Micro, Small & Medium Enterprises Development (MSMED) Act, 2006 classifies the Micro, Small and Medium Enterprises (MSME) into two classes.
Manufacturing Enterprise is an enterprise engaged in the manufacture or production of goods about the industry specified according to the Development and Regulation Act 1951. The employment plant and the machinery process adds value to the final product. MSME Act defines the manufacturing enterprise in terms of investment in Plant & Machinery.
The second classification is about the Service Enterprise. The enterprise that provides service or renders service is known as a service enterprise. MSME Act defines a service enterprise in terms of investment in equipment. The more investment in the equipment yields a better outcome in the service and its delivery.
MSME Act defines the Micro-Small and Medium Enterprises (MSMEs) in terms of the size of the investment in equipment. MSME contributes significantly to output, employment export, etc. These factors help to increase the country’s economy. MSME’s perform a critical role in the market place by employing a large number of unskilled and semi-skilled people. MSMEs contribute to exports, raises manufacturing sector production. MSMEs extends the support to many industries by providing the raw material, essential goods, finished parts, and components, etc.
According to the report delivered by the Ministry of MSME, a sector consists of 36 million units. All 36 million areas employ 80 million people. These 80 million people include skilled and semi-skilled labor. The sector produces more than 6,000 products contributing to about 8% of GDP besides 45% to the total manufacturing output and 40% to the exports from the country.
The Ministry of Micro, Small, and Medium Enterprises is one of the leading branches of the Indian Government. The Ministry of MSME is an executive body that formulates and administers the rules, regulations, and laws relating to micro, small, and medium enterprises in India. The Minister of Micro, Small and Medium Enterprises is Nitin Gadkari, and the Minister of State is Pratap Chandra Sarangi since 31 May 2019.
The statistics provided by the annual reports of Ministry of Small and Medium Enterprises (MSME) shows a rise in the plan amount spent on the khadi sector from ₹1942.7 million to ₹14540 million, and non-plan amounts from ₹437 million to ₹2291 million, in the period from 1994–95 to 2014–2015. The interest subsidies to khadi institutions increased from ₹96.3 million to ₹314.5 million in this period.
Although it is the responsibility of the State governments to promote and develop the MSMEs, the central Government passed an act in 2006 to form the Central ministry of MSME. The Supreme Court in 2006 formulated another law. This Act is known as the Micro, Small, and Medium Enterprises Development (MSMED) Act. This Act defines the three-tier of micro, small, and medium enterprises and set investment limits.
The Ministry of Small Scale Industries and Agro and Rural Industries was created in October 1999. In 2001 the central Government split the ministry into the Ministry of Small Scale Industries and the Ministry of Agro and Rural Industries. The President of India amended the Government of India (Allocation of Business) Rules, 1961, under the notification dated 9 May 2007. According to this amendment, the ministries were merged into a single ministry.
The task of this ministry is to promote and develop micro and small scale industries and enterprises. The Small Industries Development Organization was started in 1954. Ford Foundation recommended the establishment of this organization that will benefit many small scale industries. This organization has over 60 offices and 21 autonomous bodies under its management.
These independent bodies include Tool Rooms, Training Institutions, and Project-cum-Process Development Centres. After the formulation of amendment in 2007, the Small Industries Development Organization was under the control of the Ministry of MSME. The organization renamed into the National Small Industries Corporation (Limited public sector undertaking).
The Ministry of Micro, Small, and Medium Enterprises deals with the khadi, village, and coir industries through the Khadi and Village Industries Commission (KVIC) and the Coir Board. This ministry started two employment programs. The first program is the Rural Employment Generation Programme (REGP), and the second employment program is Prime Minister’s Rozgar Yojana (PMRY). The MSME Ministry launched these two employment programs with the cooperation of State Governments, the Reserve Bank of India (RBI) and other banks.
The Parliament established the Khadi and Village Industries Commission (KVIC) Act. This organization was established in 1956. According to the established Act, the organization must work for the promotion and development of khadi and village industries to provide employment opportunities in rural areas of the country. The country’s economy develops when every rural area in the country grows. The coir industry requires immense labor, thereby employing many people of a particular village. Khadi industry involves a product of coconut called coir husk. So the Khadi industry also indirectly benefits many coconut farmers. Khadi has a high demand across the world, and India exports a significant Khadi to many countries. The Coir Industry Act formulated in 1953, making the Coir Board responsible for promoting and developing the growth of the coir industry. The Coir Board is responsible for exporting the material to various parts of the world. The Coir Board has contributed significant work to expand the domestic market.
The MSME Ministry started an Integrated Training Center in Nilokheri in Karnal district in the state of Haryana.
This training center is owned and managed by the Government of India. This training center helps the technicians to upgrade their skills. This training center is under the control of the Small Industries Development Organization (SIDO). This training center provides training to extension officers of State Governments as well as managers and technician entrepreneurs both in modern small scale and traditional village industries. Due to some conflicts, the control of this organization was taken by the MSME Ministry. This step led to the development of the extension center at Ludhiana. This integrated center provides summer training programs for graduates and undergraduates studying for Degrees or Diplomas in Engineering or Computer Sciences.