Abstract:

Small and medium enterprises play a very important role in the development process of the country since independence. The sector is more labor intensive than large enterprises. In an agricultural based economy like India, it provides simple livelihood and employment opportunities to the people. It also helps in the development of entrepreneurial skill and helps in the equitable distribution of income through decentralization of economic activities. The MSME sector is the 2nd largest employer in the country after agriculture at the same time contributes nearly 6% in the GDP of the country in 2011. As per the Third all India Census of Small Scale industries conducted in 2004, the SME’s have increased from about 80,000 units in the 1940’s to more than 100 Lakh units till 2011. Their total employment is about 25 Million and they produce about 7500 products including high technology products. In the sports goods and garments sector their contribution to exports is as high as 90%  to 100% . They constitute 90% of the industrial units in the country and also contribute to about 35% of India’s exports. Government of India, in its policy regulations and in different five year plans, recognized the importance of MSME sector and gave a special status and protection in its policies. It reserved 842 items to be exclusively manufactured by small industries, i.e., Large corporations were not allowed to enter in the reserved category. Further, Government policies to counter regional imbalances (1977) promote ancillarisation (1980), encourage exports and dispersal in rural areas (1990) and then to promote Small, Tiny and Village Industries (1991) were some of the measures to promote micro and small and medium enterprises. The Micro, Small and Medium Enterprises Development (MSMED) Act, 2006 was passed to facilitate the development of these enterprises as also enhance their competitiveness. It provides the first ever legal framework for recognition of the concept of ‘enterprise’ which comprises both manufacturing and service entities. It defines medium enterprises for the first time and seeks to integrate the three tiers of these enterprises namely micro, small and medium. Globalization and Industrial Policy, 1991 brought a massive change in the economic scenario in the country. India became the member of World Trade Organization in 1995 which forced its member countries, including India, to bring economic reforms in the country. It forced its member countries to drastically scale down quantitative and non-quantitative restrictions on imports and pave the way for foreign direct investment in their country. As a result, restrictions were removed from many reserved categories including wholesale and retail business in India. As a result, de-reservation took place in the name of technological upgradation and higher productivity and the number of reserved items reduced from 842 in 1950-51 to 21 at present.

 Key words: Small And Medium Enterprises, MSMED, Globalization, Decentralization, FDI