Globally, MSMEs are now getting increasingly accepted as the main driver of growth given their nimbleness and the ability to create employment. In fact, in the USA, two third of the jobs are accounted for by this segment alone. The same story holds true in their share of sectoral contribution to the total export revenue.

What is interesting to note is that the MSMEs in India are also describing the same narrative as their North American and European counterparts. According to the Indian MSME ministry’s blog, there are more than 63 million MSMEs in the country. Together they employ more than 110 million people and account for more than 45 per cent of the industrial production and 30.5 per cent of the services industry output. And they make more than 60,000 different types of products to meet market demand.

It’s now an accepted fact that any economic growth initiative demands a policy focus on this segment. The reasons are not difficult to guess. Unlike big manufacturing units, MSMEs are more evenly distributed geographically. It doesn’t take an expert knowledge in economic theory to understand that any unit size, that has the potential to find its footprint in any geographical location, will trigger more employment without requiring migration. A big unit obviously rides a totally different path in terms of employment and other external gain implication.

The question that naturally comes to mind is that why do MSMEs create more employment opportunity than a large unit making the same product? The answer lies in the way MSMEs are organized. They are more labour reliant than a large unit and, as a result, they have a bigger labour capital ratio. It means that in the MSME sector, every rupee invested creates more employment than that in large industry segment.

There is also another important factor that endears them to policy makers and entrepreneurs alike. They require lower investment threshold making them ideal for the aspirations of start-up entrepreneurs. All over the world, the challenge for the policy makers is not only to find routes for equitable distribution of income, but also for equitable distribution of capital.

With Indian economy projected to grow to $5 trillion by 2025, and make in India being a mission statement of the government in power at the Centre, MSMEs are going to be the heroes of India given their ability to generate employment opportunity and to spread capital more equitably and fight the issue of labour migration that is taking dire proportion in the country creating a number of regional imbalances.