Benefits (Advantages) of Micro and Small Enterprises

Micro and small enterprises (MSEs) are often called the backbone of the Indian economy. Though each unit is small, together they contribute a very large share of output, exports and employment. Their importance rests on several real advantages.

1. Large-scale employment generation. Because MSEs are labour-intensive, they create the most jobs per rupee invested, especially for people with limited education and skills. This helps reduce unemployment and under-employment.

2. Low capital requirement. An MSE can be started with modest savings, a small loan or family funds, so ordinary people — not just the wealthy — can become entrepreneurs.

3. Balanced regional development. MSEs can be set up in small towns and rural areas, spreading industry away from a few big cities, reducing regional imbalance and slowing migration to cities.

4. Use of local resources. They make good use of locally available raw materials, skills and savings that might otherwise remain idle.

5. Equitable distribution of income and wealth. Ownership is spread across many small owners rather than concentrated in a few large firms, which spreads income and wealth more evenly.

6. Encouragement of entrepreneurship. MSEs are a training ground where new entrepreneurs learn to run a business on a small, manageable scale before, in some cases, growing larger.

7. Flexibility and quick decisions. With a simple structure and an owner close to the work, an MSE can change its products or methods quickly to suit customer demand. …