1

A STUDY ON “PROBLEMS OF MSMEs and FEW PREVENTIVE MEASURES”

A Project Report Submitted in partial fulfilment of the
requirements for the award of the degree.
OF
BACHELOR OF COMMERCE
Submitted by
PINNAM MANJARI PISARI JAYAKAR P.NIHARIKA PODILA PAVANI
105320405169 105320405170 105320405171 105320405172

Under the Guidance

P. RUKMINI
Assistant Professor
Department of Commerce

A.V. College of Arts, Science and Commerce.

(Affiliated to Osmania University)
Domalguda, Hyderabad -500029
(2020-2023)
 2

CERTIFICATE

This is to certify that the project work titled A Study on PROBLEMS OF

MSMEs and FEW PREVENTIVE MEASURES has been submitted by PINNAM
MANJARI, PISARI JAYAKAR, P.NIHARIKA, PODILA.PAVANI

Roll Number: 105320405169 ,105320405170 ,105320405171

,105320405172 of final year B.com(Computer Applications) to Osmania
University in a partial fulfilment of the requirements for the award of the
undergraduate degree in BACHELOR OF COMMERCE from
A.V. College of Arts, Science & Commerce, Domalguda, Hyderabad for
the academic year 2020-2023.

HEAD OF
THE DEPARTMENT EXTERNAL SIGNATURE
 3

DECLARATION

I hereby declare that this project report titled A Study on PROBLEMS

OF MSMEs and FEW PREVENTIVE MEASURES, submitted to the
department of commerce, O.U, Hyderabad, is a bonafide work

undertaken by me and it is not submitted to any other University

or Institution for the award of any degree diploma /certificate or
published any time before.

PINNAM MANJARI PISARI JAYAKAR P.NIHARIKA PODILA PAVANI

105320405169 105320405170 105320405171 105320405172
 4

CERTIFICATION

This is to certify that the Project Report titled “PROBLEMS OF

MSMEs and FEW PREVENTIVE MEASURES”, is submitted in a partial

fulfillment for the award of Bachelor of commerce to the

Department of Commerce, O.U, Hyderabad, was carried out by
PINNAM MANJARI, PISARI JAYAKAR, P.NIHARIKA
PODILA PAVAANI Under my guidance. This has not been
submitted to any other university or institution for the award of
any degree \Diploma\certificate.

Name of the Guide

P. RUKMINI
Assistant Professor of Commerce
Department of Commerce
A.V college of Arts, Science & Commerce
Hyderabad.

SIGNATURE OF THE GUIDE

 5

ACKNOWLEDGEMENT

I Sincerely thank P. RUKMINI, Assistant professor of commerce,

Department of Commerce, A.V college of Arts, Science &
Commerce, Hyderabad for her guidance and encouragement in
carrying out this project work.

I also wish to express my gratitude to Ch.Buchi Reddy and other

faculty members of Department of Commerce, A.V college of
Arts, Science & Commerce, Hyderabad, for rendering their
support on this project.

PINNAM MANJARI PISARI JAYAKAR P.NIHARIKA PODILA PAVANI

105320405169 105320405170 105320405171 105320405172
 6

INDEX

CHAPTER NO PARTICULARS PAGE NO

I INTRODUCTION 8 -18
II OBJECTIVE OF STUDY 19
III REVIEW OF LITERATURE 19-21
IV RESEARCH METHODOLOGY 21-22

V OVERVIEW OF TITLE 22

VI RESEARCH DATA ANALYSIS 22-27

INTERPRETATION
VII SUGGESTIONS AND 27-30
RECOMMENDATION
VIII RESEARCH CONCLUSIONS 31

IX BIBLIOGRAPHY 31

X ANNEXURE 33

LIST OF DIAGRAMS, PICTURES & FLOWCHARTS

We use some images and diagrams flowcharts for this project.
No. of table - 1
No.of images - 4
 7

ABSTRACT

This project describes MSMEs [Micro, Small and Medium

Enterprises]. Challenges faced by MSMEs and few preventive
measures to overcome some of those challenges . For this project we
collected information from various sources like Articles , previous
studies , statistical data, surveys etc. Statistical data represented in
this project will make us understand the concept. Suggestions ,
measures given to combat challenges of MSMEs and leads to their
development and growth.

Being a micro, small, or medium enterprise grants access to these

venues for international cooperation on trade-related issues with
various countries and encourages new commercial relationships. The
government also provides subsidies, tax breaks, and technical
assistance to MSMEs exporting goods and services.

Despite the benefits provided most of the Micro, Small and

Medium Enterprises face many obstacles. Some of such problems
are identified and few preventive measures are suggested and
explained in this project.
 8

TITLE
A Study on PROBLEMS OF MSMEs and FEW PREVENTIVE MEASURES

I. INTRODUCTION

What is MSME ?
MSME stands for Micro, Small, and Medium Enterprises. In
accordance with the Micro, Small, and Medium Enterprises
Development (MSMED) Act in 2006, the enterprises are
classified into two divisions.

The Ministry of Micro, Small and Medium Enterprises is the ministry

in the Government of India. It is the apex executive body for the
formulation and administration of rules, regulations and laws relating
to micro, small and medium enterprises in India. The Minister of
Micro, Small and Medium Enterprises is Narayan Rane.

1.Manufacturing enterprises – engaged in the manufacturing or

production of goods in any industry
2.Service enterprises – engaged in providing or rendering
services
 9

Statutory Bodies: The Ministry of MSME heads 5 statutory

bodies

Khadi and Village Industries Commission (KVIC): It is a

statutory organisation engaged in promoting and developing khadi
and village industries for providing employment opportunities in
rural areas, thereby strengthening the rural economy.

The Coir Board: It is a statutory body established for promoting

overall development of the coir industry and improving living
conditions of workers in the industry.

National Small Industries Corporation Limited (NSIC): It was

established in 1955. It is responsible for promoting, aiding and
fostering growth of micro and small enterprises in the country,
generally on a commercial basis.

National Institute for Micro, Small and Medium Enterprises,

(NI-MSME): It was established in 1960. It is responsible for
enterprise promotion and entrepreneurship development, enabling
 10

enterprise creation, performing diagnostic development studies for

policy formulation, etc.

Mahatma Gandhi Institute for Rural Industrialisation

(MGIRI): The objectives of the Mahatma Gandhi Institute for
Rural Industrialisation (MGIRI) are to accelerate rural
industrialisation for sustainable village economy, empower
traditional artisans, encourage innovation through pilot study and
R&D for alternative technology using local resources.

These bodies are responsible for aiding MSMEs with respect to

Government schemes and policies.

Features of MSMEs
Here are some of the essential features of MSMEs

1. MSMEs are known to provide reasonable assistance for

improved access to the domestic as well as export markets for
businesses
2. MSMEs support product development, design innovation,
intervention, and packaging elements of a business
 11

3. MSMEs support the upgrading of technology, infrastructure,

and the modernization of this sector as a whole
4. MSMEs provide employment opportunities and loans
5. MSMEs provide credit limits or funding support to various
banks in the country

Role of MSMEs in the Indian Economy

The MSME sector has proven to be a highly dynamic factor in the
forecasting of the Indian economy. Since MSMEs produce and
manufacture a variety of products for both domestic as well as
international markets, they have helped promote the growth and
development of various product segments and industries.

MSMEs will play an essential role in providing employment

opportunities in underprivileged areas. They have helped in the
industrialization of such areas with a low capital cost compared to
the larger industries in cities. MSMEs also contribute and play an
essential role in the country’s development in different areas like
the requirement of low investment, flexibility in operations, low
rate of imports, and a high contribution to domestic production.
 12

The MSME sector is an essential pillar of the Indian economy,

contributing significantly to its growth with a vast network of
around 30 million units, creating approximately 70 million jobs,
manufacturing over 6000 products, contributing about 45% of
manufacturing output and about 40% of exports, both directly and
indirectly.

UPDATE: New MSME definition based on investment and

turnover (2020)

On 1st June, Monday, the Union Cabinet headed by Prime

Minister Narendra Modi officially revised the MSME definition.
The recent changes in the definition of micro, small, and
medium-sized enterprises made as a part of the Atmanirbhar
Bharat Abhiyaan relief package were approved.

The investment and turnover figures were changed to larger

values, thereby resulting in a larger number of medium-sized
enterprises.
 13

Revised Classification applicable w.e.f 1st July 2020

Composite Criteria: Investment in Plant & Machinery/equipment

and Annual Turnover

Classification Micro Small Medium

Manufacturing Investment in Plant Investment in Plant Investment in Plant and
Enterprises and and Machinery or and Machinery or Machinery or
Enterprises Equipment: Equipment: Equipment:
rendering Not more than Rs.1 Not more than Rs.10 Not more than Rs.50
Services crore and Annual crore and Annual crore and Annual
Turnover ; not more Turnover ; not more Turnover ; not more than
than Rs. 5 crore than Rs. 50 crore Rs. 250 crore

MSME Mission and Objective

Encourage the establishment and development of small and
medium-sized businesses and the khadi, village, and coir
industries to establish new businesses and increase employment
possibilities. To support MSMEs and help them scale up, this
Ministry now sets policies, promotes/facilitates programs,
projects, and schemes, and supervises their execution.
 14

MSME Schemes
Every year, the Indian government rolls out several MSME
schemes.

Following list of MSME initiatives are highlighted:

● Prime Minister’s Employment Generation Programme

(PMEGP)
The program’s objectives are to provide sustainable job
opportunities in rural and urban areas by offering financial
support for the establishment of self-employment companies. To
create long-term, stable work options for young people in rural
areas who are unemployed and aspiring traditional artisans,
thereby preventing occupational migration.

● Credit Guarantee Scheme for Micro & Small Enterprises

(CGTMSE)
To encourage first-generation business owners to pursue
self-employment prospects by providing credit guarantee support
for loans to Micro & Small Enterprises (MSEs) that are
 15

collateral-free or third-party guaranteed, particularly in the

absence of collateral.

● Micro & Small Enterprises Cluster Development

Programme (MSE-CDP) Scheme
To aid MSEs in remaining viable and expanding by tackling
concerns like bettering technology, skills, and market access,
among others, to build or upgrade infrastructure in MSEs’ current
or new industrial areas and clusters and promoting
environmentally friendly and sustainable industrial practices for
the clusters.
● Raising and Accelerating MSME Performance (RAMP):
The scheme aims at strengthening institutions and
governance at the Centre and State, improving Centre-State
linkages and partnerships and improving access of MSMEs
to market and credit, technology upgradation and addressing
issues of delayed payments and greening of MSMEs..

● Mudra Loan Scheme: It was launched in April, 2015 for

providing loans up to INR 10 lakh to the non-corporate,
non-farm small/micro enterprises. It encompasses 3 financing
 16

loans: Tarun (loans up to INR 10 Lakhs), Kishore (loan up to

INR 5 Lakhs), Shishu (loan up to INR 50,000).

DIGITAL MSME
The “Digital MSME” Schemes goal is to give MSMEs digital
empowerment and encourage them to embrace digital tools,
applications, and technologies in their production and business
operations to increase their competitiveness in domestic and
international markets. This scheme aligns with the government’s
push to promote digital payments in India.

MSME Registration
Only manufacturers and service providers are eligible for the
MSME registration. Any manufacturer or service provider
meeting the requirements may enroll themselves through the
MSMEs’ single window registration system.

Applying for Udyog Aadhaar or MSME registration is open to

any manufacturer or service provider business that meets the
requirements for yearly turnover and investment in machinery
and equipment. Proprietorships, Hindu Undivided Families,
 17

Partnership Firms, One Person Companies, Limited Liability

Partnerships, Private Limited Companies, Limited Companies,
any association of Persons, Co-operative Societies, Trusts, or any
other organisation may register as MSMEs in India.

Benefits of MSME registration

Registration of your MSME is not mandatory. If you choose to
register, then your business can enjoy an excise exemption
scheme from direct taxes, avail special schemes from banks
custom made for MSMEs, and many more.

Also, registered businesses with an MSME certificate will benefit

from various government departments, including electricity.

Here are the some of the benefits:

1. Lowest interest rates on bank loans
2. Avail tax rebates customized for MSMEs credit for Minimum
Alternate Tax (MAT)
3. Very easily accessible credit for MSMEs
4. Reimbursement of ISO Certification
 18

5. Avail special rebates and concessions on patents and industry

set-ups
6. One time settlement fee for the amount unpaid
7. Government preference to MSMEs
8. Concession in electricity bills
9. Get credit guarantee schemes from the Government
10. Special consideration on International Trade fairs
Barcode registration subsidy
11. Support from your state government
12. Access to international trade
13. Marketing and promotional assistance from the
government
14. Technology upgradation support to MSME

II. OBJECTIVE OF STUDY

Despite the benefits provided through registration on MSMEs.
There are SEVERAL CHALLENGES faced by Micro ,Small and
Medium Enterprises , some of such challenges are explained in
this project and suggested FEW PREVENTIVE MEASURES.
 19

III. REVIEW OF LITERATURE

The Small and Medium Enterprises Development Bill 2005 which
was enacted in June 2006 was renamed as "Micro, Small &
Medium Enterprises Development Act, 2006". It aims to facilitate
the promotion and development of small and medium enterprises
in India.These enterprises are offered some privileges by the
Government for their promotion, growth and development in
countries like India. MSMEs play an important role in the Indian
economy. They provide the largest share of employment after the
agriculture sector.
MSME definition – why the change
As Finance Minister Nirmala Sitharaman made the announcement
about the change, she also addressed the reasons behind it. She
said the new definition will bring about many benefits that will
aid MSMEs to grow in size.

This was made under Atma-nirbhar Bharat Abhiyaan Economic

Package to assuage India’s economic predicament amidst the
pandemic.
 20

Combined with all previous economic stimulus efforts, the total

amount of the relief package comes to a whopping Rs. 20 lakh
crore.

Previous obervations on study of these MSMEs challenges made

the government to frame some benefits and the government came
with revised MSME definition and registration of MSMEs . The
government was able to achieve growth over the years in various
aspects.

Even after providing several benefits to MSMEs they are still

facing many challenges, some of such challenges and preventive
measures are given this project.
 21

IV. RESEARCH METHODOLOGY

We conducted a survey on
A STUDY ON "PROBLEMS OF MSMEs AND FEW PREVENTIVE MEASURES."

We collected responses through a google form, following are the

Questions asked in the google form
1.Do you know about the problems of MSMEs ?
2.From whom did you come to know about MSMEs?
3.What are the major problems faced by MSME?
4.Narayana Rane is the Minister of MSMEs ?
5.MSME was started in India 2007?
6.Who is eligible for an MSME loan?
7.What is the turnover limit of MSME?
8.What are the schemes of MSME launched by the
government?
9.How much percent does MSME contribute to GDP ?
10.Can you please suggest one preventive measure to combat
Problems of MSMEs ?
These questions are also helpful in bringing awareness aboūt
MSMEs.
We collected information from various sources like articles,
websites, books, questionnaires etc.
 22

V. OVERVIEW OF TITLE
Concept of Title
The title which we selected and mentioned “PROBLEMS OF MSMEs
and FEW PREVENTIVE MEASURES” will help us to understand the

concept of the project, some of the challenges faced by MSMEs

and gives few preventive measures .
Importance of Title
The given title exhibits the significance of the project. Identifying the
gaps, challenges and preventing them leads to development & growth
of MSMEs

VI. DATA ANALYSIS AND INTERPRETATION

Based on several observations and studies, we came to know and
found some of the major challenges in MSMEs
 23

PROBLEMS OR CHALLENGES OF MSMEs

● Financial Constraints: This is a significant impediment for

the MSME sector. Only 16% of SMEs have timely access to
finance, forcing small and medium-sized businesses to rely
on their own resources.

● Lack of Formalisation: Almost 86% of the country’s

manufacturing MSMEs are unregistered. Only about 1.1
crore of the 6.3 crore MSMEs are registered with the Goods
and Services Tax (GST) regime, and the number of income
tax filers is even lower. As a result of limited availability and
access to data, as well as legacy underwriting methods, the
credit requirements of Indian MSMEs have largely gone
unmet.

● Access to Technology: Majority of MSMEs use outdated

technology that prevents them from keeping up with the
 24

modern world. Adoption of new technology and training

employees is difficult and expensive, especially in
manufacturing where both physical equipment and software
are involved. Lack of access to IT education contributes to
the technological gap. Another significant factor is a lack of
awareness, which reduces willingness to invest in advanced
technology solutions.

● Skill Development: Skilled employees are critical for

business growth. Multinational corporations (MNCs)
recognise this and place on-the-job training at the heart of
their operations. Unfortunately, small-scale businesses fail to
upskill their workforce, causing them to suffer unknowingly.

● Creativity: Businesses are becoming more knowledge-based,

and their success and survival are inextricably linked to their
creativity, and innovation. To remain competitive, MSMEs
must learn and incorporate the process of innovation into
their daily operations. However, they lack the resources and
capacity to undertake innovations.
 25

● Competition: Because of increased competition, Indian

MSMEs are finding it difficult to sell their products in both
domestic and international markets. Small-scale enterprises
face stiff competition from global counterparts as well as
domestic giants due to their massive scale of operation (large
corporations). While the government does provide protection
for such small-scale businesses, competition remains largely
one-sided.

● Red-Tapism: MSMEs require various approvals and

entrepreneurs are forced to navigate various government
departments in order to obtain construction permits, enforce
contracts, pay taxes, start a business, and trade across
borders. In addition, regulatory risks and policy uncertainty
limit scaling-up of MSMEs.
● Majority of Small Firms: Micro and small businesses
account for more than 80% of MSMEs. Therefore, due to
communication gap and awareness, they cannot take
advantage of the government's emergency line of credit,
 26

stressed asset relief, equity participation, and fund of funds

operation.
 27

VII. SUGGESTIONS

FEW PREVENTIVE MEASURES

1. The National Logistics Policy can also be used to boost the

competitiveness of MSMEs. The NLP aims to reduce
logistics costs as a percentage of GDP from 13-14 percent to
8%, putting the country on par with developed nations. While
lower costs will encourage more MSMEs to use logistics
services powered by technology.

2. With the advent of online e-commerce platforms, MSMEs

have got access to a channel to expand their markets.
However, to meet the growing demand for e-commerce in
suburban and rural areas, they will require assistance. To that
 28

end, the Government could enlist India Post as a

technologically advanced last-mile delivery partner capable
of facilitating cash-on-delivery transactions at competitive
rates.

3. Similarly, the unparalleled reach of Indian Railways can be

leveraged to quickly and cost-effectively ship goods to the
most remote parts of the country. This can expand the reach
of products manufactured by MSMEs.

4. Supply Chain Finance: It can help MSMEs meet urgent

working capital requirements and allow them to make early
payments or have quicker access to funds that they are owed
and to inculcate Zero Defect & Zero Effect (ZED) practices
in manufacturing done by Indian MSMEs.

5. Technology-enabled platforms to automate transactions can

be created making it easier for MSMEs to track payments.
With such seamless and quick funding, MSMEs can easily
invest in business expansion, procure new raw materials, or
update their inventories.
 29

6. Linking Government Projects with Local MSME: The

government can play a crucial role in creating domestic
manufacturing capabilities by the leverage of proposed public
procurements and projects.
For instance, public projects such as Sagarmala, Bharatmala, and
industrial corridors can be linked with the MSME sector.
7. Industry-Academia Channel: A greater connection between
government industry-academia is required to identify the
evolving requirements in manufacturing and prepare an
employable workforce, contributing to Industrial Revolution
4.0.

8. E-Courts for Dispute Resolution: Often the National

Company Law Tribunal (NCLT) proceedings lead to drainage
of precious financial resources for the MSME sector.
To push for faster resolution of cases, there is a need to strengthen
the NCLT framework with introduction of alternate methods of
debt resolution, such as via e-courts.
 30

9. Incentivising Digital Adoption Within the Sector: By

incentivizing digital adoption within this sector, particularly
disruptive technologies such as artificial intelligence and
quantum technology, the industry can experience a
technological boom

10. Conducting research in regular time intervals and taking

the feedback and working on gaps and developing them can
also be done. Different ideas can also be taken from various
entrepreneurs

VIII. CONCLUSION
Despite the benefits provided most of the Micro, Small and
Medium Enterprises face many obstacles. Some of such problems
are identified and few preventive measures are suggested.
MSMEs can play a vital role in the growth of the economy . They
can help in inclusive and balanced development and make India a
global manufacturing hub. The Government has been supporting
 31

the MSMEs through various initiatives, the need is to focus on the

implementation and realizing the outcomes.

IX. BIBLIOGRAPHY
For the project we referred & collected information from various
sources like articles, websites, surveys etc.
Articles are given below
● MSME Definition- MSME Full-form and Meaning 2023
● The Evolution of MSMEs in India
● MSME registration – Eligibility, Process, and Requirements
● Major Challenges Faced By The Msme Sector & Their Impacts
● top 10 benefits of msme registration in india
● challenges of msmes in india

● MSMEs: Significance, Challenges and

Solutions – Explained, pointwise
● Reforms in MSME Sector
 32

REFERENCES
Ministry of Micro, Small and Medium Enterprises - Wikipedia
Reforms in MSME Sector (drishtiias.com)
MSMEs: Significance, Challenges and Solutions - Explained,
pointwise-ForumIAS Blog
Challenges of MSMEs in India - PSB Loans in 59 Minutes
The Evolution of MSMEs in India - Innoviti
MSME Definition: MSME Full-form and Meaning 2023
(razorpay.com)
Top 10 Benefits of MSME Registration in India - PSB Loans in
59 Minutes
Major Challenges Faced By The Msme Sector (lendingkart.com)

X. ANNEXURE
A STUDY ON "PROBLEMS OF MSMEs AND FEW
PREVENTIVE MEASURES." (google.com)
We used several methods to collect the information . the
following questionnaire was also conducted.
1.Do you know about the problems of MSMEs ?
 33

2.From whom did you come to know about MSMEs?

3.What are the major problems faced by MSME?
4.Narayana Rane is the Minister of MSMEs ?
5.MSME was started in India 2007?
6.Who is eligible for an MSME loan?
7.What is the turnover limit of MSME?
8.What are the schemes of MSME launched by the
government?
9.How much percent does MSME contribute to GDP ?
10.Can you please suggest one preventive measure to combat
Problems of MSMEs ?
34