Leading SMEs of India 2021

14 Overview of the Indian MSME Sector MSME – Backbone of the Indian Economy In the last 5 decades, MSME (Micro, Small and Medium Enterprises) has emerged as a highly vibrant and dynamic sector. It has made a significant contribution to India’s socio-economic development. Next to Agriculture, MSMEs foster entrepreneurship and generate huge employment opportunities at a comparatively lower cost. 6.3 crore SMEs Contribution to GDP 29 % MSMEs under Udyog Aadhar Memorandum crore 1.02 MSMEs registered on Udyog Registration Portal million 3 Source: Annual Report 2020-2021, Ministry of MSME, GoI Large corporates often rely upon MSMEs that act as ancillaries to ensure availability of necessary resources. Through MSMEs, aspiring businessmen from tier II and tier III cities have been able to generate jobs and contribute to economic growth without heavy capital investment. This has helped the local population to ascertain their source of livelihood and improve their standard of living. The MSME sector has been actively contributing to the overall growth of the economy to a great extent. It contributes approximately 30% to India’s GDP and almost 50% to the exports. Thus, MSMEs have emerged as the backbone of the Indian economy. Evolving definition of MSMEs Under the Industrial Development and Regulation (IDR) Act, 1951, small industries were defined on the basis of the number of employees. However, due to data inaccuracy in the employee strength calculation, the classification of entities into the MSME category could not be conducted accurately. A study conducted by the Export Committee onMicro, Small andMedium Enterprises (2019) indicated that most countries had more than one criterion that included number of employees, capital / asset size and turnover/sales. However, in the Indian context the definition of MSMEs was restricted only to investments in plant and machinery/equipment. Dun & Bradstreet