NCERT Textbook - Small Business | Business Studies (BST) Class 11 - Commerce PDF Download

 Page 1


Chapter 9
MSME and Bu Sin ESS Entr Epr En Eur Ship LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the meaning and nature of MSME in India;
•	
appreciate the role of MSME in India;
•	
analyse the problems faced by of MSME in India; and
•	
discuss the role of innovation and entrepreneurship for MSMEs
Chapter 9.indd   198 9/2/2022   2:20:50 PM
2024-25
Page 2


Chapter 9
MSME and Bu Sin ESS Entr Epr En Eur Ship LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the meaning and nature of MSME in India;
•	
appreciate the role of MSME in India;
•	
analyse the problems faced by of MSME in India; and
•	
discuss the role of innovation and entrepreneurship for MSMEs
Chapter 9.indd   198 9/2/2022   2:20:50 PM
2024-25
199 MSME and Bu Sin ESS Entr Epr En Eur Ship 9.1 Introduct Ion Micro, Small and Medium Enterprises 
(MSME) contribute significantly to 
the development process and acts as 
a vital link in the industrialisation 
in terms of production, employment 
and exports for economic prosperity 
by widening entrepreneurial base 
and use of local raw materials and 
indigenous skills. MSME dominate the 
industrial scenario in the country with 
sizeable proportion of labour force and 
tremendous export potential.
MSMEs play a significant role in  
the economic growth and contribute 
approximately 29.7 per cent of GDP 
and 49.66 per cent of exports. The 
sector offers employment to nearly 
60 million people through 28.5 million 
enterprises, after the agriculture 
sector. MSMEs are complementary to 
large industries as ancillary units and 
form an integral part of value chain for 
building a conducive environment for 
indigenous skills, grass root innovations 
and entrepreneurship development. 
This sector produces a wide range of 
Romi Bags of Manipur
Khumbongmayum Dhanachandra Singh didn’t have much in life. The son of a poor 
tailor, he wasn’t brought up with many privileges. He saw his father working day 
and night to earn a meagre income. He saw the rich getting richer and the poor 
remaining poor. The boy wanted to do something more in life. He couldn’t imagine 
a life of stitching clothes relentlessly and earn just enough to survive.
Imphal is a small city in Manipur. Hardworking men and women send 
their children away to bigger cities so they can have opportunities to progress. 
Khumbongmayum’s father couldn’t afford to send him or even educate him. He just 
taught him what he knew— tailoring. Fabrics, stitching and clothing styles was 
what the boy grew up with. There was only one sewing machine and the boy used 
it when his father wasn’t using it. He learnt it silently because he knew it was what 
his father wanted, but his heart wasn’t in it.
Sometimes an incident can change your life. This happened to Khumbongmayum 
when he stitched a purse made out of leftover fabrics from his father’s scraps. 
Khumbongmayum offered the purse to his friend who marvelled at the unique design. 
The friend in turn showed the interesting purse to his other friends. They asked 
Khumbongmayum if he could make such purses for them also. It led him to wonder if 
there was a market for his designs. And he knew he had stumbled on to his business 
venture. He made a business plan and launched a purse making venture ‘Romi 
Bags’ in 1996. Khumbongmayum was not one to do anything on a whim. He noticed 
the demands of his product and he calculated his costs, expenses and expected 
income. In 2007, he received the National Award for bag making under Micro and 
Medium Enterprises.  For him, though it’s just the beginning, Khumbongmayum 
Dhanchandra Singh has changed his life by sheer grit, perseverance and hard work. 
You can’t let anything stop you from moving forward. You can’t become successful 
or reach the top if you don’t listen and hear effectively.
Chapter 9.indd   199 18-04-2024   11:33:03
2024-25
Page 3


Chapter 9
MSME and Bu Sin ESS Entr Epr En Eur Ship LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the meaning and nature of MSME in India;
•	
appreciate the role of MSME in India;
•	
analyse the problems faced by of MSME in India; and
•	
discuss the role of innovation and entrepreneurship for MSMEs
Chapter 9.indd   198 9/2/2022   2:20:50 PM
2024-25
199 MSME and Bu Sin ESS Entr Epr En Eur Ship 9.1 Introduct Ion Micro, Small and Medium Enterprises 
(MSME) contribute significantly to 
the development process and acts as 
a vital link in the industrialisation 
in terms of production, employment 
and exports for economic prosperity 
by widening entrepreneurial base 
and use of local raw materials and 
indigenous skills. MSME dominate the 
industrial scenario in the country with 
sizeable proportion of labour force and 
tremendous export potential.
MSMEs play a significant role in  
the economic growth and contribute 
approximately 29.7 per cent of GDP 
and 49.66 per cent of exports. The 
sector offers employment to nearly 
60 million people through 28.5 million 
enterprises, after the agriculture 
sector. MSMEs are complementary to 
large industries as ancillary units and 
form an integral part of value chain for 
building a conducive environment for 
indigenous skills, grass root innovations 
and entrepreneurship development. 
This sector produces a wide range of 
Romi Bags of Manipur
Khumbongmayum Dhanachandra Singh didn’t have much in life. The son of a poor 
tailor, he wasn’t brought up with many privileges. He saw his father working day 
and night to earn a meagre income. He saw the rich getting richer and the poor 
remaining poor. The boy wanted to do something more in life. He couldn’t imagine 
a life of stitching clothes relentlessly and earn just enough to survive.
Imphal is a small city in Manipur. Hardworking men and women send 
their children away to bigger cities so they can have opportunities to progress. 
Khumbongmayum’s father couldn’t afford to send him or even educate him. He just 
taught him what he knew— tailoring. Fabrics, stitching and clothing styles was 
what the boy grew up with. There was only one sewing machine and the boy used 
it when his father wasn’t using it. He learnt it silently because he knew it was what 
his father wanted, but his heart wasn’t in it.
Sometimes an incident can change your life. This happened to Khumbongmayum 
when he stitched a purse made out of leftover fabrics from his father’s scraps. 
Khumbongmayum offered the purse to his friend who marvelled at the unique design. 
The friend in turn showed the interesting purse to his other friends. They asked 
Khumbongmayum if he could make such purses for them also. It led him to wonder if 
there was a market for his designs. And he knew he had stumbled on to his business 
venture. He made a business plan and launched a purse making venture ‘Romi 
Bags’ in 1996. Khumbongmayum was not one to do anything on a whim. He noticed 
the demands of his product and he calculated his costs, expenses and expected 
income. In 2007, he received the National Award for bag making under Micro and 
Medium Enterprises.  For him, though it’s just the beginning, Khumbongmayum 
Dhanchandra Singh has changed his life by sheer grit, perseverance and hard work. 
You can’t let anything stop you from moving forward. You can’t become successful 
or reach the top if you don’t listen and hear effectively.
Chapter 9.indd   199 18-04-2024   11:33:03
2024-25
200 BUSINESS  STUDIES
products, from simple consumer 
goods to high-precision, sophisticated 
finished 	products.	
Recognising the potential of this 
sector for the national development, 
this segment of industry is encouraged 
in both in pre-reform and post–reform 
period 	 for 	 fulfilling 	 the 	 objective 	 of 	 self-
reliance and rural industrialisation. 
In India, the MSME consists of 
both ‘traditional’ and ‘modern’ small 
industries. This sector has eight 
subgroups. They are handlooms, 
handicrafts, coir, sericulture, khadi 
and village industries, small scale 
industries and powerlooms. The 
Khadi and Village Industries and Coir 
segment is another major contributor 
to the growth of the MSME. Many 
global companies are increasingly 
looking to Indian MSMEs for strategic 
pa rtn ersh ip s 	 of 	 mu tu al 	 ben efi t 	 du e	
to the innovative capabilities in niche 
of low-cost manufacturing and local 
skills and capabilities. 
The Diversity of the Indian MSME Sector
MSME Tool Rooms have been credited to provide at least 10 components for 
Mangalyaan 	 (Mars 	 Orbiter 	 Mission 	 probe), 	 India’s 	 first 	 inter-planetary 	 space 	 mission.	
It has contributed vital inputs for other space satellites such as the Chandrayan. 
India’s second moon mission.  Chandrayaan-2, which was successfully launched 
on July 22, 2019 the moon mission of India, acknowledges the contribution Central 
Tool Room and Training Centre (CTTC) Bhubaneswar and Institute for Design 
of Electrical Measuring Instruments (IDEMI) Mumbai in developing several vital 
components for the Cryogenic engine of the Launch Vehicle, Navigational assemblies 
of the Lunar Orbiter and the wheel assemblies for the Moon Launch. MSMEs are 
now only not limited up to small business but their contribution starts from ground 
level which directly creates a major effect on such big missions. This sector, thus, 
holds key to inclusive growth and plays a critical role in India’s future.
Source: Ministry of MSME, MSME Insider, 2019, Government of India.
9.2 Micro , SMall and MEdiu M 
Ent Erpri SES
It is important to know how size is 
defined 	 in	 our	 country,	 with 	 reference 	
to MSME establishments. Several 
parameters can be used to measure the 
size of business units. These include 
the number of persons employed in 
business, capital invested in business, 
turnover of business, etc.
The definition used by the 
Government of India to describe 
MSME is based on the investment in 
plant and machinery and turnover. 
This measure seeks to keep in view the 
socio-economic environment in India 
where capital is scarce and labour is 
abundant.
Chapter 9.indd   200 9/2/2022   2:20:50 PM
2024-25
Page 4


Chapter 9
MSME and Bu Sin ESS Entr Epr En Eur Ship LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the meaning and nature of MSME in India;
•	
appreciate the role of MSME in India;
•	
analyse the problems faced by of MSME in India; and
•	
discuss the role of innovation and entrepreneurship for MSMEs
Chapter 9.indd   198 9/2/2022   2:20:50 PM
2024-25
199 MSME and Bu Sin ESS Entr Epr En Eur Ship 9.1 Introduct Ion Micro, Small and Medium Enterprises 
(MSME) contribute significantly to 
the development process and acts as 
a vital link in the industrialisation 
in terms of production, employment 
and exports for economic prosperity 
by widening entrepreneurial base 
and use of local raw materials and 
indigenous skills. MSME dominate the 
industrial scenario in the country with 
sizeable proportion of labour force and 
tremendous export potential.
MSMEs play a significant role in  
the economic growth and contribute 
approximately 29.7 per cent of GDP 
and 49.66 per cent of exports. The 
sector offers employment to nearly 
60 million people through 28.5 million 
enterprises, after the agriculture 
sector. MSMEs are complementary to 
large industries as ancillary units and 
form an integral part of value chain for 
building a conducive environment for 
indigenous skills, grass root innovations 
and entrepreneurship development. 
This sector produces a wide range of 
Romi Bags of Manipur
Khumbongmayum Dhanachandra Singh didn’t have much in life. The son of a poor 
tailor, he wasn’t brought up with many privileges. He saw his father working day 
and night to earn a meagre income. He saw the rich getting richer and the poor 
remaining poor. The boy wanted to do something more in life. He couldn’t imagine 
a life of stitching clothes relentlessly and earn just enough to survive.
Imphal is a small city in Manipur. Hardworking men and women send 
their children away to bigger cities so they can have opportunities to progress. 
Khumbongmayum’s father couldn’t afford to send him or even educate him. He just 
taught him what he knew— tailoring. Fabrics, stitching and clothing styles was 
what the boy grew up with. There was only one sewing machine and the boy used 
it when his father wasn’t using it. He learnt it silently because he knew it was what 
his father wanted, but his heart wasn’t in it.
Sometimes an incident can change your life. This happened to Khumbongmayum 
when he stitched a purse made out of leftover fabrics from his father’s scraps. 
Khumbongmayum offered the purse to his friend who marvelled at the unique design. 
The friend in turn showed the interesting purse to his other friends. They asked 
Khumbongmayum if he could make such purses for them also. It led him to wonder if 
there was a market for his designs. And he knew he had stumbled on to his business 
venture. He made a business plan and launched a purse making venture ‘Romi 
Bags’ in 1996. Khumbongmayum was not one to do anything on a whim. He noticed 
the demands of his product and he calculated his costs, expenses and expected 
income. In 2007, he received the National Award for bag making under Micro and 
Medium Enterprises.  For him, though it’s just the beginning, Khumbongmayum 
Dhanchandra Singh has changed his life by sheer grit, perseverance and hard work. 
You can’t let anything stop you from moving forward. You can’t become successful 
or reach the top if you don’t listen and hear effectively.
Chapter 9.indd   199 18-04-2024   11:33:03
2024-25
200 BUSINESS  STUDIES
products, from simple consumer 
goods to high-precision, sophisticated 
finished 	products.	
Recognising the potential of this 
sector for the national development, 
this segment of industry is encouraged 
in both in pre-reform and post–reform 
period 	 for 	 fulfilling 	 the 	 objective 	 of 	 self-
reliance and rural industrialisation. 
In India, the MSME consists of 
both ‘traditional’ and ‘modern’ small 
industries. This sector has eight 
subgroups. They are handlooms, 
handicrafts, coir, sericulture, khadi 
and village industries, small scale 
industries and powerlooms. The 
Khadi and Village Industries and Coir 
segment is another major contributor 
to the growth of the MSME. Many 
global companies are increasingly 
looking to Indian MSMEs for strategic 
pa rtn ersh ip s 	 of 	 mu tu al 	 ben efi t 	 du e	
to the innovative capabilities in niche 
of low-cost manufacturing and local 
skills and capabilities. 
The Diversity of the Indian MSME Sector
MSME Tool Rooms have been credited to provide at least 10 components for 
Mangalyaan 	 (Mars 	 Orbiter 	 Mission 	 probe), 	 India’s 	 first 	 inter-planetary 	 space 	 mission.	
It has contributed vital inputs for other space satellites such as the Chandrayan. 
India’s second moon mission.  Chandrayaan-2, which was successfully launched 
on July 22, 2019 the moon mission of India, acknowledges the contribution Central 
Tool Room and Training Centre (CTTC) Bhubaneswar and Institute for Design 
of Electrical Measuring Instruments (IDEMI) Mumbai in developing several vital 
components for the Cryogenic engine of the Launch Vehicle, Navigational assemblies 
of the Lunar Orbiter and the wheel assemblies for the Moon Launch. MSMEs are 
now only not limited up to small business but their contribution starts from ground 
level which directly creates a major effect on such big missions. This sector, thus, 
holds key to inclusive growth and plays a critical role in India’s future.
Source: Ministry of MSME, MSME Insider, 2019, Government of India.
9.2 Micro , SMall and MEdiu M 
Ent Erpri SES
It is important to know how size is 
defined 	 in	 our	 country,	 with 	 reference 	
to MSME establishments. Several 
parameters can be used to measure the 
size of business units. These include 
the number of persons employed in 
business, capital invested in business, 
turnover of business, etc.
The definition used by the 
Government of India to describe 
MSME is based on the investment in 
plant and machinery and turnover. 
This measure seeks to keep in view the 
socio-economic environment in India 
where capital is scarce and labour is 
abundant.
Chapter 9.indd   200 9/2/2022   2:20:50 PM
2024-25
201 MSME AND BUSINESS ENTREPRENEURSHIP
Village Industries
Village	 industry	 has	 been	 defined 	 as	 any	 industry 	 located	 in 	 a	 rural	 area	 which 	
produces any goods, renders any service with or without the use of power and in 
which 	 the 	 fixed 	 capital 	 investment	 per	 head	 or	 artisan	 or	 worker	 is	 specified 	 by	
the central government, from time to time.
Cottage Industries
Cottage industries are also known as rural industries or traditional industries. 
They 	 are	 not 	 defined 	 by	 capital	 investment	 criteria	 as	 in 	 the 	 case 	 of 	 other	 small	
scale industries.
Type of Units
Investment in Plant 
and Machinery
Turnover
Micro Enterprises 1 Crore Does not exceed 5 crore
Small Enterprises 10 Crore Does not exceed 50 crore
Medium Enterprises 50 Crore Does not exceed 250 core
% share of MSMES in
Micro Enterprises 99.4%
Small Enterprises 0.52%
Medium Enterprises 0.1%
The emergence of a large service 
sector has necessitated the government 
to include other enterprises covering 
both Small Scale Industries (SSI) sector 
and related service entities under the 
same umbrella. Expansion of the small 
enterprises was taking place growing 
into medium enterprises and they 
were required to adopt higher levels 
of technologies in order to remain 
competitive in a fast globalising world. 
Thus, it was necessary to address the 
concerns of such enterprises as micro, 
small and medium and provide them 
with a single legal framework. The 
MSMED Act, 2006 came into force 
w.e.f., October, 2006. The Micro, Small 
and Medium Enterprises Development 
(MSMED) Act, 2006 addressed these 
issues relating to its definition, 
credit, marketing and technology up 
gradation. Medium scale enterprises 
and service related enterprises also 
come under the purview of this Act. 
Chapter 9.indd   201 9/2/2022   2:20:50 PM
2024-25
Page 5


Chapter 9
MSME and Bu Sin ESS Entr Epr En Eur Ship LEARNING OBJECTIVES
After studying this chapter, you should be able to:
•	
explain the meaning and nature of MSME in India;
•	
appreciate the role of MSME in India;
•	
analyse the problems faced by of MSME in India; and
•	
discuss the role of innovation and entrepreneurship for MSMEs
Chapter 9.indd   198 9/2/2022   2:20:50 PM
2024-25
199 MSME and Bu Sin ESS Entr Epr En Eur Ship 9.1 Introduct Ion Micro, Small and Medium Enterprises 
(MSME) contribute significantly to 
the development process and acts as 
a vital link in the industrialisation 
in terms of production, employment 
and exports for economic prosperity 
by widening entrepreneurial base 
and use of local raw materials and 
indigenous skills. MSME dominate the 
industrial scenario in the country with 
sizeable proportion of labour force and 
tremendous export potential.
MSMEs play a significant role in  
the economic growth and contribute 
approximately 29.7 per cent of GDP 
and 49.66 per cent of exports. The 
sector offers employment to nearly 
60 million people through 28.5 million 
enterprises, after the agriculture 
sector. MSMEs are complementary to 
large industries as ancillary units and 
form an integral part of value chain for 
building a conducive environment for 
indigenous skills, grass root innovations 
and entrepreneurship development. 
This sector produces a wide range of 
Romi Bags of Manipur
Khumbongmayum Dhanachandra Singh didn’t have much in life. The son of a poor 
tailor, he wasn’t brought up with many privileges. He saw his father working day 
and night to earn a meagre income. He saw the rich getting richer and the poor 
remaining poor. The boy wanted to do something more in life. He couldn’t imagine 
a life of stitching clothes relentlessly and earn just enough to survive.
Imphal is a small city in Manipur. Hardworking men and women send 
their children away to bigger cities so they can have opportunities to progress. 
Khumbongmayum’s father couldn’t afford to send him or even educate him. He just 
taught him what he knew— tailoring. Fabrics, stitching and clothing styles was 
what the boy grew up with. There was only one sewing machine and the boy used 
it when his father wasn’t using it. He learnt it silently because he knew it was what 
his father wanted, but his heart wasn’t in it.
Sometimes an incident can change your life. This happened to Khumbongmayum 
when he stitched a purse made out of leftover fabrics from his father’s scraps. 
Khumbongmayum offered the purse to his friend who marvelled at the unique design. 
The friend in turn showed the interesting purse to his other friends. They asked 
Khumbongmayum if he could make such purses for them also. It led him to wonder if 
there was a market for his designs. And he knew he had stumbled on to his business 
venture. He made a business plan and launched a purse making venture ‘Romi 
Bags’ in 1996. Khumbongmayum was not one to do anything on a whim. He noticed 
the demands of his product and he calculated his costs, expenses and expected 
income. In 2007, he received the National Award for bag making under Micro and 
Medium Enterprises.  For him, though it’s just the beginning, Khumbongmayum 
Dhanchandra Singh has changed his life by sheer grit, perseverance and hard work. 
You can’t let anything stop you from moving forward. You can’t become successful 
or reach the top if you don’t listen and hear effectively.
Chapter 9.indd   199 18-04-2024   11:33:03
2024-25
200 BUSINESS  STUDIES
products, from simple consumer 
goods to high-precision, sophisticated 
finished 	products.	
Recognising the potential of this 
sector for the national development, 
this segment of industry is encouraged 
in both in pre-reform and post–reform 
period 	 for 	 fulfilling 	 the 	 objective 	 of 	 self-
reliance and rural industrialisation. 
In India, the MSME consists of 
both ‘traditional’ and ‘modern’ small 
industries. This sector has eight 
subgroups. They are handlooms, 
handicrafts, coir, sericulture, khadi 
and village industries, small scale 
industries and powerlooms. The 
Khadi and Village Industries and Coir 
segment is another major contributor 
to the growth of the MSME. Many 
global companies are increasingly 
looking to Indian MSMEs for strategic 
pa rtn ersh ip s 	 of 	 mu tu al 	 ben efi t 	 du e	
to the innovative capabilities in niche 
of low-cost manufacturing and local 
skills and capabilities. 
The Diversity of the Indian MSME Sector
MSME Tool Rooms have been credited to provide at least 10 components for 
Mangalyaan 	 (Mars 	 Orbiter 	 Mission 	 probe), 	 India’s 	 first 	 inter-planetary 	 space 	 mission.	
It has contributed vital inputs for other space satellites such as the Chandrayan. 
India’s second moon mission.  Chandrayaan-2, which was successfully launched 
on July 22, 2019 the moon mission of India, acknowledges the contribution Central 
Tool Room and Training Centre (CTTC) Bhubaneswar and Institute for Design 
of Electrical Measuring Instruments (IDEMI) Mumbai in developing several vital 
components for the Cryogenic engine of the Launch Vehicle, Navigational assemblies 
of the Lunar Orbiter and the wheel assemblies for the Moon Launch. MSMEs are 
now only not limited up to small business but their contribution starts from ground 
level which directly creates a major effect on such big missions. This sector, thus, 
holds key to inclusive growth and plays a critical role in India’s future.
Source: Ministry of MSME, MSME Insider, 2019, Government of India.
9.2 Micro , SMall and MEdiu M 
Ent Erpri SES
It is important to know how size is 
defined 	 in	 our	 country,	 with 	 reference 	
to MSME establishments. Several 
parameters can be used to measure the 
size of business units. These include 
the number of persons employed in 
business, capital invested in business, 
turnover of business, etc.
The definition used by the 
Government of India to describe 
MSME is based on the investment in 
plant and machinery and turnover. 
This measure seeks to keep in view the 
socio-economic environment in India 
where capital is scarce and labour is 
abundant.
Chapter 9.indd   200 9/2/2022   2:20:50 PM
2024-25
201 MSME AND BUSINESS ENTREPRENEURSHIP
Village Industries
Village	 industry	 has	 been	 defined 	 as	 any	 industry 	 located	 in 	 a	 rural	 area	 which 	
produces any goods, renders any service with or without the use of power and in 
which 	 the 	 fixed 	 capital 	 investment	 per	 head	 or	 artisan	 or	 worker	 is	 specified 	 by	
the central government, from time to time.
Cottage Industries
Cottage industries are also known as rural industries or traditional industries. 
They 	 are	 not 	 defined 	 by	 capital	 investment	 criteria	 as	 in 	 the 	 case 	 of 	 other	 small	
scale industries.
Type of Units
Investment in Plant 
and Machinery
Turnover
Micro Enterprises 1 Crore Does not exceed 5 crore
Small Enterprises 10 Crore Does not exceed 50 crore
Medium Enterprises 50 Crore Does not exceed 250 core
% share of MSMES in
Micro Enterprises 99.4%
Small Enterprises 0.52%
Medium Enterprises 0.1%
The emergence of a large service 
sector has necessitated the government 
to include other enterprises covering 
both Small Scale Industries (SSI) sector 
and related service entities under the 
same umbrella. Expansion of the small 
enterprises was taking place growing 
into medium enterprises and they 
were required to adopt higher levels 
of technologies in order to remain 
competitive in a fast globalising world. 
Thus, it was necessary to address the 
concerns of such enterprises as micro, 
small and medium and provide them 
with a single legal framework. The 
MSMED Act, 2006 came into force 
w.e.f., October, 2006. The Micro, Small 
and Medium Enterprises Development 
(MSMED) Act, 2006 addressed these 
issues relating to its definition, 
credit, marketing and technology up 
gradation. Medium scale enterprises 
and service related enterprises also 
come under the purview of this Act. 
Chapter 9.indd   201 9/2/2022   2:20:50 PM
2024-25
202 BUSINESS  STUDIES
9.3 r ol E of MSME
MSME in India enjoy a distinct position 
in view of their contribution to the 
socio-economic development of the 
country. The emphasis on MSME has 
always been an integral part of India’s 
industrial strategy. Development of 
MSME prevents migration of rural 
population to urban areas in search 
of employment and contributes to 
other socio-economic aspects, such 
as reduction in income inequalities, 
dispersed development of industries 
and linkage with other sectors of the 
economy.
In fact promotion of MSME and 
rural industrialisation has been 
considered by the Government of India 
as a powerful instrument for realising 
the twin objectives of ‘accelerated 
industrial growth and creating 
additional productive employment 
potential in rural and backward areas.’
The following points highlight their 
contribution.
 (i) The contribution of these 
industries to the balanced regional 
development of our country is 
noteworthy. Small industries in 
India account for 95 per cent of 
the industrial units in the country.
 (ii) MSME are the second largest 
employers of human resources, 
after agriculture. They generate 
more number of employment 
opportunities per unit of capital 
invested compared to large 
industries. They are, therefore, 
considered to be more labour 
intensive and less capital 
intensive. This is a boon for a 
labour surplus country like India.
 (iii) MSME in our country supply an 
enormous variety of products 
which include mass consumption 
goods, readymade garments, 
hosiery goods, stationery items, 
soaps and detergents, domestic 
utensils, leather, plastic and 
rubber goods, processed foods 
and vegetables, wood and steel 
furniture, paints, varnishes, 
safety matches, etc. Among 
the sophisticated items 
manufactured are electric and 
electronic goods like televisions, 
calculators, electro-medical 
equipment, electronic teaching 
aids like overhead projectors, air 
conditioning equipment, drugs 
and pharmaceuticals, agricultural 
tools and equipment and several 
other engineering products. A 
special mention should be made 
of handlooms, handicrafts and 
other products from traditional 
village industries in view of their 
export value.
 (iv) MSME which produce simple 
products using simple 
technologies and depend on 
locally available resources both 
material and labour can be set up 
anywhere in the country. Since 
they can be widely spread without 
any locational constraints, the 
benefits 	 of 	 industrialisation 	 can 	
be reaped by every region. They, 
t hus, 	 contri but e 	 si gni ficant l y 	 to	
the balanced development of the 
country.
Chapter 9.indd   202 9/2/2022   2:20:50 PM
2024-25