Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard. (10M,150 words)

The question Faster economic growth requires increased share of the manufacturing sector in GDP, particularly of MSMEs. Comment on the present policies of the Government in this regard". was asked in the Mains 2023 GS Paper 3. Let us look at the model answer to this question.


Answer: India has followed a unique growth trajectory. Over the past two decades, the services sector grew rapidly without a manufacturing boom, unlike other countries where manufacturing growth precedes services. The services sector’s contribution to GDP has risen from 45 percent to 55 percent while manufacturing has remained largely stagnant at 15 percent in 2017 and 17 percent in 2022. The Micro, Small and Medium Enterprises (MSMEs) play an important role in the manufacturing sector of the country.

Importance of the MSME sector for faster economic Growth

  • contribute more than 29% to the GDP
  • responsible for 50% of the country's total exports.
  • accountable for one-third of India's manufacturing output.
  • employ more than 11 crore people, and the aim is to grow this number to 15 crore in the coming years.
  • A lower capital-output ratio which leads to a small investment offers a good growth rate.
  • job opportunities in both urban and rural parts of the country, leading to inclusive and balanced growth.

The Government has taken a number of recent initiatives to support MSMEs in the country which include the following

  • 'Make in India’ initiative and the ‘Atmanirbhar Bharat Abhiyaan’: They have played a key role in promoting business and local manufacturing in the country, giving special thrust to Micro, Small and Medium Enterprises (MSMEs).
  • One district one product: The scheme would help Micro, Small and Medium Enterprises (MSME) to produce and promote products that are unique in each district.
  • 5 lakh crore Emergency Credit Line Guarantee Scheme (ECLGS) for business, including MSMEs.
  • Access to Credit and handholding through Start Up India, Stand Up India and the MUDRA yojna
  • 50,000 crore equity infusion through MSME Self-Reliant India Fund.
  • New revised criteria for classification of MSMEs.
  • Tenders for government procurement will no longer be open for global companies in projects worth up to Rs 200 crore. This will give push to domestic manufacturing units especially MSMEs
  • Launching of an online Portal “Champions” in June, 2020 to cover many aspects of e-governance including grievance redress and handholding of MSMEs.
  • Inclusion of Retail and Wholesale trades as MSMEse.f. 02nd July, 2021.
  • Non-tax benefits extended for 3 years in case of an upward change in status of MSMEs.
  • Roll out of Raising and Accelerating MSME Performance (RAMP) programme with an outlay of Rs. 6,000 crore over 5 years.
  • Launch of Udyam Assist Platform (UAP) on 11.01.2023 to bring the Informal Micro Enterprises (IMEs) under the formal ambit for availing the benefit under Priority Sector Lending (PSL).
  • Credit Linked Capital Subsidy and Technology Up-gradation Scheme (CLCS-TUS): One of the components under the schemes is Credit Linked Capital Subsidy (CLCS) under which capital subsidy up to Rs. 15 Lakh is provided to Micro and Small Enterprises (MSEs) for accessing modern technology.
  • MSME Samadhaan Portal: Ease of filing application under Micro, Small and Medium Enterprise Development (MSMED) Act, 2006 which contains provisions of Delayed Payment to Micro and Small Enterprise (MSEs).

The MSMEs play an important role in the growth story of India as it enters the Amrit Kaal phase. They promote inclusive and balanced development and make India a global manufacturing hub. There is a need to focus on the implementation and realising the outcomes.