The ministry says there is evidence of upward inter-category mobility between manufacturing and service units. file | Photo credits: K. pichumni
The Finance Ministry has sought to debunk the “narrative” that India’s micro, small and medium enterprises (MSMEs) are stagnant, citing data that it claims has shown that smaller firms have been outperforming large ones in recent years. developed in units. However, industry representatives are not convinced that the numbers have been interpreted correctly by the ministry.
In its recent monthly economic review for February, the ministry had said the number of micro units graduating small units was set to increase to 65,140 in 2022-23 from 28,881 in 2021-22, “refuting the statement that MSME units suffer from inertia at rest and are reluctant to be upwardly mobile”.
“Among major states, Bihar, Assam, Chhattisgarh, Uttar Pradesh, Jharkhand, Madhya Pradesh, Odisha etc. have shown encouraging results, which are well above the country average. The number of ‘small’ units that have elevated themselves to the ‘medium’ category has also increased by 75%, from 3,699 in FY12 to 6,474 in FY23. These upwardly mobile units are from Maharashtra, Gujarat, Delhi, Tamil Nadu, Uttar Pradesh and Karnataka,” the ministry said.
Acknowledging that the MSME sector played a significant role in the Indian economy with a share of 26.8% in overall gross value added (GVA) and 38.5% in manufacturing GVA by 2020-21, the ministry said that the contribution of the sector was Important not only quantitatively but also qualitatively in terms of developing a culture of entrepreneurship.
“There is evidence of upward inter-category mobility among manufacturing, service and trading units. The significant share comes from the manufacturing sector, which is reassuring given the high employment-generating potential of the sector,” the ministry said.
It noted that 53% of units ranging from “micro” to ‘small’ were manufacturing units in 2021-22, before coming down slightly to 45% in 2022-23. The ministry concluded, “This trend is also evident in the case of ‘small’ to ‘medium’ and ‘micro’ to ‘medium’ movements, though to a lesser extent.
KE Raghunathan, National President, Association of Indian Entrepreneurs, who was associated with a recent survey of MSMEs which showed that 72% of MSMEs had stagnated in the last five years, was skeptical of the ministry’s findings. Notably, he said that the Udyam portal was not exhaustive, with only about 20%, or 1.5 crore, of the total MSME units in the country registered on it.
The Udyam portal was launched by the Ministry of MSME in July 2020 to help MSME firms register themselves. The Finance Ministry has said that the Udyam portal receives data from the portals of the Income Tax Department and the Goods and Services Tax Network and then classifies the registered MSMEs on the basis of investment and turnover data.
“Enterprise data has been misinterpreted,” pointed out Mr. Raghunathan Hindu..”The classification of an applicant into micro or small or medium is done by self-declaration and is not taken from the IT and GST portal as claimed. That registration has been so poor is evident from the fact that even as per the old classification the number of MSMEs was 6.15 crore.
The government had changed the investment and turnover criteria for MSME classification in 2020. A micro unit is one which has an annual turnover of up to ₹5 crore and an investment in plant and machinery up to ₹1 crore. The turnover limit for small and medium enterprises is ₹50 crore and ₹250 crore, respectively, while the investment limit is capped at ₹10 crore and ₹50 crore, respectively.