FINACING OPTIONS FOR MSME SECTOR IN INDIA

ABSTRACT:
Micro, Small and Medium Enterprises have been playing a vital role in the balanced
economic growth of India. Today, Micro, Small and Medium Enterprises are operating across the
sectors utilizing available domestic resources and producing more than 6000 quality products.
The sector contributes a formidable portion to the nations GDP, employment, export and
industrial production. This study primarily focuses on the contributions made by Micro, Small
and Medium Enterprises in Indian economy. It also aims to analyses the present status and future
prospects of the MSME sector in India.
MSME sector facing major problems in getting finance. This study provides details about the
flow of finance to the MSME sector. This also providing information about the challenges facing
by MSME sector for finance (Finance gap in MSME sector) and also about the potential
interventions to increase access finance to MSME sector. This paper shows the importance of
development of MSME sector in India.

LITERATURE REVIEW:
1) ANNUAL REPORTS OF MSME SECTOR:
The annual reports of MSME sector has been taken from the Ministry of MSME.
These annual reports provides detailed information about MSME sector. These five year
annual reports provides information like Definitions of MSME, Growth and performance of
Micro Small Medium Enterprises over the period. These annual reports provides various
schemes and policies established by both central and state government to promote and
develop MSME sector in both rural and urban areas. These reports contain more accurate
data because they were released by Ministry of MSME.

2) A CRITICAL EVALUATION OF THE CONTRIBUTIONS MADE BY THE MICRO,
SMALL AND MEDIUM ENTERPRISES IN INDIAN ECONOMY:

This paper was written by ABDUL NASER who is a research scholar in
Pondicherry University. This paper provides information about the MSME sector in the
following areas-
i) Employment opportunities generated by the MSME sector
ii) MSME share in Indian GDP
iii) Contribution to Industrial production and Exports by MSME sector
iv) Finance gap for MSME
v) Need to provide infrastructure facilities to MSME sector.


3) ROLE OF MSMES IN ECONOMIC DEVELOPMENT:

This paper was written by BHOOMIKA GARG, Assistant professor at Rajdhani
College, University of Delhi. This paper provides following information about the MSME sector-
i) Current status of MSME in India
ii) Challenges faced by MSME sector
iii) Credit to MSME sector
iv) Initiatives taken by Government of India to develop MSME sector.
v) RBI guidelines for MSME.


4) ROLE OF MICRO, SMALL AND MEDIUM ENTERPRISES IN INCLUSIVE GROWTH:

This paper was written by SRINIVAS K T, Associate professor at CIMS B-
School. This paper provides following information about the MSME Sector-
i) Contribution of MSMEs in GDP
ii) Number of enterprises in MSME sector.
iii) Fixed Investment in MSME sector.
iv) Employment in MSME sector.
v) Production in terms of Gross Output in MSME sector.
vi) Major issues to be concerned in development of MSME sector.

5) MICRO, SMALL AND MEDIUM ENTERPRISES FINANCING IN INDIA - ISSUES
AND CONCERNS:

This paper was written by Dr. C. S. PRASAD. This paper provides information
related to credit flows to MSME sector. It provides information about multi-level
institutional credit structure for MSME Sector.A multi-level institutional structure exists
for financing of small enterprises and non-farm enterprises in India. This consists of
commercial banks, cooperative banks, RRBs, State Financial Corporations. Credit to small
enterprises comes under priority sector lending program of banks. The Reserve Bank of
India (RBI) constantly reviews the flow of credit to this sector. This paper also provides
information about status and contribution by SSIs in India.

6) 2013 SMEs ACCES TO FINANCE SURVEY:

The survey was conducted by Ipsos MORI. This document containing
information related to external financing to MSME sector. This report gives detailed
information like how these MSMEs are getting external finance and what are the different
sources of external finance and also it shows how MSMEs are using external finance to
develop their business.





7) MICRO SMALL AND MEDIUM ENTERPRISE FINANCE IN INDIA:

This report done by the Intellectual Capital Advisory Services Private Limited
for the International Finance Corporation. This document contains following information
about the MSME sector-

i) Overall demand for finance in MSME sector
a. Debt demand
b. Equity demand
c. Non-addressable finance demand in MSME sector

ii) Overall flow of finance to the MSME sector
a) Flow of MSME debt finance from the informal sector
b) Flow of MSME debt finance from the formal financial sector
c) Equity finance flows to the MSME sector

iii) Financial gap to the MSME sector
a) Demand Supply gap by size of the enterprises
b) Demand Supply gap by type of the enterprises
c) Demand supply gap by the geography

iv) Environment for growth of finance to the MSME sector
a) Legal and Regulatory framework
b) Government support
c) Financial infrastructure support

v) Potential interventions to increase access to MSME finance
a) Potential interventions
b) Liquidity management
c) Risk management


I have referred these articles which were related to the MSME sector. I have chosen these articles
based on two aspects and they are i) contribution by MSME to the Indian economy ii) Various
Sources of Financing options related to the MSME sector.

STATISTICAL TOOLS:

Based on the collected secondary data we can use the following statistical tools to
make projections.
I) Trend analysis
II) Forecasting

After making these projections we can predict the performance of MSME sector in the
future years and how the MSME sector plays a vital role in Indian Economy.