MSMED Act, 2006 and Policy Package for MSMEs

The MSMED Act, 2006, was enacted to provide a policy environment for the development and promotion of the MSME sector by way of defining MSMEs, putting in place a framework for developing and enhancing competitiveness of the MSME enterprises, ensuring flow of credit to the sector and paving the way for preference in ensuring flow of credit to the sector and paving the way for preference in Government procurement to products and services of the MSEs, address the issue of delayed payments, etc.

The objectives of the act include:

Defining MSMEs

Creating a framework to enhance the competitiveness of MSMEs

Ensuring credit flow to the sector

Giving MSMEs preference in government procurement

Addressing delayed payments

Providing marketing assistance and infrastructural facilities

The impact of the sector in the economy can be improved by addressing the challenges affecting growth of the sector. Some of the major ones are as follows.

a) Policy and institutional interventions

b) Accelerating growth and enabling formalization

c) Addressing infrastructural bottlenecks

d) Facilitating capacity building

e) Facilitating access to credit and risk capital

f) Technological interventions for improving underwriting standards and delivery

g) Enabling market linkage and tie-up with public procurement platforms

Some benefits of the MSMED Act include:

Easy access to MSME loans from banks without collateral

Preference in obtaining government tenders

Benefits from Stamp Duty

Reservation policies for manufacturing/production

Reimbursement of ISO Certification Expenses

The act also:

Frees small enterprises from multiple laws and regulations

Provides a proper legal framework for the small sector

Recognizes small enterprises as a composite sector

Facilitates the natural mobility of small enterprises to medium ones

Contains penal provisions relating to the delayed payment to these enterprises

The Government has taken various measures including ongoing schemes to ensure sufficient financial accessibility and seamless credit to Micro, Small, and Medium Enterprises (MSMEs). Contemplating the role of this sector in Employment generation, promotion of entrepreneurship, regional development, export promotion, innovation, reduction of income disparities, and support for large industries, the Government of India and the Reserve Bank of India launched the following initiatives.

1. MSME Samadhaan,
2. Atmanirbhar Bharat,
3. Udyog Aadhaar,
4. Mudra,
5. ZED scheme,
6. Make in India,
7. Stand up India,
8. Startup India,
9. Udyam Assist Platform,
10. RAMP scheme,
11. Support and Outreach Program: This program includes initiatives such as increasing the interest rebate for exporters, requiring public sector companies to buy more from MSMEs, and setting up tool rooms.
12. Entrepreneurship Awareness Programme (EAP): This one-day training program is for entrepreneurship and self-employment awareness.
13. Entrepreneurship cum Skill Development Programme (E-SDP): This six-week training program is for entrepreneurship and skill training.
14. Advanced E-SDP: This one-week program is conducted by IIMs, IITs, ICAR, CSIR, BARC, IISC, NIT, and the Agricultural University of Central and State government.
15. Government Process Reengineering (GPR): This exercise reviews schemes, the role of line agencies, and organizational review.
16. Surveys, Studies, and Policy Research: This scheme studies issues concerning MSMEs and other factors impacting the MSME sector.

17. National Board for MSME: This board is chaired by the Minister of MSME and deliberates on strengthening the MSME sector.

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