A recent report by the McKinsey Global Institute sheds light on the critical role of micro, small, and medium enterprises (MSMEs) in India’s economy. Contrary to other emerging economies where MSMEs contribute 77% to employment, in India, they constitute 62% of the workforce. However, their contribution to the overall business value added is 30%, with only 10% coming from micro-MSMEs, compared to 49% in other emerging economies.
The report highlights that MSMEs in India are 26% as productive as large companies, similar to the productivity levels in other emerging economies. In contrast, in wealthier economies, a transition from microenterprises to larger corporations is observed as they progress up the income ladder. This shift results in increased contributions from large businesses to the national output.
The role of MSMEs in Indian employment
MSMEs are integral to India’s economic landscape, fostering industrial employment, adding value, and dispersing industries regionally. They account for over 8% of GDP, 45% of manufacturing output, and 40% of exports, showcasing their pivotal role in the economy.
Employment-wise, MSMEs employ over 111 million people, highlighting their significance as primary job creators. Their adaptability and widespread presence, especially in rural areas, ensure inclusive economic development.
Furthermore, MSMEs drive innovation by embracing new technologies, fueling India’s economic growth and global competitiveness.
Their impact extends beyond economic metrics, creating diverse job opportunities nationwide. This role is crucial for maintaining regional economic equilibrium and promoting socio-economic empowerment across urban and rural areas.
The pillars of India job market
The McKinsey Report indicates the pivotal role of Micro, Small, and Medium Enterprises (MSMEs) in the Indian job market, shedding light on their substantial contributions to the economy. Globally, MSMEs are crucial economic drivers, representing about half of the world’s GDP, with varying shares across different countries. In India, while they contribute less than 40 per cent of the GDP, they are significant employers, constituting around 40 per cent of total employment and a staggering 70 per cent of employment within the business sector, excluding agriculture, government, and finance.
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