Policy Resolution, 1956, came into being,
establishment and growth of village and small industries were given due
consideration and importance along with the agriculture. Growth Potential of
MSMEs and their significant contribution to the growth and development of
our economy attracted the attention of the Indian Government. MSMED Act,
2006 was enacted by the parliament to encourage and promote this MSME
sector.
In this unit, you will learn about the legal definition of MSMEs, their
features, MSME Development Act and its role in entrepreneurship
development.

13.2 MICRO, SMALL AND MEDIUM

ENTERPRISES (MSMEs)
Governments support business enterprises to facilitate the industrial and trade
activities. Micro, Small, and Medium Enterprises (MSMEs) deserve special
attention. In spite of being small investment enterprises, MSMEs may
contribute a significant in the economic development of the country. Over the
last five decades, the Micro, Small, and Medium Enterprises (MSME) sector
has emerged as one of the most dynamic and vibrant sectors of the Indian
economy. By fostering entrepreneurship and creating large employment
opportunities at relatively low capital costs, the sector contributes
considerably to the country's economic and social development. As ancillary
units, MSMEs are complementary to large industrial sectors and they
contribute greatly to the inclusive industrial development of the nation.
MSMEs are broadening their reach across several sectors of the economy,
producing a multitude of products and services to meet the needs of the
global as well as domestic markets.
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13.2.1 Role of MSMEs in Economic Development Entrepreneruship
Development and
MSMEs
Employment opportunities: MSMEs create employment opportunities for
people at large at comparatively lower cost of capital. In the economy like
ours where unemployment and underemployment pose a big challenge.
MSMEs are crucial for us as government alone cannot provide employment
opportunities to the people.

Optimum utilisation of resources: MSMEs make proper and optimum

utilisation of the local resources available such as land and building, human
resources, raw materials etc. in the society which may remain idle otherwise.

Balanced regional growth: Micro and small enterprises are scattered across
the length and breadth of the country which enables balanced regional
growth.

Rural Development: MSMEs contribution in the rural areas has been

tremendous. It uses local available resources that lead to socio-economic
development of rural areas.

MSMEs have also contributed in the development of handicraft industry,

labour intensive industries, and export sector. It also helped in the
empowerment of local people, have made India self sufficient through
emphasise on the production and use of swadeshi products, have increased
rural-urban interaction and self-employment.

Considering the role of MSMEs in economic development of our nation,

government is paying great attention to MSMEs. To assist the MSMEs and
help them to scale up, the Ministry of Micro, Small and Medium
Enterprises (M/o MSME) was formed in 2007 by merging the Ministry of
Small Scale Industries and the Ministry of Agro and Rural Industries.
With a view to boost the development of small enterprises in the country, the
Government of India has enacted Micro Small and Medium Enterprises
Development (MSMED) Act, 2006. Through MSMED Act, 2006 the
Government aims to facilitate the growth of these enterprises as well as boost
their competitiveness.

13.2.2 Definition of MSMEs

The Micro Small & Medium Enterprises (MSMEs) are defined in India
under the MSMED Act 2006.

Micro, Small and Medium Sized Enterprises (MSME) have different

definitions across countries and organizations, based on variables such as
number of employees, turnover, investment in assets, or a combination of
these. According to the World Bank, Micro, Small and Medium Enterprises
(MSMEs) have been defined in terms of numbers of employees. In micro
enterprises: 1–9 employees; small: 10–49 employees; and medium: 50–249
employees.

The MSMED Act, 2006 defines the Micro, Small and Medium Enterprises
based on:
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Entrepreneurship and 1) The investment in plant and machinery for those engaged in
Micro, Small and
Medium Enterprises manufacturing or production, processing or preservation of goods and,
(MSMEs)
2) The investment in equipment for enterprises engaged in providing or
rendering of services.

On 26.06.2020, a new composite criterion of classification for manufacturing

and service units was notified which came into effect on 1st July, 2020. The
MSMEs are now classified according to a composite criterion that includes
both their investment and sales turnover.
Let us now know the definitions of MSMEs, both old as well as new so that
we can understand their nature and features.

Old Definition of MSMEs (as per MSMED Act, 2006)

The guidelines with regard to investment in plant and machinery or
equipment as defined in the MSMED Act, 2006 are:

Nature of Investment in plant and Investment in

Enterprise machinery excluding land and equipment excluding
building for enterprises engaged land and building for
in manufacturing or production, enterprises engaged in
processing or preservation of providing or rendering
goods of services

Micro Not exceeding Rs.25.00 Lakhs Not exceeding Rs.10.00

Lakhs

Small More than Rs.25.00 lakhs but does More than Rs.10.00 lakhs
not exceed Rs.5.00 crore but does not exceed
Rs.2.00 crore

Medium More than Rs.5.00 crore but does More than Rs.2.00 crore
not exceed Rs.10.00 crore but does not exceed
Rs.5.00 crore

Considering the importance of MSMEs in the economic development,

Government focuses on promotion of activities and facilities to the
businesses that come under the ambit of MSMEs. The old definition given
above was restricting many MSMEs that grew and wanted to expand further,
from taking facilities and privileges provided to them by the Government.
There was a demand from MSME sector to change this definition. Union
Finance Minister, Ms. Nirmala Sitaraman made the announcement of new
definition of MSMEs saying “, the decision to change the definition of
MSMEs was made mainly because of the low threshold limit under the old
definition of MSMEs”. She further added that the old definition of MSMEs
created a "fear” among them that if they expand further, they may lose the

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benefits that MSMEs enjoy. She said this has been "killing the urge to grow" Entrepreneruship
Development and
among the MSMEs. MSMEs

New Definition of MSME

You have already learnt above that the criterion of classification of MSMEs
under MSMED Act, 2006 was based on investment in plant and machinery /
equipment. It was different for manufacturing and services units. It was also
very low in terms of financial limits. Consequently, the Indian MSME sector
has been calling for an amendment to the MSME definition for a long time.

The central government has attempted to revise the definition of MSMEs

given in the MSMED Act, 2006 on two occasions previously. The
government introduced the MSME Development (Amendment) Bill, 2015
which proposed to increase the investment limits for manufacturing and
services MSMEs but this Bill was withdrawn in July 2018 and another Bill
was introduced. The MSME Development (Amendment) Bill, 2018
proposed to use annual turnover as criteria instead of investment for
classification of MSMEs but the 2018 Bill lapsed with the dissolution of 16th
Lok Sabha.
Finally, a new composite classification criteria was approved which was
announced by the Finance Minister Mrs. Nirmala Sitharaman in the
Aatmanirbhar Bharat Package on 13th May 2020. The new classification went
into effect on 1st July, 2020.

In accordance with the composite criterion of classification the Micro, Small

and Medium Enterprises (MSME) are classified as below:

Nature of Investment in Plant and Annual Sales Turnover

Enterprise Machinery and Equipment

Micro Does not exceed one crore Does not exceed five crore
rupees rupees

Small Does not exceed ten crore Does not exceed fifty crore
rupees rupees

Medium Does not exceed fifty crore Does not exceed two
rupees hundred and fifty crore
rupees

13.2.3 Key Highlights of the New Classification

As the economy has changed significantly since the enactment of the
MSMED Act in 2006, a revision in the definition was required in order to be
realistic with time and to establish an objective system of classification and to
promote ease of doing business. As a result of new composite criteria of
classification for manufacturing and service units:
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Entrepreneurship and x There will be no difference between manufacturing and service sectors.
Micro, Small and
Medium Enterprises x In addition to the investment in plant and machinery criteria, a new
(MSMEs)
criterion of turnover has been added to the previous classification
criteria.
x MSMEs will benefit from MSMEs' new threshold limit in many ways,
including growth in size.
x The turnover from exports will not be counted in the limits of turnover
for micro, small or medium units.
x It will benefit the MSME sector by attracting more investments and
creating more jobs.

Overall, the new definition of MSMEs is a substantial improvement over the

previous definition and is expected to help these enterprises to face new
challenges in a better frame and help them grow and expand further.

13.3 MSMED ACT, 2006

Different stakeholders from time to time have emphasized that the small
business sector had a long need for a comprehensive Act for the development
and regulation of small enterprises in order to free themselves from the
plethora of laws and regulations. Further, committees such as the Abid
Hussain Committee (1997) and Study Group under Dr. S.P. Gupta have made
recommendations to provide a proper legal framework for small business to
relieve it of the burden of complying with multiple rules and regulations.

Although small scale manufacturing industries have continued to be

important for the economy, in the past few years, small scale services have
also emerged as a substantial sector that contributes substantially to the
economy and employs millions of workers. Therefore, in accordance with
worldwide practice, it became necessary to combine the concerns of
manufacturing and services together and identify them as a composite sector.
An economy like India, which is experiencing rapid growth, requires policy
interventions and a legal infrastructure that facilitates the development of
small scale business enterprises. With these objectives in view, the
Government came with an exclusive legislation for micro, small and medium
enterprises known as the Micro, Small and Medium Enterprises Development
Act, 2006.

The Micro, Small and Medium Enterprises Development (MSMED) Act,

2006 is an act to provide for facilitating the promotion and development
and enhancing the competitiveness of micro, small and medium
enterprises and for matters connected therewith or incidental thereto.
Key Provisions of the MSMED Act 2006
x It provides the legal framework for recognition of the concept of
“enterprise” which comprises both manufacturing and service
enterprise. It defines the term as:

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 An enterprise is an industrial undertaking or a business concern or any Entrepreneruship
Development and
other establishment, by whatever name called, engaged in the MSMEs
manufacture or production of goods, in any manner, pertaining to any
industry specified in the first schedule of the Industries (Development
and Regulation) Act, 1951 or engaged in providing or rendering any
service or services.
x It broadly classifies the manufacturing and service entities into three
tiers, namely, Micro, Small and Medium.

x It establishes a National Board for Micro, Small and Medium

Enterprises. The role of the Board is to examine the factors affecting the
promotion and development of MSMEs, review the policies and
programmes of the Central Government and make recommendations in
regard to facilitating MSMEs promotion and development enhancing
their competitiveness.

x It empowers the Central Government to constitute an Advisory

Committee. The role of the Committee is to give recommendations to
the Board, Central and State government on the matters referred to it.
x It provides for the procedure for the filling of forms for registration
under MSME.

x It empowers the Central Government to undertake programmes and issue

guidelines and instructions to promote, develop and enhance the
competitiveness of MSMEs.

x It provides provisions for the delayed payments to micro and small

enterprises.

x It empowers the Central and State government to make rules to carry

out the provisions of the Act.
It should be kept in mind that the State governments are primarily responsible
for the promotion and development of MSMEs within their jurisdictions.
However, the Central Government, through its various initiatives,
supplements the efforts of the states. The Ministry of MSME and its
organizations are responsible for helping the States in encouraging
entrepreneurship, employment and livelihood opportunities, and to increase
the competitiveness of MSMEs amid the changing economic scenario.

Let us now discuss these key provisions in detail.

13.3.1 National Board for Micro, Small and Medium

Enterprises (NBMSME)
TheNational Board for Micro, Small and Medium Enterprises was
established under the MSMED Act, 2006. It consists of 47 members
including Chairman, Vice Chairman and Member Secretary. The Minister for
Ministry of MSME is the ex-officio chairman of the NBMSME and the head
office of the Board is at Delhi. Subject to the directions of the central
government, the Board should perform all, or any of the following functions:
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Entrepreneurship and x Examine the factors affecting the promotion and development of micro,
Micro, Small and
Medium Enterprises small and medium enterprises and review the policies and programmes
(MSMEs) of the Central Government in this direction.
x Make recommendations for promotion and development of the micro,
small, and medium enterprises and increasing their competitiveness.
x Advice the Central Government on use of the Fund or Funds constituted
under Section 12 of the Act.

13.3.2 Advisory Committee

The MSMED Act, 2006 also provides for the constitution of an Advisory
committee for MSME. The advisory committee comprises five officers of
the central government having experience in matters relating to MSME, three
representatives of the state governments and one representative each from
MSME association. The Member Secretary of the National Board of Micro,
Small and Medium Enterprise is also the Secretary of the Advisory
committee. The role of the advisory committee is as follow:

x The Central Government before classifying any class or classes of

enterprise, should obtain the recommendation of an advisory committee.
x The Central Government may take advice of the advisory committee on
matters of:
¾ Promotion and development and enhancing competitiveness of
MSMEs;

¾ Credit facility for micro, small and medium enterprises;

¾ Preference policies in procurement of goods and services for micro

and small enterprises;

¾ Administration and utilisation of fund or funds.

x The State government may take advice from the advisory committee to
make rules to carry out the provisions of the MSMED Act, 2006.
x The advisory committee may give recommendations to the Board,
Central or State government on any of the following matters:

¾ Level of employment in a class or classes of enterprises;

¾ Level of investment in plant and machinery or equipment;

¾ The need of higher investment in plant and machinery or equipment

by the class or classes of enterprise for technological upgradation,
employment generation and enhanced competitiveness;

¾ The possibility of promoting and diffusing entrepreneurship in

MSMEs;

¾ The international standards for classification of SMEs.

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13.3.3 Promotion, Development and Enhancement of Entrepreneruship
Development and
Competitiveness of MSME MSMEs

In accordance with MSMED Act, 2006, the following provisions facilitate

MSMEs promotion, development, and enhanced competitiveness.
1) In order to facilitate the promotion, development and enhancement of
competitiveness of MSME, the central government may launch programs
for:

¾ Development of skills in employees, management and

entrepreneurs;
¾ Technological upgradation;
¾ Marketing assistance;
¾ Infrastructure development; and
¾ Cluster development.
x Enactment of progressive credit policies for timely and smooth
availability of credit for micro, small and medium enterprises.
x Formulation of preference policies by Central and State
government in respect of procurement of goods and services for
micro and small enterprises,
x Constitution, administration and utilisation of funds by way of
grants by central government for the promotion, development
and enhancement of competitiveness of MSMEs.

13.3.4 Some Other Provisions

The MSMED Act, 2006 also provides for the rules and regulations related to
the registration and delayed payment in MSMEs. They are discussed below:

MSME Registration: According to the MSMED Act, 2006 registration

under MSME is discretionary for a micro or small enterprise (manufacturing
or service) and also for a medium enterprises engaged in providing or
rendering of services. It is compulsory for a medium enterprise engaged in
the manufacture or production of goods pertaining to any industry specified
in the First Schedule (IDR Act).

x For registration under the MSMED Act, 2006 the MSMEs entrepreneurs
earlier used to file Entrepreneurs Memorandum Part 1 (EM-I) at District
Industries Centres (DICs) before starting an enterprise, and
Entrepreneurs Memorandum Part 2 (EM-II) after commencement of the
operations.

x Since, September 2015 in order to promote ease of doing business the

Ministry replaces EM (I and II) filing with UdyogAadhaar Memorandum
(UAM). UAM is an online self-certification registration system.

x Based on the composite classification criteria of MSMEs notified on

26.6.2020, the Ministry has also now replaced the process of registration
by filing of UdyogAadhaar Memorandum (UAM), with ‘Udyam’. Now,
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Entrepreneurship and the existing and prospective MSME entrepreneurs may do registration
Micro, Small and
Medium Enterprises online on portal: https://udyamregistration.gov.in.
(MSMEs)
Delayed Payments: The MSMED Act, 2006 makes provisions for the
matters relating to the delayed payments between the buyers and micro and
small enterprise suppliers of goods and services.
x The Act stipulates that the payments for goods or services have to be
cleared by the buyer in favour of the supplier on or before the date
agreed between them. In case of no agreed date, the payment period
should not exceed 45 days from the day of acceptance.

x If, in any case the buyer fails to make the payment, he is also liable to
pay interest on the amount due to the supplier.
x For any dispute related with delayed payment, the concerned party may
move to Micro and Small Enterprises Facilitation Council for redressal.
x To further the objective of MSMED Act, 2006 Ministry of MSME
launched a portal MSME SAMADHAAN
(http://samadhaan.msme.gov.in/) on 30.10.2017. The portal gives
information regarding the delayed payment status of micro and small
enterprises. It also facilitates these enterprise to file related complaints
online.

Check Your Progress A

1) Define MSME.
2) List the key provisions of the MSMED Act, 2006.

3) Fill in the blanks:

i) The Micro Small & Medium Enterprises (MSMEs) are defined in
India under the ………………….

ii) MSMEs are now classified according to a composite criterion that

includes both their ……………………. and ……………………..

iii) Under MSMED Act, 2006 registration is compulsory for a

…………………. engaged in manufacturing.

iv) ………………….. is constituted under MSMED Act, 2006 to give

recommendations to the Board, Central and State government on the
matters referred to it.

v) For any dispute related with delayed payment, the MSMEs may
move to ……………………. for redressal.

4) State whether the following statements are True or False:

i) MSMEs create employment opportunities for people at large at

comparatively lower cost of capital.

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 ii) A medium enterprise is one where investment in plant and Entrepreneruship
Development and
machinery does not exceed ten crore rupees and annual sales MSMEs
turnover does not exceed fifty crore rupees.

iii) The Minister for Ministry of MSME is the ex-officio chairman of

the NBMSME.

iv) The old classification criterion for MSMEs was different for
manufacturing and services unit.

v) At present, the MSMEs entrepreneurs has to file Entrepreneurs

Memorandum Part 1 and 2 for registration.

13.4 ROLE OF GOVERNMENT IN

DEVELOPMENT OF MSMEs
The State Governments are primarily responsible for promoting and
developing MSMEs. The Government of India, however, supplements state
efforts through a variety of initiatives. The Ministry of Micro, Small &
Medium Enterprises (M/o MSME), which envisions a more progressive
MSME sector by promoting growth and development of the sector, has been
created by the Government of India in recognition of the role MSMEs play in
the Indian economy.

A number of statutory and non-statutory bodies work under the aegis of the
Ministry of MSME. These include: the Khadi and Village Industries
Commission (KVIC), The Coir Board, National Small Industries Corporation
(NSIC), National Institute for Micro, Small and Medium Enterprises
(NIMSME) and Mahatma Gandhi Institute for Rural Industrialisation
(MGIRI).The Ministry of MSME, as well as its organizations, are responsible
for supporting States that endeavour to promote entrepreneurship,
employment and livelihood opportunities. It also aims at improving the
competitiveness of MSMEs in a changing economic environment.

Together with other ministries, departments, and institutions, the Ministry of

MSME offers a wide range of assistance programs and other initiatives which
are designed to enhance MSMEs' financial capabilities, provide them
technology assistance, upgrade their infrastructure, increase their skills and
improve their competitiveness.

The Government, Ministry of MSME and its various organizations

frame and implement various policies and programmes in order to
provide following facilities to these enterprise:
x access to adequate credit from banks and financial institutions;
x support for technology upgradation and modernization;
x well-developed infrastructure facilities;
x state-of-the-art testing and certification facilities;
x familiarity with modern managerial practices;
x training programmes for entrepreneurship and skill development;
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Entrepreneurship and x assistance with product development, design intervention, and
Micro, Small and
Medium Enterprises packaging;
(MSMEs)
x welfare support to artisans and workers;
x support for better access to both domestic and export markets; and
x cluster-based assistance to assist units and their collectives in
strengthening capacity building.

We will now discuss in detail about the organisations working under the
aegis of the Ministry of MSME, the programs and schemes developed by
them, and various recent initiatives undertaken. This will help you in
understanding the government's role in the development of MSMEs.

13.4.1 Statutory Bodies, and Other Attached Offices under

the Ministry of Micro, Small and Medium Enterprises
The following statutory bodies and institutions work under the ministry of
MSME:

1) Khadi and Village Industries Commission (KVIC)

2) Technology Centres (TCs)
3) Coir Board (CB)
4) National Small Industries Corporation Limited (NSIC)
5) Mahatma Gandhi Institute for Rural Industrialisation (MGIRI)
6) National Institute for Micro, Small and Medium Enterprises (NI-MSME)
Let us discuss about them in detail:

Khadi and Village Industries Commission (KVIC)

Khadi and Village Industries (KVI) are two national heritages of India.
Khadi& Village Industries Commission (KVIC) is a Statutory Organization
under the aegis of the Ministry of MSME which was established under the
Khadi and Village Industries Commission Act, 1956. In addition to
promoting and developing Khadi and Village Industries, KVIC works to
strengthen rural economies by providing employment opportunities in the
rural areas through the production and marketing of Khadi and Village
Industries products. The Commission's head office is located in Mumbai.

"Village Industry” means any industry located in a rural area that produces
any goods or renders any service with or without the use of power. In such
industry, the fixed capital investment per head of an artisan or a worker does
not exceed Rs.1.00 Lakh in plain areas and Rs.1.50 lakhs in hilly areas or
such other sum may be by notification in the official gazette, be specified
from time to time by the Central Government.

Village Industries comprise six different sectors: Agro Based and Food
Processing Industry (ABFPI); Mineral Based Industry (MBI); Wellness &
Cosmetics Industry (WCI); Hand Made Paper, Leather and Plastic Industry
(HMPLPI); Rural Engineering and New Technology Industry (RENTI) and;
284 Service Industry.

The main objectives of KVIC include: Entrepreneruship
Development and
MSMEs
x The social objective of providing employment in rural areas;
x The economic objective of producing saleable articles; and
x The wider objective of creating self-reliance amongst people and
building up a strong rural community spirit.

Coir Board
The Coir Board is a statutory body established under the Coir Industry Act,
1953 for the purpose of promoting the development of the coir industry. India
is the largest producer of coir fibre in the world, accounting for more than 80
percent of total global coir fibre production. The Board's headquarter is
located in Kochi, Kerala.

The main objectives of Coir Board includes:

x To facilitate and promote the production and marketing of coir yarn, and
its products;
x To promote exports of coir and coir-derived products;
x To improve the living conditions of workers engaged in this industry.

The National Small Industries Corporation (NSIC) Limited

The National Small Industries Corporation Limited (NSIC) is an ISO 9001-
2015 accredited Government of India Enterprise under Ministry of Micro,
Small and Medium Enterprises(MSME). NSIC operates its services through
eight technical centres throughout the country. NSIC has established
Training-cum-Incubation Centre and also offers a package of services
tailored for the needs of the MSME sector.

The main objectives of NSIC includes:

x To provide integrated services, including marketing, finance, technology,
and other services, in order to promote and support Micro, Small and
Medium Enterprises.
x To be the country's premier organization for the development of Micro,
Small, and Medium-sized Enterprises.

Mahatma Gandhi Institute for Rural Industrialisation (MGIRI)

The Jamnalal Bajaj Central Research Institute (JBCRI), Wardha was

redesigned in 2008 by the Indian Institute of Technology, Delhi as a national
institute under the Ministry of MSME and is now known as Mahatma Gandhi
Institute for Rural Industrialization (MGIRI).

There are six sections of MGIRI which conduct the organization's activities,
each sector has been headed by a senior scientist or technologist. These
divisions are: Chemical Industries Division, Khadi and Textile Division, Bio-
processing and Herbal Division, Rural Energy and Infrastructure Division,
Rural Crafts and Engineering Division, and Management & Systems
Division.
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Entrepreneurship and The main objectives of MGIRI includes:
Micro, Small and
Medium Enterprises
(MSMEs) x To accelerate rural industrialization for a sustainable village economy, so
that KVI coexists with major industry;
x To bring professionals and experts to Gram Swaraj;
x To support traditional artisans;
x To develop innovative ideas through pilots and field trials; and
x To conduct research & development using local resources for alternative
technologies.

National Institute for Micro, Small and Medium Enterprises (NI-

MSME)
NI-MSME was originally set up as Central Industrial Extension Training
Institute (CIETI) in New Delhi in 1960 under the then Ministry of Industry
and Commerce, Government of India. In 1962, the Institute was shifted to
Hyderabad as a registered society called Small Industry Extension Training
Institute (SIET). After the enactment of MSMED Act, 2006, the Institute was
re-designated as National Institute for Micro, Small and Medium enterprises
(NI-MSME). The organization is currently operating under the Ministry of
Micro, Small and Medium Enterprises.
Activities of the Institute are organized through its four Schools of
Excellence namely, Enterprise Development; Enterprise Management;
Entrepreneurship and Extension; and Enterprise Information and
Communications.

The main objectives of NI-MSME includes:

x The primary goal of the National Institute for MSME is to train trainers;
x To conduct trainings on new areas of information technology;
x To bring to light a variety of topics through conferences and seminars.;
x To put emphasis on need based programmes;
x To adopt a client-oriented approach and innovative interventions;
x To evaluate the program's effectiveness; and
x To put strong emphasis on research publications.

Technology Centres
The Technology Centres, formerly known as Tool Rooms and Technical
Development Centres, are set up by the Ministry of MSME and play a crucial
role in providing practical skill and development training to over two lakh
unemployed youth and industry workers each year.

Currently, there are 18 technology centres in operation. Ten of these are for
the tooling industry, and eight of them are for other industries such as ESDM
(electronics, system design, and manufacturing), glass, footwear, and
fragrance and flavour.

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A wide range of quality tools, skilled personnel, and consultancy services are Entrepreneruship
Development and
provided by these Technology Centres (TCs) to MSMEs in order to update MSMEs
technology in their processes and products.

13.4.2 Major Programs and Schemes of the Ministry of

MSME
The Ministry of MSME runs numerous schemes and programs which are
aimed at providing:
x credit and financial assistances;
x skill development training;
x infrastructure development;
x marketing assistance;
x technological and quality upgradation; and
x other services for the MSMEs across the country.

A snapshot of all the schemes and programs is provided below:

Name of the Scheme Objective of the scheme

Prime Minister Employment Generation Programme and Other Credit

Support Schemes

1. Prime Minister’s Employment To provide financial assistance for the

Generation Programme establishment of self-employment
(PMEGP) ventures. It aims at the creation of
sustainable employment opportunities
in rural and urban settings.

2. 2nd Loan for up-gradation of the To provide financial assistance for

existing PMEGP/MUDRA expansions and upgrades of
units PMEGP/MUDRA units that have
achieved success and high
performance.

3. Credit Guarantee Scheme for To provide collateral-free / third-party

Micro & Small Enterprises guarantee-free loans to Micro and
(CGTMSE) Small Enterprises (MSEs). It provides
grants especially without collateral, in
order to help first generation
entrepreneurs to venture into self-
employment.

4. Interest Subsidy Eligibility To provide concessional loan for khadi

Certificate (ISEC) programmes being conducted by
Khadi institutions.

Marketing Promotion Schemes

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Entrepreneurship and
Micro, Small and 5. Procurement and Marketing To promote new market access
Medium Enterprises Support (PMS) scheme initiatives and increase awareness of
(MSMEs)
topics related to trade fairs, digital
advertising, e-marketing, GST, the
GeM portal, public procurement, and
other topics related to market access.

6. International Cooperation (IC) To provide financial assistance to

Scheme improve export opportunities, access
to international business networks and
competitiveness by subsidizing
participation in international events.

7. Marketing Assistance Scheme To provide financial support to

participants or organizers of
exhibitions and trade fairs (domestic
and international).

Development of Khadi, Village and Coir Industries

8. Scheme of Fund for Regeneration To create clusters of traditional

of Traditional Industries industries and artisans to boost their
(SFURTI) competitiveness and long-term
sustainability.

9. Coir Industry Technology To help entrepreneurs upgrade,

Upgradation Scheme (CITUS) modernize and/or establish new coir
processing units.

10. Skill Upgradation and Mahila To train rural women artisans about
Coir Yojana self-employment opportunities in
regions that process coconut husk.

11. Science and Technology for To assist coir workers in the areas of
Coir Scheme technology transfer, incubation,
testing, and service.

12. Domestic Market Promotion To expand the coir market by

(DMP) providing financial assistance for
establishing sales depots, participating
in trade fairs, and expanding the
market network.

13. Export Market Promotion To provide financial and market

(EMP) assistance to the coir industry in order
to increase exports.

14. Welfare measures (under Coir Board Coir Workers Group

Pradhan Mantri Suraksha Personal Accident Insurance scheme
BimaYojna - PMSBY) has been converged to PMSBY with
effect from 1st June, 2016.
288


15. Trade and Industry Related
Functional Support Services
(TIRFSS)
16. Work-Shed Scheme for Khadi
Artisans
17. RojgarYuktGaon
18. Pottery Activity under
GramodyogVikasYojana (GVY)
scheme
19. Beekeeping Activity under
“GramodyogVikasYojana(GVY)
Scheme
20. Agarbatti Making Project under
“GramodyogVikas
Yojana(GVY) Scheme
Technology Upgradation and Quality Certification
21. A Scheme for Promotion of
Innovation, Rural Industries and
Entrepreneurship (ASPIRE)
22. ZED Certification Scheme
23. Credit Linked Capital Subsidy
Component (CLCS & TU
Scheme)

Entrepreneruship
To collect statistical data for making Development and
appropriate policy for the overall MSMEs
organized and systematic development
of the coir industry.
To empower and facilitate the Khadi
spinners and weavers and provide
them with a better working
environment.
To develop sustainable and self-reliant
Khadi-based enterprises in
socioeconomically disadvantaged
villages.
To provide assistance to pottery
artisans for their holistic development.
To assist beekeepers in their overall
development.
To support the development of
agarbatti artisans on all fronts.
To establish a network of technology
and incubation centres in order to
accelerate entrepreneurship. It also
aims at fostering innovation to develop
and enhance the competitiveness of
the MSME sector.
To ensure Zero Defect & Zero Effect
practices are incorporated in
manufacturing processes, so that
MSMEs can manufacture quality
products and support Make in India
programme.
To provide an upfront capital subsidy
of 15 percent for MSEs technology
upgrades (on institutional finance of
up to Rs. 1 crore availed by them).
289
Entrepreneurship and
Micro, Small and 24. Lean Manufacturing
Medium Enterprises Competitiveness for MSMEs
(MSMEs)
25. Design Clinic for Design
Expertise to MSMEs
26. Digital MSME
27. Entrepreneurial and Managerial
Development of SMEs
through Incubators
28. Awareness on Intellectual
Property Rights (IPR)
29. Marketing Support/ Assistance
to MSMEs (Bar Code)
30. Technology and Quality
Upgradation Support
31. Enabling Manufacturing Sector
to be Competitive through QMS &
QTT
Entrepreneurship and skill Development Programme
290

To finance the implementation of lean
manufacturing techniques, primarily
by paying for the consultant fee (80%
by the GOI and 20% by the
beneficiaries).
To assist MSMEs through financing
for engagement of design consultants
for design intervention (GoI
contribution @ 75% for micro, 60%
for SMEs for the project range up to
Rs. 40 lakh).
To promote the adoption of
information and communication
technology (ICT) tools and
applications by the MSME sector for
production and business processes.
To provide financial assistance for the
development and transformation of
innovative ideas into commercially
available products. It facilitates the
establishment of new companies
dedicated to the commercialization of
successful innovations.
To raise awareness among the MSMEs
about Intellectual Property Rights and
to take measures for protecting their
ideas and business strategies by
reimbursement of
Patent/Trademark/GI.
To conduct seminars and reimbursing
registration fees associated with bar
coding in order to encourage SMEs to
use it.
To provide financial assistance in the
form of credit and subsidies in order to
encourage MSMEs to use energy
efficient technologies in
manufacturing units.
To provide funding support to adopt
the latest Quality Management
Standards (QMS) and Quality
Technology Tools (QTT).
 Entrepreneruship
32. Entrepreneurship Skill To promote establishment of new Development and
Development Programme (ESDP) enterprises, strengthen existing MSMEs

Scheme MSMEs, and instil entrepreneurial

cultures in the country.

33. Assistance to Training To build a strong infrastructure and

Institutions (ATI) Scheme assistance support for entrepreneurship
and skill development training
programmes.

Infrastructure Development Programme

34. Micro & Small Enterprises To upgrade infrastructural facilities in

Cluster Development Programme the new / existing Industrial Areas /
(MSE Clusters of MSEs and to establish
– CDP) Common Facility Centres.

Some Other Schemes

35. National SC-ST Hub To provide professional support to

Scheduled Caste and Scheduled Tribe
Entrepreneurs.

36. Scheme of Surveys, Studies and To collect, study, and analyse data on
Policy Research MSME where the results are used for
effective policy design.

37. Scheme of Information, To publicize the different schemes that

Education and Communication the ministry runs in order to encourage
(IEC) MSMEs to take advantage of them.

6RXUFH: e-book on Schemes for MSMEs

13.4.3 Some Recent Initiatives by the Government for the

Development of MSMEs
Here are a few recent government initiatives geared toward promoting the
development of MSMEs:

Udyam Registration: The government has launched a zero cost MSME

registration portal, where the existing and prospective entrepreneurs may file
their ‘Udyam’ Registration online. Udyam Registration is a self-declaration
paperless and free of cost system. Using this system, entrepreneurs will no
longer have to go through the lengthy registration process and it will also
help the government to collect real- time data on the number of MSMEs in
the country.
My MSME: In order to make available all the schemes and programs at the
fingertips of the enterprises, the Office of Development Commissioner

291

Entrepreneurship and (MSME) has launched a web-based application module called My MSME.
Micro, Small and
Medium Enterprises This module can also be accessed from a mobile application.
(MSMEs)
MSME Data Bank: The government has now required MSMEs to provide
information about their enterprises in an online database it maintains at
www.msmedatabank.in. By using this data bank, the Ministry of MSME will
be able to streamline and monitor schemes and pass on the benefits directly to
MSMEs.

Direct Benefit Transfer in the M/o MSME: Governments of India have

brought all welfare and subsidy schemes under Direct Benefit Transfer
(DBT) in order to improve delivery by automating the existing procedure. It
ensures more efficient flow of funds, accurate targeting of the beneficiaries,
and to reduce fraud.

Grievance Monitoring: The Ministry has started an MSME internet

grievance monitoring system (eSAMADHAN) to address delayed payments
to micro and small enterprises.

Job Portal for MSMEs: The MSMEs have created a job portal called
“MSME SAMPARK” through which job seekers (e.g. graduate trainees /
students of MSME Technology Centres) and recruiters can interact for
mutual benefit.

Champions Portal: Creation and Harmonious Application of Modern

Processes for Increasing the Output and National Strength (CHAMPIONS)
has been launched on 1st June, 2020. This is an ICT-based technology system
designed to help and assist smaller organizations to grow. A system of
control rooms was created that provides every support on a local level. It
includes: financial, market access, technology upgrades, and skill
development to MSMEs.

Skill Training Ecosystem of Ministry of MSME: In order to build the

capacity of existing and prospective entrepreneurial ventures, the Ministry
has organized several skill development training programmes/courses. The
Ministry has taken initiatives to align its training courses with National Skill
Qualification Framework (NSQF), Ministry of Skill Development &
Entrepreneurship (MSDE). Skill trainings of the Ministry are reported to
Ministry of Skill Development & Entrepreneurship (MSDE) under Skill India
Mission convergence.

Government e-Market Place: GeM is an online portal that allows

government officials and agencies to buy and procure goods and services
from an online marketplace in order to achieve an efficient and transparent
procurement process. In order to encourage MSMEs to register on the GeM
Portal, the Ministry of MSME has already begun to make every effort.

Check Your Progress B

1) What is a village industry?

2) List the various marketing promotion schemes run by the Ministry of

MSME.
292

3) What is e-samadhan? Entrepreneruship
Development and
MSMEs
4) Fill in the blanks:

i) The …………………… has a social objective of providing

employment in rural areas.

ii) NSIC operates its services through eight …………………

throughout the country.

iii) ………………. aims at creating clusters of traditional industries and

artisans to boost their competitiveness and long-term sustainability.

iv) The primary goal of the ………………….. is to train trainers.

v) Under ……………….. collateral free loans are provided in order to
help first generation entrepreneurs to venture into self-employment.

2) State whether the following statements are True or False:

i) A village industry is one where the fixed capital investment does not
exceed Rs.1 crore.

ii) India is the largest producer of coir fibre in the world.

iii) Champions’ portal is an ICT-based technology system designed to
help and assist smaller organizations to grow.

iv) ASPIRE establish a network of technology and incubation centres.

v) The Ministry has started an MSME internet grievance monitoring
system called MSME SAMPARK.

13.5 ROLE OF MSMEs IN ENTREPRENEURSHIP

DEVELOPMENT
Over the years, MSMEs sector has emerged as an effervescent and active
sector across all the economies, especially in developing economies. Its
contribution in socio-economic development of a nation is such that it is
widely and popularly called as engine of economic growth. This is giving flip
to entrepreneurship development as well as they are innovative in nature and
respond timely and effectively to the changing market scenario. They are
complimentary to the large industries. Let us now discuss the role of MSMEs
in entrepreneurship development.

1. Promotes Entrepreneurial opportunities: MSMEs provide real

platform to the budding entrepreneurs. Pools of entrepreneurs are created
by MSMEs who are considered to be the catalyst of socio-economic
growth and development of a nation.

2. Promotes Entrepreneurial culture: MSMEs nurture entrepreneurial

culture. It creates supportive environment and take various initiatives
ranging from implementing a receptive regulatory environment to

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Entrepreneurship and establishing access to technology and finance. This makes the
Micro, Small and
Medium Enterprises environment conducive for the aspiring and budding entrepreneurs.
(MSMEs)
3. Commercialise inventions: We all use mobile phones (smart phones
now a days). You must be aware of the fact that telephonic conversation
was invented long back in the year 1876 by Alexander Graham Bell. He
was not only an inventor but also an entrepreneur as he launched the Bell
Telephone Company in 1877. Since then, face of phone has witnessed
huge improvements through technological and other innovations. From
fixed dial phones to smart phones we have enjoyed varied services. Can
you imagine who undertook all these improvements? Yes, you are right!
Various telecommunication companies are responsible to offer these
services. Unless the inventions are commercialised it is of no use to the
society. This commercialisation encourages innovations from time to
time.
4. Encourages and exploit innovation: MSMEs help in creating
entrepreneurial culture through business innovation. As the saying goes
money begets money, similarly, an entrepreneur encourages others to
become an entrepreneur. Many companies support their ancillary units in
its establishment and expansion. Innovation and entrepreneurship go
hand in hand.

5. Facilitate and complement large industries: MSMEs are considered to

be complementary to the large industries. Many large enterprises depend
on MSMEs for supply of necessary raw materials for the production of
goods and services, and they also make use of these small firms in
distributing their final output.

6. Boost in Service sector: MSMEs are immensely contributing in service

sector. Its contribution in service sector is more vis-a-vis manufacturing
sector. There can be seen a huge prospect of entrepreneurship
development in service based MSMEs.

13.6 LET US SUM UP

Ever since the Industrial Policy Resolution, 1956, came into being,
establishment and growth of village and small industries were given due
consideration and importance along with the agriculture. Growth Potential of
MSMEs and their significant contribution to the growth and development of
our economy attracted the attention of the Indian Government. MSMED Act,
2006 was enacted by the parliament to encourage and promote this MSME
sector.

A number of statutory and non-statutory bodies work under the aegis of the
Ministry of MSME. These include the Khadi and Village Industries
Commission (KVIC), The Coir Board, National Small Industries Corporation
(NSIC), National Institute for Micro, Small and Medium Enterprises
(NIMSME) and Mahatma Gandhi Institute for Rural Industrialisation
(MGIRI).The Ministry of MSME, as well as its organizations, are
responsible for supporting States that endeavour to promote entrepreneurship,
294

employment and livelihood opportunities, and improve MSMEs' Entrepreneruship
Development and
competitiveness in a changing economic environment. MSMEs

The Ministry of MSME runs numerous schemes and programs which are
aimed at providing credit and financial assistances,skill development
training;infrastructure development, marketing assistance, technological and
quality up-gradation and other services for the MSMEs across the country.

Over the years, MSMEs sector has emerged as an effervescent and active
sector across all the economies, especially in developing economies. Its
contribution in socio-economic development of a nation is such that it is
widely and popularly called as engine of economic growth. This is giving flip
to entrepreneurship development as well as they are innovative in nature and
respond timely and effectively to the changing market scenario. They are
complimentary to the large industries.

13.7 KEYWORDS
Coir Board: A statutory body established under the Coir Industry Act, 1953
for the purpose of promoting the development of the coir industry.

Enterprise: An enterprise is an industrial undertaking or a business concern

or any other establishment, by whatever name called, engaged in the
manufacture or production of goods. The engagement is in any manner,
pertaining to any industry specified in the first schedule of the Industries
(Development and Regulation) Act, 1951 or engaged in providing or
rendering any service or services.
Khadi& Village Industries Commission (KVIC): A Statutory Organization
under the aegis of the Ministry of MSME which was established under the
Khadi and Village Industries Commission Act, 1956. It promotes and
develops Khadi and Village Industries and strengthens rural economies by
providing employment opportunities in the rural areas through the production
and marketing of Khadi and Village Industries products.

Mahatma Gandhi Institute for Rural Industrialisation (MGIRI): A

national institute under the Ministry of MSME to accelerate rural
industrialization for a sustainable village economy, so that KVI coexists with
major industry.
Medium Enterprise: An enterprise where investment in plant & machinery
and equipment does not exceed fifty crore rupees and annual sales turnover
does not exceed two hundred and fifty crore rupees.
Micro Enterprise: An enterprise where investment in plant & machinery
and equipment does not exceed one crore rupees and annual sales turnover
does not exceed five crore rupees.
MSMED Act: An act to provide for facilitating the promotion and
development and enhancing the competitiveness of micro, small and medium
enterprises and for matters connected therewith or incidental thereto.

295

Entrepreneurship and National Board for Micro, Small and Medium Enterprises (NBMSME):
Micro, Small and
Medium Enterprises A board established under MSMED Act, 2006 to examine the factors
(MSMEs) affecting the promotion and development of MSMEs. It reviews the policies
and programmes of the Central Government and makes recommendations in
regard to facilitating MSMEs promotion and development enhancing their
competitiveness.

National Institute for Micro, Small and Medium Enterprises (NI-

MSME): A national institute under the aegis of ministry of MSME that has
been instrumental in conducting training programs.

National Small Industries Corporation Limited (NSIC): An ISO 9001-

2015 accredited Government of India Enterprise under Ministry of Micro,
Small and Medium Enterprises to provide integrated services. It includes
marketing, finance, technology, and other services, in order to promote and
support Micro, Small and Medium Enterprises.

Small Enterprise: an enterprise where investment in plant & machinery and

equipment does not exceed ten crore rupees and annual sales turnover does
not exceed fifty crore rupees.

13.8 ANSWERS TO CHECK YOUR PROGRESS

A. 3. i. MSMED Act, 2006 ii. Investment, sales turnover iii. medium
enterprise iv. Advisory Committee v. Micro and Small Enterprises
Facilitation Council
4.i. True ii. False iii. True iv. True v. False
B. 4.. i. KVIC ii. technical centres iii. SFURTI iv. National Institute for
MSME v. Credit Guarantee Scheme for Micro & Small Enterprises
(CGTMSE)
5.i. False ii. True iii. True iv. True v. False

13.9 TERMINAL QUESTIONS

1) How are micro, small and medium enterprises defined in India? Discuss
the distinctive characteristics of MSMEs.

2) Discuss the role MSMEs play in the economic development of a

developing country like India.

3) What is MSMED Act, 2006? Discuss the key provisions of the Act.

4) What is the need of the government in the development of MSMEs in

India? Critically examine the recent initiatives taken by the government
in this regard.

5) Discuss the various programs and schemes run by the ministry of MSME
for the growth of micro, small and medium enterprises.

296

6) “There are various statutory and non-statutory bodies working under the Entrepreneruship
Development and
aegis of the Ministry of MSME to promote entrepreneurship”. Discuss MSMEs

7) Discuss the role played by MSMEs in entrepreneurship development.

Note: These questions will help you to understand the unit better. Try to
write answers for them. But do not submit your answers to the University for
assessment. These are for your practice only.

FURTHER READINGS
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