Micro Small and Medium (MSME) enterprises: Need for Governing

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Micro Small and Medium (MSME)

Written By:– Sreshta Satpathy

What is MSME?

MSME is referred to as Micro Small and Medium (MSMEs) enterprises. MSME industries are the backbone of the economy in a developing country like India. The MSME became fully operational on October 02, 2006. It was established to promote, facilitate and develop competitiveness in the field of micro, small and medium enterprises. Apart from that MSMEs are also pivotal to the growth of every nation as they provide employment to lakhs of unskilled or semi-skilled individuals.

The National Board for Micro, Small and Medium Enterprises (NBMSME) was established by the Government under the Micro, Small and Medium Enterprises Development Act, 2006 and Rules made thereunder. It examines the factors affecting the promotion and development of MSMEs, and it also reviews existing policies and programmes and makes recommendations to the Government in formulating the problematic policies and programmes for the growth of MSME.

Contribution to Indian Economy

MSMEs have played a very vital role in providing employment opportunities in rural areas. They have helped in the industrialization process of these areas with a low capital cost compared to the large industries. Acting as a side unit to large sectors, the MSME sector has enormously contributed to its socio-economic development. The Micro, Small, and Medium Enterprises came into force in India by the Government through an agreement with the Micro, Small, and Medium Enterprises Development Act of 2006.

Since then, MSMEs have played a major role in different sectors of the Indian Economy in collaboration with concerned Ministries, State Governments, and other stakeholders, the Ministry of Micro, Small, and Medium Enterprises (MSME) supports a progressive MSME sector by promoting growth and development of the sector, including Khadi, Village, and Coir Industries, by providing support to existing enterprises, adopting cutting-edge technologies, and encouraging the creation of new enterprises.

Need for Governing MSME’s

The separation of decision making from decision ratification and decision execution from decision monitoring is the essence of effective governance in MSME. However, greater rates of informality, high mortality, low quality, and a lack of competitiveness and environmental sustainability plague the sector. The agenda of governance of the sector is loud and clear. The prevalent discourse on the governance of MSMEs seems to be taking the corporate governance route. There are a lot of major issues that are faced by this sector for a long time. Such problems are major because the governance part is different in both cases. Meaning; governance of MSME sectors is different from that of governance of other corporate sectors.

The benefits that other corporate sectors have been provided are way too different from that of what MSME are. Better technical aid should be available. Because the world is moving more towards the technology aspect, MSMEs need assistance to keep up with the pace. This will speed up the sector’s process, resulting in increased productivity and profit in the near future. Another point to be noted is that there is a need for the creation of a proper legal structure for establishing MSMEs rules, regulations, and operating procedures.

This could be a significant move since the other companies are supervised under the Companies Act of 2013, which creates a distinction between them and another industry. Hence, for dealing with MSMEs in a more corporate manner, it is important to have legislation having regulations that of like other corporate sectors. Lastly what I feel could be done is that the authority in charge should be ensuring that the infrastructure is in good working order. Organizations with adequate infrastructure have more customers and profits than those without. Despite its shortcomings, MSME has come a long way, and good infrastructure will be the perfect accessory.


This article emphasises that the duty for governance cannot be delegated; yet, given the unique characteristics of the MSME sector in various contexts, it may be constructively shared. In recent years, the MSMEs sector has experienced positive growth. Covid-19, on the other hand, has created a situation for the corporate sector, particularly for MSMEs, which already have limited resources.

The government’s Aatma Nirbhar Bharat initiative, which was launched this year, has proven to be a glimmer of hope for MSMEs. Various programs have been put in place to keep MSMEs afloat and prevent them from collapsing. MSME has made a significant contribution to India as a whole, and it is the government’s job to ensure that it is properly governed.

Other big industries might often act as a curtain, concealing the demands of smaller industries. They too require such governance in order to continue working efficiently. This is significant since the sector’s strong expansion in the absence of such initiatives has demonstrated that it is self-sufficient. The better the governance, the faster the sector will grow, which will help the growth of other sectors of the Indian economy.

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Micro Small and Medium (MSME)


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