The micro, small and medium enterprises that form the MSME sector contribute about 8 per cent of India’s GDP, about 45 per cent of manufactured output and about 40 per cent of exports. And the Economic Survey 2009-10 noted, “This, coupled with a high labour-to-capital ratio, high growth and high dispersion, makes them crucial for achieving the objective of inclusive growth.” According to the Quick Results of the fourth All India Census of MSMEs (2006-07), there were 26 million MSMEs in India, which provided employment to about 60 million people. Rural enterprises account for 52 per cent of all MSMEs. The majority of the enterprises are in the service sector; manufacturing units make up around 28 per cent of the total.
The largest sector within the MSME sector is retail trade and repair and maintenance of personal and household goods, which accounts for a little over a third of total employment in the sector. The bulk of MSMEs fall in the unregistered category. Registered units, or the enterprises permanently registered up to March 31, 2007 at District Industry Centres of the respective State Directorate of Industries, comprise just 5.94 per cent of the total MSME units.
Across the states, though Uttar Pradesh has the highest number of MSMEs, Maharashtra, Tamil Nadu, Andhra Pradesh and West Bengal overtake Uttar Pradesh when it comes to total employment in the MSME sector. By and large, of course, the larger, more populous states have more MSMEs. However, if we adjust for population, the states and Union Territories (UTs) that rank at the top are Kerala, Tamil Nadu, Daman & Diu, Delhi and Goa while Chhattisgarh, Jharkhand, Nagaland and Bihar rank at the bottom. In fact, West Bengal and Karnataka do better than Maharashtra and Gujarat on that score.
| RESOURCE CRUNCH | ||
| 2006-07 (%) | Registered | Unregistered |
| Share in total MSMEs | 5.94 | 94.06 |
| Enterprises by source of finance | ||
| Self-finance/ No finance | 87.77 | 93.08 |
| Finance through institutional sources | 11.21 | 4.80 |
| Finance through non-institutional sources | 1.02 | 2.12 |
| Source: Quick Results of 4th Census of MSME, Ministry of Micro, Small and Medium Enterprises | ||
Employment generation is higher in registered units than in unregistered units; on an average per unit employment is 5.93 compared to 2.05. Per unit employment in both categories is, of course, higher for manufacturing than services. Looking at average employment per unit, Dadra and Nagar Haveli and Daman and Diu are the leaders with more than 10 people employed for every MSME. In both these UTs, there is a very large presence of registered manufacturing MSMEs with high employment in industries like plastic products, soaps, textile fabrics, paperboards and so on. At the other end are 13 states/UTs where average employment is less than two. Andhra Pradesh and Gujarat perform better than Maharashtra and Tamil Nadu in terms of employment generation.(Click here for graph)
One of the biggest problems facing the MSME sector is the lack of access to credit. More than 90 per cent of the units are self-financed; institutional finance is only for a minority. There is also a significant difference in access for registered and unregistered units — more than 10 per cent of registered MSMEs have received finance through institutional sources, while less than 5 per cent of unregistered MSMEs have had that advantage. Although the small-scale sector, now designated as micro and small units, has been a part of priority sector lending for commercial banks, small units continue to face significant credit constraints.
Indian States Development Scorecard, a weekly feature by Indicus Analytics, focuses on the progress in India and across the states across various socio-economic parameters