Micro, Small and Medium Enterprises Development Act, 2006

msme

1. Micro, Small and Medium Enterprises Development Act, 2006 K.PADMAVATHY I M.COM

2. SYNOPSIS INTRODUCTION CLASSIFICATION FEATURES CHALLENGES ADVANTAGES DISADVANTAGES

3. INTRODUCTION The  Micro, Small, and Medium Enterprises Development Act, 2006 (MSMED Act)  was passed by the Indian Parliament. According to the MSME act, “Any buyer who fails to pay MSMEs within agreed-upon terms or within a maximum of 45 days will be charged monthly compounded interest at three times the Reserve Bank of India’s authorized rate.”

4. According to the Micro, Small and Medium Enterprises Development Act, 2006, MSMEs are classified into three categories: Micro enterprise Small enterprise Medium enterprise

5. MICRO ENTERPRISE MEANING: An enterprise where the investment in the plant and machinery or equipment does not exceed ₹1 crore, and turnover does not exceed ₹5 crores. EXAMPLE: Street vendors Local bakery shops Independent carpentry services Independent shoemakers

6. SMALL ENTERPRISE MEANING: An enterprise where the investment in the plant and machinery or equipment does not exceed ₹10 crores, and turnover does not exceed ₹50 crores. Examples: Candles Chocolate Stationery items

7. MEDIUM ENTERPRISE MEANING: An enterprise where the investment in the plant and machinery or equipment does not exceed ₹50 crores, and turnover does not exceed ₹250 crores. Examples: Manufacturers Wholesalers Recruitment service providers

8. FEATURES OF MSMEs MSMEs provide several benefits to the development of the economy. They provide room for employment for millions of artisans and workers. They also promote entrepreneurship and the development of specialized skills. Additionally, they support the development of modernized technology, infrastructure and the development of the sector as a whole. They help in harnessing the growth of domestic as well as international markets. MSMEs are playing a major role in the Government's 'Make in India' initiative to give an impetus to manufacturing in India and make India a global manufacturing hub.

9. CHALLENGES FACED BY MSMEs ​​​​​​​ The following are the challenges faced by MSMEs: MSMEs have shown tremendous growth in India in the past few years but despite the growth, there are many challenges faced by this sector. Financial challenges are the foremost when it comes to the progress of the MSME sector. Most MSME proprietors are unable to secure loans from banks due to a lack of proper collateral and a steady stream of income. MSMEs depend heavily on informal workers who lack the skills and expertise to boost productivity. Hence, India's MSMEs are far behind their counterparts in other countries.

10. CHALLENGES FACED BY MSMEs Furthermore, the absence of managerial, entrepreneurial and marketing skills remains a big challenge in the growth of the sector. Boosting sales and customer acquisition require the right mix of marketing strategies. Additionally, due to a lack of awareness, most MSMEs miss out on having modernized technology thus hindering their growth.

11. ADVANTAGES AND DISADVANTAGES OF MSMEs

12. ADVANTAGES OF MSMEs

13. LOWER STARTUP COSTS MSMEs often have lower infrastructure and investment expenses than bigger companies, which makes it simpler for entrepreneurs to launch new firms and enter the market.

14. COLLATERAL FREE BANK LOANS The Indian Government has made collateral-free financing available to all small, medium and micro businesses. Both new and established firms can file benefits claims under this scheme.  The Credit Guarantee Trust Fund Scheme was introduced by the GoI , SIDBI, and the Ministry of Micro, Small & Medium Enterprises to ensure this scheme (Credit Guarantee Scheme) is implemented for all Micro and Small Enterprises.

15. MORE FLEXIBILITY AND AGILITY MSMEs could react to market developments more effectively and modify their business plans since they are generally more flexible and agile than bigger companies.

16. POTENTIAL FOR JOB CREATION AND ECONOMIC GROWTH MSMEs in India is a major source of job opportunities, particularly in rural and semi-urban areas. MSMEs contribute to almost 30% of India’s GDP, significantly boosting the country’s economy.

17. PILING OF INTEREST The first issue is the amount of interest that must be paid. The interest that must be paid on loans accumulates rapidly. Despite being the interest rate lower than other loans, the interest accumulates and costs much money when paid. 

18. DISADVANTAGES OF MSMEs

19. DIFFICULTY SCALING UP AND EXPANDING  MSMEs often struggle to scale up their operations and expand their businesses, as they lack the needed resources, infrastructure, and expertise. This can limit their ability to compete with larger and more established businesses.

20. LACK OF SKILLED LABOR MSMEs often struggle to attract and retain skilled labour, as they cannot offer the same benefits and compensation as larger businesses. This limits their ability to innovate and compete in the market.

21. LACK OF ECONOMIC EXPERTISE  Many marketers lack the financial know-how to influence the business in the right direction, even as they continue to develop new strategies and plan the expansion of their present business. Marketers without a strong understanding of economics could not make important business decisions about MSME financing.

22. PROCESSING FEES The borrower’s fee for loan processing results in additional expenses for the entrepreneur. There is no requirement for optional payments like those provided through crowdsourcing or angel investing.