MSMEs in India
The Micro, Small & Medium Enterprises (MSME) sector is one of the largest contributors to India’s economy. It contributes 6.11% of the country’s manufacturing Gross Domestic Product (GDP) and 24.63% of the GDP through services activity. The sector accounts for about 33.4% of India’s total manufacturing output. It employs more than 120 million people in the country and is the second-largest employer in rural India after agriculture.
Contribution of the MSME sector to India’s GDP
Source: Press Information Bureau, Government of India
What is MSME Innovative Scheme?
In March 2022, Union Minister of Micro, Small and Medium Enterprises, Mr Narayan Tatu Rane, launched the MSME Innovative Scheme along with MSME Idea Hackathon 2022 under the MSME Champions Scheme. The primary objective is to promote and support untapped creativity and help in adopting the latest technologies and methods in the MSME sector.
The MSME Innovative Scheme is an amalgamation of three earlier schemes of the MSME Ministry: Incubation, Design and Intellectual Property Rights (IPR). These three schemes will function as separate units with interflows and connections. The three schemes will work in tandem with each other and will be sequentially and parallelly integrated. The idea behind this is to have a structured approach toward encouraging, promoting and supporting innovation in India. The MSME Innovative Scheme will act as a host who will encourage entrepreneurs and guide in the development and also financially help business propositions that will benefit the society directly.
Objectives of the Scheme
The primary objective of the MSME Innovative Scheme is to encourage innovation in India by providing a platform to entrepreneurs and to promote the complete value chain from developing ideas into innovation through incubation and design interventions. The scheme intends to provide appropriate facilities and support for the development of the concept to market, design competitiveness, and protection and commercialisation of intellectual property. This will be done to increase the number of MSME industries in India and support their growth.
The scheme also aims to create a culture of innovation and creative problem-solving in India through knowledge sharing and collaboration among various industries, institutions, government bodies, and research institutes. The scheme will provide funding to different stages of new businesses in hopes to increase participation, easy access to technology and help promote ideas in the market. The various agencies that are part of the scheme will serve as a link between industry and academic leaders and thinkers. With this, the government of India aspires to develop businesses and promote innovations that will benefit society as a whole while being commercially viable and sustainable.
Activities under the scheme
The MSME Innovative Scheme will be a combination of three schemes: Incubation, Design and IPRs. These three schemes will act as separate units.
The Incubation Component
The first step under the incubation phase is the recognition of eligible institutions named Host Institute (HI), which will act as a Business Incubator (BI). The institutes will be chosen from among technical colleges, universities, professional institutes, R&D institutes, NGOs that are involved in incubation activities, and central or state government institutions that will participate in the process. The selected institutes will then invite ideas from MSMEs and others.
Process flow of selection process for funding
Following shortlisting of ideas by the HIs, the Project Management Units (PMUs) will carry out first-stage screening and will forward the screened ideas ahead to the Domain Expert Selection Committees (DESCs). The ideas will then be segregated into the following five verticals:
The five DESCs will evaluate the shortlisted ideas and send them to the Project Monitoring and Advisory Committee (PMAC). The approved ideas will receive financial assistance under the scheme for development.
The government will provide financial assistance of a maximum Rs. 15 lakh (US$ 19,600) per idea. Financial assistance of a maximum Rs. 1 crore (US$ 0.13 million) will be provided to HI for the procurement and installation of relevant plants and machinery.
The Design Component
The objective of the design component is to bring India's manufacturing sector and design expertise to a common platform. It aims to provide cost-effective and sustainable design solutions and help in further improvement. The scheme is divided into two parts,
Under this scheme, MSMEs will submit their designs to the Implementation Agencies (IAs). The approved design projects will be granted a maximum amount of Rs. 40 lakh (US$ 52,000). For student design projects, a maximum of Rs. 2.5 lakh (US$ 3,250) will be provided as financial assistance.
The main objective of the IPR component is to spread awareness about intellectual property in India and to encourage MSMEs to apply for patents. The aim is to protect MSMEs’ innovations, ideas and knowledge-driven business strategies.
Agencies eligible under the IPR scheme include MSME development institutes, technology centres, government bodies, departments, autonomous organisations, MSME India industry associations, non-profit bodies, NGOs, research and educational institutes, and universities and colleges.
Various levels of financial assistance are provided under the IPR scheme: Rs. 5 lakh (US$ 6,500) for foreign patents, Rs. 1 lakh (US$ 1,300) for domestic patents, Rs. 2 lakh (US$ 2,600) for GI registration, Rs. 15,000 lakh (US$ 200) for design registration and Rs. 10,000 (US$ 150) for trademarks.
Other schemes for MSMEs in India
As the MSME sector is critical to India’s growth and expected to play a vital role in helping the country achieve its US$ 5 trillion economy dream, the government of India and the MSME Ministry have implemented various initiatives and schemes, as given below.
Credit and Financial Assistance
Financial assistance initiatives launched by the government include Prime Minister’s Employment Generation Programme (PMEGP), Credit Linked Capital Subsidy for Technology Upgradation (CLCSS), Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), and Rs. 20,000 crore (US$ 2.62 billion) subordinate debt for stressed MSMEs.
Skill Development and Training
The schemes focus on increasing skills in India through training and development programmes such as Entrepreneur and Skill Development Programme (ESDP) and Technology Centres.
T sustainability and promotion of MSMEs, the government of India has launched schemes such as the Scheme of Fund of Regeneration of Traditional Industries (SFURTI), Micro & Small Enterprises Cluster Development (MSE-CDP) and Promotion of MSMEs in NER and Sikkim programmes.
As a part of the e-Governance initiative, the government of India has also introduced several web services such as Udyam Registration, MSME Samadhaan Portal and MSME Sampark Portal to make operations accessible online.
Additionally, the government has launched several schemes such as procurement and marketing support, technology up-gradation and financial assistance under Atmanirbhar Bharat for increasing the number of MSMEs in India.
Future of MSMEs in India
The MSME sector in India is growing rapidly. More than 50% of MSMEs are located in rural areas and the sector accounts for nearly 50% of the total exports from the country. It is one of the most important sectors for the growth of the country.
Under the MSME Innovative Scheme, the government of India plans to launch industry awareness activities, training programmes and workshops to facilitate learning of relevant world practices. The government has also set up seed capital support for financial assistance for the incubation and growth of businesses. Few months after its launch, about 900 ideas have been approved for financial assistance of more than Rs. 36 crore (US$ 4.7 million). Supported by various schemes and initiatives, the MSME sector in India can see a huge growth in the coming future.