WHAT IS THE IMPORTANCE AND ROLE OF MSME IN THE INDIAN ECONOMY?
To generate large scale employment
In India, capital is scarce and labour copious. MSMEs are thought to have lower capital-output and capital-labour ratios than large-scale industries, and therefore, better serve growth and employment . The MSME sector in India has grown radically since 1960 – with an average annual growth rate of 4.4% in the number of units and 4.62% in employment (currently employing 30 million). Not only do MSMEs generate the highest employment per capital investment, but they also go a long way in checking rural-urban migration by providing people living in inaccessible areas with a sustainable source of employment.
To sustain economic growth and increase exports
Non-traditional products account for more than 95% of the MSME exports (dominating in the export of sports goods, readymade garments, plastic products etc.). Since these products are mostly handcrafted and hence recyclable, there exists a tremendous potential of expand the quantum of MSME led exports. Also, MSMEs act as supplementary industries for Large Scale Industries providing them with raw materials, vital components and rearward linkages e.g. large scale cycle manufacturers of Ludhiana rely heavily on the MSMEs of Malerkotla which produce cycle parts.