ROLE AND CONTRIBUTION OF MSME’s

Assignment submitted to the School Of Excellence in

Law in partial fulfillment of the requirement for the
Degree of BA.LLB (Hons) (Semester IV Law and
Economics)
By
HEMA SUDANTHIRA.G (HA21035)

Under The Supervision

Dr. R. VADIVELU

SCHOOL OF EXCELLENCE IN LAW (SOEL)

THE TAMILNADU Dr. AMBEDKAR LAW UNIVERSITY
CHENNAI
MARCH 2023
ACKNOWLEDGEMENT:

This project would not have been possible without the kind
support and help of a lot of people. I would like to extend
my sincere thanks to all of them. I am highly indebted to
my teacher Mr. VADIVEL for his guidance and constant
supervision as well as for providing necessary information
regarding the project. I would also like to thank him for his
support in completing the project.

I would like to express my gratitude towards my parents

and friends for their kind co-operation and encouragement
which helped me a lot in the completion of this project. My
special thanks and appreciations also goes to my colleague
and classmates and all the people who have willingly
helped me out with their abilities.

Yours faithfully,
G. Hema Sudanthira,
(HA21035),
BA.LLB(Hons.)
II Year- “A” Sec.
 TABLE OF CONTENTS

S.NO TITLE PAGE.NO

.
01. INTRODUCTION

02. REVIEW OF LITERATURE

03. OBJECTIVES OF THE STUDY

04. RESEARCH METHODOLOGY

05. MSME’s CONCEPTUAL

FRAMEWORK
06. SIGNIFICANCE OF THE STUDY

07. HYPOTHESIS

08. RESULTS AND DISCUSSIONS

09. FINDINGS

10. CHALLENGES OF MSMEs IN

INDIA
11. SUGGESTIONS

12. CONCLUSION

13. REFERENCES
 ROLE AND CONTRIBUTION OF MSME’s

ABSTRACT:
The Micro, Small and medium enterprises of India is an important
driving factor for the growth of Indian Economy. These MSMEs not
only provide the employment opportunities but helps in the process
of industrialization in rural areas simultaneously reducing the
unequal income distribution among the residents. The MSMEs
contribute significantly in the development of Indian economy
through export production, domestic production, low investment
requirements, operational flexibility, technology oriented enterprises
etc. In India, after agriculture, small business is the second largest
employer of human resources. MSMEs constitute more than,
 80 percent of the total number of industrial enterprises and
support industrial development,
 40 percent of industrial output,
 80 percent of employment in the industrial sector,
 45 percent of value added by the manufacturing sector and
 40 percent of total exports.
In this paper an attempt is made to know the growth and
contribution made by Micro, Small and Medium Enterprises in
India and to understand the role of MSMEs in providing
employment opportunities in India. The various problems faced by
these MSMEs in executing their operations have also been
discussed in this paper.
INTRODUCTION:
The Micro, Small and Medium Enterprises (MSME) sector has
emerged as a highly vibrant and dynamic sector of the Indian
economy over the last five decades. It contributes significantly in
the economic and social development of the country by fostering
entrepreneurship and generating largest employment opportunities
at comparatively lower capital cost, next only to agriculture. MSMEs
are complementary to large industries as ancillary units and this
sector contributes significantly in the inclusive industrial
development of the country. The MSMEs are producing a wide
range of products and services to meet demands of domestic as well
as global markets. On an average this sector has almost 36 million
units that provide employment to about 80 million individuals. This
sector through the production of 8000 products contributes 8% to
GDP of the country. The schemes & various initiatives of Ministry of
MSMEs & other organisations seeks to provide the following
facilities: Adequate flow of credit from financial institutions/banks,
Support for technology up-gradation and modernization, Integrated
infrastructural facilities,

Modern testing facilities and quality certification, Access to modern

management practices, Entrepreneurship development and skill up
gradation through appropriate training facilities, Support for
product development, design intervention and packaging, Welfare of
artisans and workers, Assistance for better access to domestic and
export markets, and Cluster wise measures to promote capacity
building and empowerment of the units and their collectives. The
various commissions, institutions , organisations & acts has been
setup by the concerned Ministry to promote & develop the various
industries at micro, small and medium levels. Some of the
important institutional setups are as:
Micro, Small and Medium Enterprises Development (MSMED) Act
2006, Khadi & Village Industries Commission (KVIC), Coir Board,
National Small Industries Corporation (NSIC) Ltd., Mahatma
Gandhi Institute for Rural Industrialisation (MGIRI), National
Board for Micro, Small and Medium Enterprises (NB MSME), and
National Institute for Micro, Small and Medium Enterprises.

REVIEW OF LITERATURE:
Ghatak, Shambhu (2010) in his paper titled "Micro, small and
medium enterprises (MSMEs) in India: an appraisal highlighted that
status of Indian MSMEs is better than its counterpart in
Bangladesh & Pakistan. About 36% of Pakistani SMEs have bank
accounts where as about 46% Bangladeshi’s SMEs have Bank
accounts. In comparison to them about 95% of Indian SMEs have
their bank accounts. He further stated that Indian Govt. should
accelerate its initiatives to provide further support to these Small
scale industries.

Srinivas, K. T. (2013) in his paper entitled Role of micro, small and

medium enterprises in inclusive growth concluded that the MSMEs
has been termed as the engine for the growth of the Country. In the
last few years, there has been tremendous change in the national &
State level for consolidating this sector. Poor infrastructure & lack
of marketing linkages are the key reasons for the poor growth of the
MSMEs in India. The support provided by the state as well as
Central Govt. is not adequate for the upliftment of the MSMEs in
India. Therefore the entrepreneurs in India & Govt. should take
some initiatives for further development of these MSMEs in India.

OBJECTIVES OF THE STUDY:

1. To study the current status and growth of MSMEs in India.
2. To study the impact of MSMEs on employment generation in
India.
3. To know the problems faced by MSMEs in India.

RESEARCH METHODOLOGY:
The study is based on secondary data that has been collected from
various secondary sources such as magazines, annual reports,
department of MSMEs & various other published reports. The data
has been presented in the form of table and interpretations
have been made in light of the objectives of the study cited above.

MSME’s CONCEPTUAL FRAMEWORK:

MSMEs constitute over 90% of total enterprises in most of the

economies and are credited with generating the highest rates of
employment growth and account for a major share of industrial
production and exports. In recent years, the MSME sector has
consistently registered higher growth rate compared to the overall
industrial sector. In accordance with the provisions of Micro, Small
& Medium Enterprises Development (MSMED) Act, 2006. MSMEs
are classified in two categories manufacturing and service.

I. 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 are defined in terms of
investment in Plant & Machinery.
II. Service Enterprises-The enterprises engaged in providing or
rendering of services and are defined in terms of investment
in equipment.

SIGNIFICANCE OF THE STUDY:

Across the globe, MSMEs are accepted as a means of economic

growth and for promoting equitable development. They are known
to generate the highest rate of growth in the economy. MSMEs
have driven India to new heights through requirements of low
investment, flexible operations, and the capacity to develop
appropriate native technology.

1. MSMEs employ around 120 million persons, becoming the

second-largest employment generating sector after
agriculture.
 2. With approximately 45 lac units throughout the country, it
contributes about 6.11% of GDP from manufacturing and
24.63% of the GDP from service activities.

3. MSME ministry targets to increase its contribution towards

GDP by up to 50% by 2025 as India moves ahead to become a
$5 trillion economy

4. Contributing around 45% of overall Indian exports

5. MSMEs promote all-inclusive growth by providing

employment opportunities, especially to people belonging to
weaker sections of the society in rural areas.

6. MSMEs in tier-2 and tier-3 cities help in creating

opportunities for people to use banking services and
products, which can amount to the final inclusion of the
contribution of MSMEs for the economy.

7. MSMEs promote innovation by providing an opportunity to

budding entrepreneurs to help them build creative products
hey and thereby boost competition in business and fuel the
growth.

The Indian MSME sector provides silent support to the national

economy and acts as a defense against global economic shock and
adversities. Hence, we can say that India is propelling towards a
robust global economy through a silent revolution powered by
MSMEs.
HYPOTHESIS:

• Hypothesis 1: Performance Expectancy has a positive effect on

Behavioural Intention.

• Hypothesis 2: Effort Expectancy has a positive effect on

Behavioural Intention.

• Hypothesis 3: Social Influence has a positive effect on

Behavioural Intention.

• Hypothesis 4: Facilitating Conditions have a positive effect on

Behavioural Intention.

• Hypothesis 5: Anxiety has a positive effect on Behavioural

Intention.

H1: Performance
Expectancy (PE)

H2: Effort Expectancy

(EE)

Behavioural
H3: Social Influence (SI)
Intenntion (BI)

H4: Facilitating
Conditions (FC)
 H5: Anxiety (A)
RESULTS AND DISCUSSION:

Hypothesis Testing Value Relations Results

H1 5.061 PE->BI Accepted

H2 2.200 EE->BI Accepted

H3 4.707 SI->BI Accepted

H4 2.073 FC->BI Accepted

H5 5.037 A->BI Accepted

The final results of hypothesis testing in Table show that,

 Hypothesis 1 is accepted which shows that Perception of

Performance Expectancy (PE) has a positive effect on habits
that show a desire to use e-money technology. MSME owners
believe that using e-money in their business transactions will
help them gain performance gains.
 Hypothesis 2 is accepted which shows that Perception of
Effort Expectancy (EE) has a positive effect on habits that
show the desire to use e-money technology, MSME owners see
that the easier it is to use e-money systems, the more often
they use e-money in transactions.
  Hypothesis 3 is accepted which shows that Perception of
Social Influence (SI) has a positive effect on habits that show
the desire to use e-money technology, MSME owners believe
that social influence can affect them to use e-money, the more
people use it, the more they will follow the trend.
 Hypothesis 4 is accepted which shows that Perception
Facilitating Conditions (FC) has a positive effect on habits that
show the desire to use e-money technology, MSME owners
believe that organizational and technical infrastructure e-
money service providers are there to assist them in using e-
money technology.
 Hypothesis 5 is accepted which shows that Perception of
anxiety in using new technology has a positive effect on the
desire to use e-money technology, MSME owners do not feel
anxious about using e-money because they believe that e-
money is easy to use and if there are obstacles there is
technical assistance from e-money service provider. Based on
data analysis and testing of these hypotheses, it can be seen
that the concept of e-money can be applied to MSMEs in
Yogyakarta.

FINDINGS:
1. Growth of MSMEs in rural areas i.e. 51% are more when
compared to urban areas ie.,49%.
2. Growth of Medium enterprises i.e., 0.05 lakhs are very low when
compared to Micro and Small enterprises i.e., 630.52 lakhs and
3.31 lakhs.
3. Male owned MSMEs i.e., 79.63% as compared to female owned
MSMEs i.e., 20.37%.
4. Male owned enterprises are more in case of small and medium
enterprises i.e., 95% and in case of micro enterprises their
dominance is 80%.
5. Employment generation is more in Urban areas i.e., 55% when
compared to rural
areas ie.,45%.
6. Male employees are 76% and female employees are only 24% in
MSMEs sector.
7. Out of 1109.89 lakhs no. of. MSMEs, the growth of medium
enterprises are only 1.75 lakhs.
8. In case of service sector, registration of MSMEs under UAM is
55%, whereas manufacturing sector it is 45%. Till May 2019, 68.25
lakh MSMEs have been registered under UAM.
CHALLENGES OF MSMEs IN INDIA:
1. Lack of credit from banks- The banks are providing on an
average 50% total capital employed in fixed assets. The cost of
credit is also high. Interest rates on MSME loans are between
8.65% to 16.25%.
2. Competition from multinational companies- In present era of
globalization, the MSME`S are facing the great from the
international manufacturing companies who are proving quality
goods at cheapest price.
3. Poor infrastructure-Though, MSME`S are developing so rapidly
but their infrastructure is very poor. With poor infrastructure, their
production capacity is very low while production cost is very high.
4. Unavailability of raw material and other inputs- For MSME’s
required raw material skilled work force and other inputs, which
are not available in the market. Due to unavailability of these
essentials, it is very difficult to produce the products at affordable
prices.
5. Lack of advanced technology-The owners of MSME`S are not
aware of advanced technologies of production.
6. Lack of distribution of marketing channels-The MSME`S are
not adopting the innovative channels of marketing. The ineffective
advertisement and poor marketing channels leads to a very poor
selling.
7. Lack of training and skill development program-The owners
are not aware of the innovative methods of production. The skill
developmental schemes conducted by the government are not
sufficient.
SUGGESTIONS:
1. MSMEs in urban areas need to be improved to create more
employment opportunities for the development of economy.
2. Opportunities must be provided to women in terms of
employment and business both
in urban and rural areas through proper training.
3. Government of India must take necessary steps to encourage
medium enterprises too.
4. Bank credit and interest rates must be flexible according to the
requirements of MSMEs.
5. Proper training must be provided to the MSMEs both in rural and
urban areas in terms of technology and innovation.
CONCLUSION:
The MSME sector in India is growing at good pace & even is
providing employment opportunities to masses of the people. The
contribution of Manufacturing Sector as well as Service Sector of
MSMEs in significant to the total GDP of the Country. The Govt. of
India has taken number of initiatives & is in the process of gearing
up the growth of Micro, Small & Medium Enterprises in the
country. The Govt. of India is also making number of tie-ups &
agreements with the NGOs, Governmental agencies as well as with
the Universities for making it sure that proper implementation of
Governmental policies for setting up of MSMEs is there &
entrepreneurs are properly guided for starting their ventures. But
still MSMEs are facing many challenges. The problem of
unawareness towards technological advancement can removed after
running effective training and skill development programs. There
should be low cost credit to the MSME’S. The foreign banks are not
taking so much interest in sanctioning loan to the MSME sector.
The outstanding bank credit is less than
50% of total fixed assets employed in MSME`S while the owners
invest their own fund in working capital. The panel of experts must
constitute to assess the status and the needs of the MSME’S. The
future of MSME sector in India is bright and it will grow the
economy.

REFERENCES:
1. Annual Report 2018-19, Govt. of India, Ministry of Micro,
Small and Medium Enterprises, available at :www:msme.gov.in
2. MSME Development Act. (2006). Ministry of the District
Industry Centers (DIC) MSME, Government of India.
3. RBI Reports 2019.
4. Ministry of Statistics' and program implementation,
Government of India.
5. Anis Ali et al (2014), “MSMEs in India: Problems, Solutions
and prospectus in Present scenario”, International Journal of
Engineering and Management Science, vol- 5, issues- 2, ISSN-
2229-600X, PP-109-115.
6. Vinay Kumar (2017), “An analysis of growth of MSMEs in
India and Their contribution in Employment and GDP of the
Country”, International Journal of Interdisciplinary and Multi
disciplinary studies, vol-4, issue-2, ISSN-0348-0343, PP-157-
191.
7. Prof M. Chandraiah (2014), “The Prospects and Problems of
MSMEs sector in India an Analytical study”, International
Journal of Business and Management Invention, Volume 3
Issue 8, ISSN-2319 – 8028, PP-27-40.
8. Dr. Sp. Mathiraj (2018), “Performance Of MSME Units In
India”, National Conference on Prospects of Micro, Small &
medium Enterprises (MSMEs) in Indian Scenario, The American
College, Madhurai, February 2018.
9. Dr. Vasant Desai(2013), “ Management of Small Scale
Industries”, Himalaya Publishing House.
10. Neeta Baporikar (2013), “entrepreneurship and Small
Industry (theory & practice)”, Himalaya Publishing House.
11. T. Gopi(2009), “ Promotion of Small Entrepreneurship in
AP- A
comparative study”, Finance India, Vol-XXIII, No-1 pp-199-209.
12. Srinivas.K.T.(2013), Role of Micro,Small and Medium
Enterprises in inclusive growth, International Journal of
Engineering and Management Research, vol-3(4),57-61.
13. Ghatak, Shambhu (2010), “Micro, Small and Medium
Enterprises (MSMEs) in India: an appraisal”, Journal of
technology management & innovation vol:6(1), pp-66-76.