Procurement policy for MSME - Blog two

In the Report submitted by the Prime Minister’s Task Force on MSME in 2010, one of the key recommendations was to put in place a Public Procurement Policy for MSMEs at the earliest. Approved by the Cabinet in 2011 the procurement policy for MSME was instituted in 2012, followed by a serious governmental effort to overhaul the policy in 2013. The contribution of the MSME sector to the country’s GDP stands at 8% but is reckoned to have a potential to reach 15%.Employing close to 40% of India's workforce and contributing 45% to India's manufacturing output, SMEs play a critical role in the economy.

However, structural deficiencies in MSMEs in India and the nature of their participation (mainly as an informal sector) significantly undermine their potential to contribute further to the economy.The goal of an annual procurement of minimum 20% from Micro & Small Enterprises including 4% from MSMEs owned by SC/ST entrepreneurs is yet to be realised, even as a complete integration of the rural, backward and unemployed populace waits. And this is also limited to Public Sector Enterprises, there is a strong case for taking it to private sector and State PSU’s. Due to a high degree of variance in the spread of MSME units across the states of India and because of differing production/consumption patterns, a state-level revision of the procurement policy is required.