With a vast network of about 63.38 million enterprises, MSME sector contributes to about 45% of manufacturing output, more than 40% of exports and over 28% of GDP. Besides, MSMEs create employment for about 111 million people. The sector produces a wide range of products, from simple consumer goods to high-precision, sophisticated finished products. It has also been contributing significantly to the expansion of entrepreneurial base through business innovations.

Due to its tremendous multiplier impact on economic growth, and its forward and backward linkages with industry, it is rightly considered the growth engine of Indian economy.
However, MSMEs in India face a lot of constraints such as high cost of credit; low access to new technology and marketing; poor access to international markets; lack of skilled manpower; inadequate infrastructure and regulatory issues related to taxation, labour laws and environment.
In this regard, the following key reforms, as discussed in the UK Sinha Committee report, are needed to improve the business climate for MSMEs:
 Addressing the cumbersome registration process and promote use of Unique Enterprise Identifier (UEI) like PAN for purposes like procurement, availing government sponsored benefits, etc.
 Establishing Enterprise Development Centers (EDCs) in each district for capacity building of entrepreneurs.
 MSME clusters should collaborate with companies having innovation infrastructure, R&D institutions and universities.
 Considering their vulnerability and size, insolvency code / delegated legislation should provide for out-of-court assistance such as mediation, debt counseling etc. to MSMEs.
 Creation of a Digital Public Infrastructure to reduce loan-operating costs significantly and also address information asymmetry that improves credit access.
 Creation of a National Council for MSMEs to facilitate coherent policy outlook and uniform monitoring.
 The MSMED Act, 2006 should be amended and its focus should be towards market facilitation and ease of doing business.
It must be ensured that MSMEs come to terms with the ongoing structural changes in the economy (like GST) and fully benefit from advances in digitization. This shall also substantially reduce the cost and time for this sector and enhance its ease of doing business.


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