PERFORMANCE OF THE MICRO, SMALL AND MEDIUM ENTERPRISES (MSMEs) MANUFACTURING SECTOR IN SELECT STATES IN INDIA: THE CONCEPT OF MSME MANUFACTURING BUSINESS FACILITATOR (MSME-MBF) INDEX

The MSMEs play a very critical role in Indian economy. The growth & development of MSMEs, particularly in the manufacturing space, is aligned with job creation, leading to eradication of poverty, bridging of income inequality, development of backward areas, etc. The MSMEs are widespread and present in almost all the states & union territories in India. However, the success of MSMEs is not even across the states. While in some states the MSMEs are torch bearer of manufacturing activity, in others MSMEs are yet to realise their full potential. The current study on performance of MSME manufacturing sector in different states tries to ascertain the factors behind differences in performance of MSMEs through the prism of an index known as MSME Manufacturing Business Facilitator (MBF) Index. The MSME-MBF index has been proposed by taking into account a host of factors, those, in our belief, significantly impacts the MSME sector in India. These include active labour force in a state as a percentage of active labour force in the country and literacy rate of the state as a measure of employability of the available labour force, a State’s share in total installed power in the country and per capita availability of power in a State, Road infrastructure in terms of percentage of total national highways in a state and per capita availability of national highways in a State, Credit flow measured in terms of Credit to Deposits ratio in a State, availability of Port infrastructure in a State, Size of Gross State Domestic Product (GSDP) of a State relative to the national GDP, Fiscal discipline of a State as measured by the fiscal deficit ratio of a State, Ease of Doing Business (EoDB) Index rank of a State and Density of MSME Manufacturing clusters in a state measured in terms of an MSME cluster in sq.km. Absence of these factors or inadequate presence of these factors significantly impedes the growth of the MSME sector. Through the MSME-MBF index, we try to explain the factors behind growth differential of MSME Manufacturing units in different states as well as prescribe the benchmark level for all such parameters. Our study ascertains that the state of Maharashtra has the highest MSME-MBF index value implying that the state is best suited for the growth of MSME manufacturing sector in India. Maharashtra is closely followed by the states of Andhra Pradesh, Gujarat, Tamil Nadu, West Bengal, Uttar Pradesh and Kerala.