SME SME Samadhan

An Analysis of SME sector

Small and medium enterprises (SMEs) or small and medium- sized businesses are non-subsidiary independent firms which employ a fewer than the given number of employees. This number varies across countries.Small and medium enterprises are, by definition, small; however, they outnumber large firms by a wide margin. Though they do not have the resources of large companies, their essence is entrepreneurial. They are very important to the innovation and growth of a country’s economy. Small-sized companies can be compared to Main Street companies and medium-sized enterprises can be compared to lower mid-market companies.

Over the last five decades the SME sector has emerged as a highly vibrant and dynamic sector of Indian economy. SMEs not only helps in providing large employment opportunities at a lower capital cost than larger industries but also helps in industrialization of rural and backward areas.SMEs also play a significant role in Nation’s development through its high contribution in domestic production, significant export earnings, low investment requirements, operational flexibility, location wise mobility, low intensive imports, capacities to develop appropriate indigenous technology, import substitution, contribution towards defence production, technology–oriented industries, competitiveness in domestic and export markets thereby generating new entrepreneurs by providing knowledge, training and skill development .

With a view to boost the development of small enterprises in the country the Government of India was notified with the “Micro, Small and Medium Enterprises Development (MSMED) Act, 2006” and also set up a separate ministry for the same. The Act provides the first- ever legal framework for the recognition of the term ‘enterprises’ and integrating the three tiers of these enterprises i.e. micro, small and medium. Apart from more clear and progressive classification of each category of enterprises, the Act also provides for statutory consultative mechanism at national level with a wide representation of all section of stakeholders. It also provides with a wide range of advisory function. The Government has also announced a Policy Package for Stepping up Credit to Small and Medium Enterprises assuring, inter alia, a 20 per cent year-on-year growth in credit flow. The Micro, Small and Medium Enterprises Development Bill 2006 was passed with a view to facilitate the promotion, development and enhancement of the Micro, Small and Medium Enterprises. The Government will take up effective and expeditious implementation of this legislation in a close collaboration with all stakeholder. The Government will also soon enact a law on Limited Liability Partnerships covering, among others, micro, small and medium enterprises, with a view, inter alia, to facilitating infusion of equity and venture capital funding in these enterprises.

Benefits available to the enterprises registered under MSMED Act, 2006 :

In-short, the benefits available to Enterprises are:

  1. a) Easy finance availability from Banks, without collateral requirements
  2. b) Protection against delay in payment from Buyers and right of interest on delayed payment
  3. c) Preference in procuring Government tenders,
  4. d) Stamp duty and Octroi benefits,
  5. e) Concession in electricity bills,
  6. f) Reservation policies to manufacturing / production sector enterprises
  7. g) Time bound resolution of disputes with Buyers through conciliation and arbitration,
  8. h) Reimbursement of ISO Certification Expenses.

The MSMED Act is a law with a large impact taking into consideration the necessary structure and development of MSMED’s in India by forming a Board and the entire structure and composition is mentioned in the Act. It simplifies the registration process of MSMEs, it substantially imposes penalties on late payments, sets agenda for specific policies that it will be created and implemented in future and another future policy that will regulate the clause of sick or weak units; “Closure of Business or Exit policy.”


Nupur shah –  Govt law college ,  Mumbai &
Rupen Doctor –  CEO Smart Gain

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