IMPACT OF LIBERALIZATION ON CONTRIBUTION OF MSMES IN ECONOMIC DEVELOPMENT OF INDIA S. L. GUPTA 1 & R. RANJAN 2 1 Director, Birla Institute of Technology, Mesra, Patna Campus, Bihar Veterinary College, Patna, Bihar, India 2 R. Ranjan, Research Scholar, Department of Management, BIT, Patna, Bihar, India ABSTRACT MSMEs plays crucial role in providing large employment opportunities at comparatively lower capital expenditure. MSMES alleviates the problem of regional and social disparities by ensuring inclusive growth. MSMEs are complementary to large industries as ancillary units and contribution of this sector has been tremendous on social-economic development of the country as well. The MSME sector accounts for around 45% of total manufacturing output and 43% of total exports of the country. However despite a sizeable proportion of workforce being engaged into this sector its contribution to GDP is meager 8.72%.Moreover, the protection availed during pro-business phase, which was drafted away with onset of pro- market phase from 1991 and enactment of MSMED Act 2006 has not contributed to surge of MSME sector’s graph significantly. Through this paper an empirical study has been conducted to highlight whether the growth in number of MSMEs after liberalization has contributed to proportionate growth of MSMEs contribution in various parameters viz Production, Employment and Exports. KEYWORDS: Micro, Small, Medium Enterprises, MSME, MSMED2006, Liberalization, Contribution, Growth INTRODUCTION Micro, Small and Medium Enterprises (MSME) as classified in the MSME development Act 2006 to categorize erstwhile Small Scale Industries (SSI) in India has remained as a highly vibrant and dynamic sector of the Indian economy since Independence. MSMEs plays crucial role in providing large employment opportunities at comparatively lower capital expenditure. It helps in industrialization of rural and backward areas, MSMEs are complementary to large industries as ancillary units and contribution of this sector has been tremendous on social-economic development of the country as well. As a group it is estimated that Micro, Small and Medium enterprises employ 101 million people, accounts for 45% of total manufacturing output and 43% of total exports of the country. MSME exports mainly consists of pearls, precious stones, metals, electrical, electronic equipment, pharmaceutical products, organic chemicals and articles of iron and steel, among others 1 . The economic contribution of small firms to industrially developed and developing countries is widely recognized (Ayyagari et al. 2007). However many firms in this category are unable to sustain and grow and are even being forced to shut down. In global perspective India ranks 134 out of 185 countries in ease of doing business. Further, starting a business in India takes 12 procedures, 26 days, and paid up capital of 140 percent of per capita income. By contrast, it takes only 7 procedures, 19 days and 18 percent of per capita income on average for our neighbors in south Asia. Though the MSME sector employs 101 million people, its contribution to India’s GDP is a meager 8.72%. Higher cost of credit, limited access to equity capital, inability to build brands have meant Indian MSMEs are lagging far behind their peers in other emerging and developed economies 2 . International Journal of Business Management & Research (IJBMR) ISSN(P): 2249-6920; ISSN(E): 2249-8036 Vol. 4, Issue 4, Aug 2014, 11-22 © TJPRC Pvt. Ltd.