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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.

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.  

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.

An Assessment of the Role of MSME in the Indian Economy

Table 1 Revenue Generated through Exports by MSME Sector (In Millions USD)

Years	Revenue Generated
2012-13	1,27,992.76
2013-14	1,33,313.28
2014-15	1,38,896.72
2015-16	1,30,768.70
2016-17	1,37,068.80
2017-18	1,47,390.08
CAGR (Compound annual growth rate):  2.86%

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

S. No	District Name	Total Udyam	Micro	Small	Medium
1.	Ludhiana	150254	141668	7831	755
2.	Jalandhar	78446	76179	2084	183
3.	Amritsar	64478	62490	1871	117
4.	Patiala	61964	60658	1191	115
5.	SAS Nagar	58878	57006	1719	153
6.	Bathinda	36731	35691	973	67
7.	Sangrur	35162	34222	886	54
8.	Hoshiarpur	32770	32190	562	18
9.	Gurdaspur	27512	27011	476	25
10.	Moga	27293	26877	394	22
11.	Kapurthala	23888	23471	390	27
12.	Ferozepur	21846	21509	317	20
13.	Sri Muktsar Sahib	19192	18745	424	23
14.	Fazilka	19039	18594	396	49
15.	Taran Taran	16875	16711	159	5
16.	Fatehgarh Sahib	16748	15237	1199	312
17.	Faridkot	16640	16350	267	23
18.	Barnala	16104	15785	309	10
19.	Shahid Bhagat Singh Nagar	15452	15262	185	5
20.	Mansa	15296	14981	299	16
21.	RupNagar	14580	14292	275	13
22.	Pathankot	12122	11808	305	9
23.	Malerkotla	5502	5445	56	1
	Total	786772	762182	22568	2022

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.

Serial Number	State	Micro	Small	Medium	MSMEs
1.	Punjab	14.56	0.09	0.00	14.65
2.	Kerala	23.58	0.21	0.00	23.79
3.	Haryana	9.53	0.17	0.00	9.70
4.	Gujarat	32.67	0.50	0.00	33.16
5.	Madhya Pradesh	26.42	0.31	0.01	26.74

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

Serial Number	State	Female	Male	Total
1.	Punjab	4.24	20.55	24.80
2.	Kerala	13.77	30.86	44.64
3.	Haryana	2.78	16.27	19.06
4.	Gujarat	13.71	47.44	61.16
5.	Madhya Pradesh	10.13	38.61	48.80

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.

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. 

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.

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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