3 min read.Updated: 06 Nov 2018, 06:41 PM ISTLivemint
The government should work to improve the overall regulatory architecture in order to incentivize smaller firms to scale up
The announcement of support to micro, small and medium enterprises (MSME) by Prime Minister Narendra Modi last week had both economic and political rationales behind it. Politically, the government would like to be seen as supporting MSMEs, given that people engaged in the sector are considered a core constituency of the ruling Bharatiya Janata Party. Economically, any improvement in the sector’s operating environment will help the Indian economy. The share of MSMEs in the country’s gross value added is estimated to be about 32%. It also contributes about 40% to total exports and 45% to manufacturing output.