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Growth and Development of MSME: A Case Study of
Punjab |
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| Paper Id :
18290 Submission Date :
30/11/2023 Acceptance Date :
04/12/2023 Publication Date :
15/12/2023
This is an open-access research paper/article distributed under the terms of the Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution, and reproduction in any medium, provided the original author and source are credited. DOI:10.5281/zenodo.10421315 For verification of this paper, please visit on
http://www.socialresearchfoundation.com/remarking.php#8
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| Abstract |
Micro, Small, and medium enterprises are the driving force
behind the development of an economy. They have a massive record of providing
employment opportunities and act as an important link in the supply chain as
ancillary units for the finished goods. However, the greatest hurdles faced by
MSMEs are in the areas of financial assistance, technical expertise, and
managerial expertise. This purpose is to study the performance of MSMEs in
Punjab and the issues they encounter. Secondary data is considered for the
same. The data is collected from various sources by thoroughly evaluating
papers in journals, and publications, studying worldwide policy regimes, web
pages, and data from various government bodies. The data is put forward in tables, charts, and figures, and CAGR is
computed to understand the growth and performance of Industrial units in
Punjab. Moreover, there is a need to understand the initiatives that
have been taken by the government keeping in mind the challenges that are faced
by these industries in the areas of finance, managerial ability, skilled
employees, and infrastructure demands. These obstacles have to be dealt with to
achieve more noteworthy results in the MSMEs sector of Punjab. Therefore, it is
of the utmost importance to tackle the challenges that this sector encounters
and handle them in an attempt to achieve total improvement in the state of
Punjab. |
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| Keywords | Micro Small and Medium Enterprises (MSMEs), Infrastructure, Economic Development, Industrial Growth. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Introduction | MSMEs are a
vibrant and active sector of the economy that not only contributes to GDP
growth but also is beneficial to rural areas, maximizing equitable regional
development and equal distribution of wealth. They play an important role in
large industrial organizations as auxiliary units that create final items. They
are especially valuable for emerging economies because they are extensive
contributors to employment with fewer capital needs than big corporations and
industries. They foster the rural economy by generating employment
prospects and incorporating goods into remote regions that improve their
quality of life. In the current technological and innovative world, this
sector has the potential to put forward an approach to the challenges of income
disparity, poverty, and unemployment. MSME performance could be strengthened
through more refined and capable employee selection, all-inclusive training,
and compensation.
In addition to additional business areas such as manufacturing, accounting, advertising, stock, and transportation, MSME faces numerous obstacles in obtaining financing, outdated equipment or lack of ability to adapt to new contemporary technology, problems with infrastructure like stagnant rural electrification advancement or excessive installation expenses, fiercely competitive rivalry from big businesses, a lack of understanding on innovation behaviors, and expertise in management. The revised definition of Micro,
Small, and Medium Enterprises regarding Investment and Turnover composition is
as follows:
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| Aim of study |
1. To
comprehend the role of MSMEs in the development of the state of Punjab. 2. To identify the major obstacles faced by MSMEs in Punjab. 3. To identify solutions to tackle issues in the MSME sector in Punjab. |
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| Review of Literature | Ashu Katyal and
Betsy Xaviour (2015) conducted a study addressing the purpose of human resources
practices for recruiting in India. The research comprised 524
MSMEs from the NCR region. According to the research conclusions, the
primary significant issues involve recruiting competent and qualified personnel
and keeping them enthusiastic. Poonam Rani
(2016) the study
conducted focused entirely on the Bathinda district of Punjab. The data had
been collected from primary as well as secondary through the medium of
Structured Questionnaires and Government websites. The findings from the[i] field survey observed that numerous
entrepreneurs have leaned on their relatives, friends, and traditional
moneylenders for borrowing purposes; they were reluctant to obtain funds from an
organized structure like banks or borrow from SIDBI. Shukrant
Jagotra (2016) tried to
explore the challenges for raising credit in the districts of Punjab namely,
Amritsar, Jalandhar, Ludhiana, Mohali, and Patiala. The study was confined to
these five major cities of Punjab with large industrial data. Therefore, the
conclusion drawn from the research was that bank credit was a common means to
obtain loans however, due to Bureaucratic procedures, high interest rates, and
the behavior of staff act as a major demerit for the requirement of financial
assistance by MSMEs. Maumita
Choudhury and Chandana Goswami (2019) analyzed the MSME sector's funding shortages and
due to that, the sector's expansion has been hampered. Reliance on the
informal sector is not a healthy alternative. According to the findings, a key
impediment is a lack of funds.
Pushkar Dubey and Kailash Kumar Sahu (2020) attempted to study the consequences of the pandemic on MSME growth in India including economic assistance measures for them. The report noted the aid package for the MSME sector is inadequate and that adjustments are required along with more initiatives put forth by the government to help it prosper. |
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| Main Text | An Assessment of the Role of MSME in the Indian Economy Table 1 Revenue
Generated through Exports by MSME Sector (In Millions USD)
Source: Open
Government Data Platform in India, 2019 From 2012-13 to
2017-18, the CAGR for income earned from exports was 2.86 percent. Based on
information gathered by the Directorate General of Commercial Intelligence and
Statistics (DGCIS), the share of MSME-related goods in overall Indian exports
for 2018-19 is 48.10 percent. Industrial
development is critical to the health of any economy because it fosters rapid
economic growth and creates opportunities. Industrial growth comes first,
followed by economic expansion. The growth of industries and industrialization
led to the creation of jobs, the eradication of poverty, the facilitation of
urbanization, and the supply of facilities for people's health and education.
About one-third of jobs in Punjab and approximately one-fourth of the GSVA are
in the industrial sector. With over half of the industrial sector's gross state
product coming from manufacturing, the industry has the highest proportion of
any sector in the province. More than 25% of the industrial GSVA is attributed
to construction. Figure 1 Distribution
of MSMEs by activity in Punjab Source: Punjab
Economic Survey 2021-22 Manufacturing
has a significant influence on the overall sector's growth tendency because of
its sizeable portion of the GSVA industrial sector. Over half of the GSVA of
the industrial sector is accounted for by manufacturing. Next, accounting for
about 25% of the industrial GSVA is construction. The percentage of
construction has decreased between 2011–12 and 2021–22(A), while the percentage
of manufacturing, gas, electricity, water supply, and other utilities has
increased. Figure 2: Top
five districts, by output of small-scale industries in Punjab, 2019-20 (in Rs.
Crore) Source: Punjab
Economic Survey 2021-22 The MSME
industry is essential in offering substantial opportunities for employment at
relatively reduced capital costs. MSMEs also contribute to the
industrialization of underdeveloped and rural regions, which lessens regional
disparities. The MSME sector is becoming a major force behind socioeconomic
expansion. More than two lac small-scale businesses in Punjab produce car
parts, bicycle parts, sports products, hosiery, agricultural tools, and other
items. These have had rapid growth recently, with an average 12% increase in
output value between 2016–17 and 2019–20. In 2019–20, there were 78,522
more MSME units, which resulted in 3.67 lac jobs being created. In all,
small-scale industry employs around 21.5 lac people. With an output
value of Rs. 81,255.33 crores, Ludhiana was home to the majority of the
small-scale industries. In terms of output production by small-scale
enterprises, Sangrur (Rs. 11,802.39 Crores), Fazilka (Rs. 7814.82), and
Amritsar (Rs. 7684.52 Crores) followed Ludhiana. The goal of the State's
MSME policy is to boost the growth of its MSME units by upgrading and
establishing common facility centres in 10 clusters annually, upgrading 10
technology centres in the State, and conducting comprehensive studies of the 10
clusters for targeted interventions to boost their competitiveness. The policy
also acknowledged that MSMEs come at different phases and have varied demands.
Ideating a Business, starting a Business, growing a Business, reviving a
Business, and Exiting a Business were the five major stages of MSME growth. The
policy addressed the demands that arise in each of these stages with a growth
and performance-driven approach. Figure 3:
Distribution of Udayam Registrations State-wise as of 31 December 2022 Source: Annual
Report of MSME, 2022-23 The above
statistic shows that Gujarat had the greatest number of UDYAM registrations,
with 1447653 for microenterprises, 67135 for small and medium-sized firms, and
6888 for all three categories. Madhya Pradesh comes next, with 23598 and 1653
registrations for small and medium-sized businesses, and 957992 registrations
for micro-enterprises. Punjab is the following state with 762169 Micro, 22568
Small, and 2022 Medium Enterprises. MSMEs will
receive Growth Accelerator services from the State. It will include creating a
customized intervention that targets the issues that each MSME sector faces and
combines handholding, training, and coaching. The State will select and educate
growth managers to mentor MSMEs toward greater growth in collaboration with
internationally renowned organizations. We will work to ensure these growth
managers' viability as service providers. Additionally, a plethora of
Government of India initiatives provides unit-level incentives to certain
industries, such as food processing, electronics, leather goods, and textiles.
The State will collaborate with appropriate organizations to help a larger
number of MSMEs in the state. It will assist MSMEs in putting together
applications and getting approvals under the appropriate schemes. Table 2 Udyam
Registration of Micro, Small, and medium enterprises by district of Punjab,
2021
Source: Punjab
Economic Survey 2021-22 The
aforementioned figure shows that the district of Ludhiana in Punjab had the
greatest number of Udyam registrations of Micro Enterprises, with 141668,
followed by Jalandhar, Amritsar, Patiala, and so on. It is evident that the
Ludhiana district had the largest number of small and medium-sized businesses,
with 7831 and 755, respectively. Malerkotla has the fewest businesses, with
only 5502 udyam registrations. In 2019–20,
growth in medium-sized and big businesses declined. Compared to the 1.80% rise
in the year before, the value of output fell by 7.90% in that year. In Punjab,
41 new units were established during this period. 590 big industrial units with
a total fixed capital of Rs. 83, 08,593 were located in Punjab. Two, 91,816
people were working in this industry overall. Sangrur produced the most medium-
and large-scale industrial output in the State, totalling Rs. 58,917.75 crores.
In terms of output production by large-scale units, Ludhiana (Rs. 40,312.26
Crores), Hoshiarpur (Rs. 12,224.53 Crores), and SAS Nagar (Rs. 8349.77 Crores)
surpassed Sangrur. As a component
of the Punjab Industrial and Business Development Authority, the government has
also established "MSME Punjab" to concentrate medium-sized growth of
MSMEs through the following crucial functions: I. Improving
MSMEs' competitiveness in the altered economic environment; II. ensuring a
sufficient flow of credit from banks and other financial institutions; III. supporting
technology modernization and upgrades; IV. offering
state-of-the-art testing facilities and quality certification; V. granting
access to contemporary management techniques; and VI. Supporting
product development, design intervention, and packaging. Table 3
Distribution of the Estimated Number of MSMEs by State in Lakhs.
Source: Annual
Report of MSME, 2022-23 The MSME
industry is essential in offering substantial job possibilities at relatively
reduced capital costs. MSMEs also contribute to the development of
underdeveloped and rural regions, which lessens regional disparities. The MSME
sector has become a key driver of socioeconomic development. The Central
Government adopted the Micro Small Medium Enterprises Development (MSMED) Act
2006 in an effort to promote the growth of small businesses, increase their
competitiveness, and establish a framework for the legal registration of
businesses engaged in both manufacturing and services. The State of
Punjab is aware that the demands of MSMEs vary depending on their stage of
development. The development of an MSME may be essentially categorized into
five stages: ideation, startup, growth, revival, and exit. Different demands
that arise during these periods will be addressed by the policy. The policy is
growth and performance-focused rather than just providing subsidies for the
factors of production. The goal of the strategy is to fortify governmental
institutions in order to facilitate the development of an innovative and
efficient smart MSME ecosystem. Table 4
Distribution of the Number of Employees State-Wise in MSMEs
Source: Annual
Report of MSME, 2022-23 With around 3.5
million MSME units, Punjab has a sizable base that reflects the adventurous
nature of the region. The State would reorganize Controller Stores as
"MSME Punjab," a dedicated wing of the Department of Industries &
Commerce, Punjab for the focused development of MSMEs, in order to address the
numerous challenges faced by MSMEs in the State and to make it a highly vibrant
and dynamic sector. The State has
established a robust and efficient Single Window System at the District level,
which would be further, reinforced, in order to strengthen assistance to the
industry, particularly the MSME sector at the district level.
Each major industrial cluster will have a single Technology Centre established by the State. The Technology Centre will serve as a centre for innovation and design services, testing and calibration, incubation, prototyping, research, and exhibition of the newest instruments and technical expertise. These technology centers will collaborate on a national and international level with Punjab Technical University, the Council for Science and Technology, and other scientific and technological organizations. Primary obstacles to
MSMEs' growth Despite being
essential to growth in accordance with ensuring job opportunities,
exporting inventory for finished goods, alongside balancing regional growth, it
ultimately experiences challenges with finances, managerial skills, and
inability to operate advanced technology besides unwillingnessto implement them
when conducting the course of their everyday operations, lacking
understanding in innovation, unskilled and antiquated procedures. A major issue
in MSME's internal and exterior structure has slowed its expansion.A wide
cause requires suitable resolution in the context of government policy
guidelines and subsequent recommendations. Financial
Problems:
MSMEs require capital to invest in new ventures or expand their business,
though due to an intricate documentation process, needed collateral for the
loans, fixed repayments, and high-interest rates entrepreneurs are
hesitant to count on financial loan providers and instead prefer borrowing
from friends and relatives. Further, since their businesses have limited
investment demand owing to poor returns or revenue, they need a modest loan size;consequently, financial
institutions have barely any interest in offering loans, particularly to
micro-entrepreneurs. Competition
from MNCs: MNCs
are enormous industries with an extensive investment base that is able to
devote considerable amounts of resources to R&D, advertisements, and
delivering commodities in aesthetically pleasing packaging at cost-effective
prices. Although the government provides various initiatives promoting
MSMEs, competitiveness is heavily lopsided. In light of globalization and
growing trade from nations such as China, Bangladesh, Thailand,
and Vietnam, such nations tend to manufacture low-cost, high-quality items
that contemporary customers choose to purchase. Innovation
Practices: There
is a continual requirement to promote optimism among businesses with
the essential skills up gradation and maintenance. In India, where
there is extensive population size, strengthening skills alone cannot ensure a
nation's development concerning economic growth. It is necessary to
initially educate innovators so that they could develop a well-formed mind
rather than a well-filled mind. Recruitment
challenges:
MSMEs function on a small financial scale, this being particularly applicable
for Micro and Small Enterprises. Due
to their reputation and inadequate wage deals, professionally
educated and skilled individuals select to seek employment for MNCs, offering
advantages, job stability, respected standing, and career advancement.
Complicated
Laws and Regulations: To
enter the startup industry a business owner must first obtain multiple
authorizations, the GSTN Identification, an industrial license, permits for
construction such as electricity, and environmental approvals. There is no
doubt that these principles are essential and therefore we ought to adhere
to them; nevertheless, the framework and approach should be simplified so
that an average person who may not be highly educated could think about
starting a business. The process of filing these permits and taxes is so
cumbersome that individuals require certified accountants to accomplish it for
them. These all possess a demoralizing and anxiety-inducing effect. |
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| Methodology | The research's
objectives were met by an extensive and detailed evaluation
of journal papers, publications, international policy
regimes, and data from different government agencies. The present research
does a theoretical analysis and is based on Secondary data, which has been collected from several sources
such as MSME Annual reports, Industrial Profiles of states, statistical
abstracts, and other published reports. |
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| Tools Used | The data is collected from various sources by thoroughly evaluating papers in journals, and publications, studying worldwide policy regimes, web pages, and data from various government bodies. The data is put forward in tables, charts, and figures, and CAGR is computed to understand the growth and performance of Industrial units in Punjab. | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Analysis | From 2012-13 to
2017-18, the CAGR for income earned from exports was 2.86 percent. Based on
information gathered by the Directorate General of Commercial Intelligence and
Statistics (DGCIS), the share of MSME-related goods in overall Indian exports
for 2018-19 is 48.10 percent. Manufacturing has a significant influence on the
overall sector's growth tendency because of its sizeable portion of the GSVA
industrial sector. Over half of the GSVA of the industrial sector is accounted
for by manufacturing. Next, accounting for about 25% of the industrial GSVA is
construction. The percentage of construction has decreased between 2011–12 and
2021–22(A), while the percentage of manufacturing, gas, electricity, water
supply, and other utilities has increased. The MSME sector is becoming a major
force behind socioeconomic expansion. More than two lac small-scale
businesses in Punjab produce car parts, bicycle parts, sports products, hosiery,
agricultural tools, and other items. These have had rapid growth recently, with
an average 12% increase in output value between 2016–17 and 2019–20. In
2019–20, there were 78,522 more MSME units, which resulted in 3.67 lac jobs
being created. In all, small-scale industry employs around 21.5 lac
people. With an output value of Rs. 81,255.33 crores, Ludhiana was home to the majority of the small-scale industries. In terms of output production by small-scale enterprises, Sangrur (Rs. 11,802.39 Crores), Fazilka (Rs. 7814.82), and Amritsar (Rs. 7684.52 Crores) followed Ludhiana. The goal of the State's MSME policy is to boost the growth of its MSME units by upgrading and establishing common facility centres in 10 clusters annually, upgrading 10 technology centres in the State, and conducting comprehensive studies of the 10 clusters for targeted interventions to boost their competitiveness. The policy also acknowledged that MSMEs come at different phases and have varied demands. Ideating a Business, starting a Business, growing a Business, reviving a Business, and Exiting a Business were the five major stages of MSME growth. The policy addressed the demands that arise in each of these stages with a growth and performance-driven approach. Gujarat had the greatest number of UDYAM registrations, with 1447653 for microenterprises, 67135 for small and medium-sized firms, and 6888 for all three categories. Madhya Pradesh comes next, with 23598 and 1653 registrations for small and medium-sized businesses, and 957992 registrations for micro-enterprises. Punjab is the following state with 762169 Micro, 22568 Small, and 2022 Medium Enterprises. the district of Ludhiana in Punjab had the greatest number of Udyam registrations of Micro Enterprises, with 141668, followed by Jalandhar, Amritsar, Patiala, and so on. It is evident that the Ludhiana district had the largest number of small and medium-sized businesses, with 7831 and 755, respectively. Malerkotla has the fewest businesses, with only 5502 Udyam registrations. In 2019–20, growth in medium-sized and big businesses declined. Compared to the 1.80% rise in the year before, the value of output fell by 7.90% in that year. In Punjab, 41 new units were established during this period. 590 big industrial units with a total fixed capital of Rs. 83, 08,593 were located in Punjab. Two, 91,816 people were working in this industry overall. Sangrur produced the most medium- and large-scale industrial output in the State, totalling Rs. 58,917.75 crores. In terms of output production by large-scale units, Ludhiana (Rs. 40,312.26 Crores), Hoshiarpur (Rs. 12,224.53 Crores), and SAS Nagar (Rs. 8349.77 Crores) surpassed Sangrur. |
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| Conclusion |
Although the MSME sector is
important to the Indian economy, it faces a number of challenges that limit its
growth. According to the findings of the preceding study, the income generated
by the MSME sector through exports (in millions of USD) has grown. The revenue
CAGR from 2012-13 to 2017-18 was 2.86 percent. Furthermore, the CAGR for The
Prime Minister's Employment Generation Programme (PMEGP) recipients is 3.14
percent for women and 38.10 percent for those with disabilities. Additionally,
West Bengal, Tamil Nadu, Telangana, Karnataka, and Uttar Pradesh are the top
five Indian states in terms of MSMEs owned by women. The MSME GVA share of All India GDP (percentage) ranges from 30.5 percent in 2018-19 to 26.83 percent in 2020-21. According to the Udyam Registration portal, the number of individuals engaged in MSMEs is expected to grow at an 8.67 percent CAGR from 2019-20 to 2022-23. More importantly, Uttar Pradesh has the highest number of estimated MSMEs in lakhs in India, followed by West Bengal (88.67), Tamil Nadu (49.48), Maharashtra (47.78), Karnataka (38.34), Bihar (34.46), Andhra Pradesh (33.87), Gujarat (33.16), Rajasthan (26.87), Madhya Pradesh (26.74), and the rest of the states have 164.52. MSMEs must increase production and quality, reduce expenses, and innovate. Government policy should assist MSMEs in increasing their effectiveness and viability in an economy governed by markets. In order to maintain the development engine proceeding in a favorable direction, it is necessary that we concentrate on welcoming policies, optimal working surroundings, the establishment of adequate facilities, obtaining stability and safety, organizing suitable finance, and product managers, and arranging suitable technology to support MSMEs. |
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| Suggestions for the future Study | 1. The financial system fails to provide sufficient funding to satisfy the necessities for MSME formation and for operational functions. Consequently, lending at lower interest rates has to be available in compliance with the demands. 2. In order to compete and succeed, entrepreneurs must employ current technologies that will assist them in obtaining economies of scale and decreasing their long-run average cost. Innovation in consumer trends is critical to a successful outcome since fresh ideas will entice buyers. Overall, organizational improvement occurs in Indian enterprises that encompass innovations. As a result, the enterprises are able to acquire a competitive advantage. Innovations operate as a trigger, improving an organization's performance as compared to an enterprise that fails to use innovation. 3. According to research, organizations ought to refrain from enabling individual beliefs to influence hiring practices while striving to uphold beneficial HRM techniques. In modern times, it is essential to establish a framework that governs how every division manages its obligations, making individuals liable for their activities in addition to utilizing polite language and mentorship. The business ought to acknowledge an employee who provides substantial contributions to the business's achievement. They must have a voice in key choices and be encouraged to think creatively. Employees must be placed in the appropriate location at the right time in occupations that they value. 4. Regulations issued by governments are meant to simplify life for individuals yet entrepreneurs find the guidelines and procedures incredibly challenging and perplexing. As a way to abide by them, businesses must retain Chartered Accountants and Lawyers whose expertise can assist them in comprehending the regulations and authorizations that must be followed in order to operate a successful business. 5. Most organizations shed out on the most recent technological breakthroughs due to a lack of experience and awareness. MSMEs must stay up with shifting technological developments in order to expand their enterprises. Recommendations 1. The government of India must also take the necessary measures to boost medium-sized businesses. 2. Finance from banks along with interest rates should be flexible as a way to meet the necessities of MSMEs. 3. In relation to innovation and technological advances, MSMEs in both rural and urban regions need adequate training. 4. Improved infrastructure amenities such as electricity, sewage, and water should be ensured. 5. Strengthening employee abilities in accordance with commercial requirements. 6. Easing labour regulations to boost participation. 7. Approaches for eliminating occupational illness and rehabilitating viable sick units. 8. Adopting a quality administration system in MSMEs. 9. Promoting beneficial competition, research, and development for bettering MSMEs. 10. Treating small and medium-sized personnel as an asset and recognizing them with assisting in developing their capabilities. |
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