INTRODUCTION units) in this sector employing nearly


Micro Enterprises play
an important role in e employment creation and income generation. These Small
Scale Enterprises are more efficient in the nation’s economy as they create
employment and can provide income generation opportunity for low income groups.
The small scale enterprises provide the entrepreneurial culture and boast of
the economy against economic crises, such as low per capita income, poverty and
unemployment. According to Government of India SMEs as one of the four important
drivers of growth for the Indian economy. The SMEs sector is highly labor intensive
and this sector provides employment to the major part of non-agriculture labour
fource in India. They have been long overlooked even when this sector actually employs
millions of people in India which is 40% of the total workforce, through 44
million enterprises. Not only are they a source of basic livelihood but have
improved the standard of living of many families over the years. MSMEs
contribute approximately 8% to India’s GDP, are responsible for a stunning 45%
of its total industrial output and 40% of its total exports. The manufacturing
sector among MSMEs, which is a little larger than the services sector,
constitutes 90% of the total industrial units that spread all over India.

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The Micro, Small and
Medium Enterprises (MSMEs) continue to be a vibrant sector of the Indian
economy. It is estimated that there are about 26 million units (over 90 per
cent of total industrial units) in this sector employing nearly 59 million
people in India.  They not only create
job opportunities at lower capital cost comparing to other sectors, but also
require lower capital investment and play a vital role for proper utilization
of local resources and talent. Organized industrial sector require an
investment of Rs.6.66 lakh to generate employment of one person, whereas MSMEs
sector generate employment of 1.27 persons with the same investment. This
sector contributes nearly 45 percent manufactured output and 40 percent of the
total export, it is estimated that MSMEs contribute around 15 percent of
exports indirectly. In a span of over three decades, from financial year
1973-74 to financial year 2006-07, export from MSMEs has increased by more than
514 times.  MSMEs sector has consistently
registered a higher growth rate than the rest of the industrial sectors.  There are over 6000 products ranging from
traditional to high-tech items, which are being manufactured by the MSMEs. In
India, after agriculture, the MSMEs sector provides the maximum opportunities
for both self-employment and jobs in the country.  The MSMEs sector in India holds great
potential for further expansion and growth in the future.  In fact, the employment potential of the
sector is un-matched by any other sector of the economy.   As per results of the Fourth Census of MSMEs
in 2006-07, the number of MSMEs was estimated at 261 lakh, employment at 597.29
lakh persons and 72 percent and 28 percent of the MSMEs are manufacturing
enterprises and service enterprises respectively in the country. In terms of
size of the enterprise, 94.67 percent are micro enterprises, 5.05 percent are
small enterprises and the rest 0.25 percent are medium enterprises. The MSMEs
have shown an average growth of 18 percent over the last five years, around 98
percent of the production units are in the MSMEs sector. We know that
Small-scale industries were the dream of our father of nation Mahatma Gandhi.
He has supported the growth of small-scale industries in India, because he had
the vision that it will help the poor people of India to come up.  


can be defined from the aspect of number of person employed and amount of
investment in plant and machinery. From the viewpoint of number, micro
enterprise is defined as an enterprise, which employs fewer than 10 persons,
small enterprise is defined as an enterprise, which employs fewer than 50
persons, and medium-sized enterprise is defined as an enterprise, which employs
fewer than 250 persons. From the viewpoint of investment in plant and machinery
and equipment the Micro, Small and Medium Enterprises Development Act, 2006 are
defined Micro, Small & Medium Enterprises. The Act classified Micro, Small
and Medium Enterprises (MSME) into two classes: (a) Manufacturing Enterprises:
The enterprises engaged in the manufacture or production of goods pertaining to
any industry specified in the first schedule to the industries (Development and
Regulation) Act, 1951. The Manufacturing Enterprise is defined in terms of
investment in Plant Machinery. 

Manufacturing Sector     
Enterprises  Investment in plant
& machinery     Micro
Enterprises  Does not exceed twenty five
lakh rupees     Small Enterprises  More than twenty five lakh rupees but does
not exceed five crore rupees     Medium
Enterprises More than five crore rupees but does not exceed ten  crore rupees (b) Service Enterprises:  The enterprises engaged in providing or
rendering of services and are defined in terms of investment in equipment. 

Sector      Enterprises  Investment in equipments     Micro Enterprises  Does not exceed ten lakh rupees:     Small Enterprises  More than 
ten lakh rupees but does not exceed two crore rupees     Medium Enterprises More than two crore
rupees but does not exceed five core rupees

Contribution of MSMEs
towards economic development can be analyzed from the viewpoint of: i) Growth
trend of MSMEs,  ii) Contribution of
MSMEs toward GDP,  iii) MSMEs and Employment
generation,  iv) Contribution of MSMEs
towards Export,  v) MSMEs and country’s
total production,  vi) Fixed investment
made by MSMEs in different sectors. All of these contributions are briefly
discussed below:



CONCLUSION  The Micro, small and medium (MSMEs) enterprises
constitute a very important segment of the Indian economy.  MSME’s contribution to the development of our
economy is significant as it evident in terms of MSMEs being the major
constituent sector in the production system, employment generation, GDP, Export,
Rural industrialization etc. MSMEs also have an aptitude for innovation,
creativity, and flexibility which enabling them to respond with more quickly to
structural changes and to adapt the dynamic demand patterns of consumers. It is
also clear that MSMEs sector has performed exceedingly well and enabled our
country to achieve a wide measure of industrial growth and diversification. If
government policies towards MSMEs are closer towards its various problems and
prospect it can be nearer contributors with agriculture in all respect in
future. To keep this growth engine at right way and right direction it is time
to emphasis on formulation of MSMEs friendly policies, conductive operating
environment, improvement of proper infrastructure, securing peace and security,
arranging proper finance, efficient manager and arranging appropriate modern
technology. Considering MSMEs contribution towards every side of economic
development it should consider at equal recognition with agriculture.