The Micro, Small and Medium Enterprises (MSME) sector in Uttar Pradesh received a total investment of about Rs 13,000 crore during the Eleventh Five Year Plan (2007-12). The MSME sector contributes 60 per cent of the state’s annual industrial output, employs 9.2 million people and generates economic activity worth Rs 120,000 crore annually. At present, UP is home to almost 4.4 million MSMEs, including 4.2 million unregistered units.

The state government’s thrust on industrial development had resulted in the establishment of about 166,000 MSMEs, with a total investment of over Rs 13,000 crore and the creation of 850,000 job opportunities during the Eleventh Plan period, Associated Chambers of Commerce and Industry of India (Assocham) said in a recent study titled MSME sector in Uttar Pradesh, which was jointly conducted with the Thought Arbitrage Research Institute (TARI).

UP had made significant progress in promoting the growth of MSMEs through the creation of a supportive environment and policy framework to enable the sector to achieve higher levels of production, exports and employment, Assocham Secretary General D S Rawat said while releasing the study in Lucknow.

The implementation of the Infrastructure and Industrial Investment Policy 2012 by the Akhilesh Yadav government led to the establishment of over 45,000 MSMEs with a total investment of Rs 3,000 crore and new jobs for half a million people in 2013-14. However, there has been a fall in MSME investments since 2012-13 owing to the macro-economic slowdown and a gradual shift from manufacturing to the services sector, which requires lower investments.

Repair and servicing industries accounted for a one-fourth share in key MSME industries in UP, followed by miscellaneous manufacturing (15 per cent), food products (15 per cent), hosiery and garments (11 per cent).

In terms of region-wise composition of MSMEs, Western UP accounted had the lion’s share with 50 per cent of the MSMEs in the state, followed by eastern UP (28 per cent), central UP (16 per cent) and Bundelkhand (six per cent).

MSMEs play a crucial role in providing large-scale employment at lower capital cost, promoting industrialisation in rural and backward areas, reducing regional imbalances and assuring equitable distribution of national income and wealth. Besides, the MSME sector is the second largest employment generator after agriculture in UP, employing over 9.2 million people across the state. However, 90 per cent of these are employed with unregistered MSME entities.

Shortage of working capital, lack of technology support, internal structural issues, a heavy interest burden, obsolete plant and machinery, shortage of resources and a dearth of manpower are key challenges faced by MSMEs in UP. The government should involve industry players, academic institutions and field experts to assist sick MSMEs in reviving their businesses, which would also lead to utilisation of assets and capacity already created, the Assocham study suggested.

UP has region- and product-specific traditional MSME hubs and clusters across the state – Varanasi (for zari and silk), Bhadohi (carpets), Lucknow (chikan), Kanpur (leather), Agra (footwear, leather), Aligarh (locks), Moradabad (brassware) and Meerut (sports goods), among others.

To support the MSME sector, UP has finalised its own start-up policy to promote the start-up culture and entrepreneurship in the state. UP Information Technology & Start-Up Policy 2016 is aimed at facilitating the coming up of both small and large information technology and IT-enabled services ventures through the provision of incentives and the establishment of a supportive policy framework.

States such as Tamil Nadu, Rajasthan, Karnataka, Kerala and Chhattisgarh have already set out their respective start-up policies or are in the process of doing so, to promote their budding entrepreneurs.

Under the proposed policy, UP will promote start-ups through the INFUSE model (Incubators-Fund of Funds-Startup Entrepreneurs), wherein it will provide financial support to incubators, start-ups and venture capitalists. The government will create an initial corpus or seed fund of Rs 100 crore to promote incubators and mobilise start-ups.

However, funds will not be invested directly in a start-up, but injected into Venture Capital (VC) funds approved by the Securities and Exchange Board of India. For UP-based start-ups, the state government will contribute 25 per cent of the money invested by the VC.

The corpus will be professionally managed like a private equity (PE)/venture fund and a permanent fund manager is to be appointed to manage the funds granted by the government, according to the policy draft. The policy has trifurcated UP into three tiers. Tier-I includes Noida and Greater Noida. Tier-II comprises Lucknow, Agra, Kanpur, Allahabad, Meerut, Varanasi and other cities with a population of more over million, including the Agra-Greater Noida Yamuna Expressway region. Tier-III includes cities with a population of less than two million.

An Empowered Committee under the chairmanship of the chief secretary will monitor the implementation of the policy. It will comprise senior bureaucrats and principal secretaries of the departments of information technology, finance, planning, small industries, commercial tax, energy, transport, revenue and housing.

In a survey on ‘Ease of Doing Business’ conducted by the World Bank Group in collaboration with KPMG and the Confederation of Indian Industry, UP had stood 10th in the rankings, which were topped by Gujarat and followed by Andhra Pradesh and Jharkhand.

Source: Business Standard

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