The empirical analysis in this paper is based on cross-sectional secondary data. For the analysis we have used different statistical tools, i.e. correlation matrix, simple regression analysis, ANOVA Test, Elasticity, and Cobb-Douglas Production Function.
Growth of MSMEs in India
Table – 1 Performance of MSME sector in India
Year | No. of Working Enterprise | Employment (in lakh) | Market value of FAs (in crore) | Gross output (in crore) |
2001-02 | 105.21 | 249.33 | 154349 | 282270 |
2002-03 | 109.49 | 260.21 | 162317 | 314850 |
2003-04 | 113.95 | 271.42 | 170219 | 364547 |
2004-05 | 118.59 | 282.57 | 178699 | 429796 |
2005-06 | 123.42 | 294.91 | 188113 | 497842 |
2006-07 | 361.76 | 805.23 | 868543.79 | 1351383.45 |
2007-08 | 377.37 | 842.23 | 917437.46 | 1435179.26 |
2008-09 | 393.70 | 881.14 | 971407.49 | 1524234.83 |
2009-10 | 410.82 | 922.19 | 1029331.46 | 1619355.53 |
2010-11 | 428.77 | 965.69 | 1094893.42 | 1721553.42 |
2011-12 | 447.73 | 1012.59 | 1176939.36 | 1834332.05 |
2012-13 | 467.54 | 1061.40 | 1268763.67 | ** |
2013-14 | 488.46 | 1114.29 | 1363700.54 | ** |
2014-15 | 510.57 | 1171.32 | 1471912.94 | ** |
Average | 318.38 | 723.89 | 786901.74 | 1034122.14 |
CAGR | 11.94% | 11.68% | 17.48% | 14.30% |
Source: MSME Annual Report 2017-18, GoI |
** Data not Available |
Above table 1 indicate the growth in Numbers of Working Enterprises, Employment, Market Value of Fixed Assets and Gross Output of MSME from 2001-02 to 2014-15. In 2001-02 Number of working enterprises are 105.21, it increases to 510.57 in 2014-15. The employment position shows 249.33 lakh in 2001-12 and it raised to 1171.32 lakh in 2014-15. Market value of fixed assets point out 154349 crore in 2001-12, now it also continuously went up to 1471912.94 crore in 2014-15. The gross output increased from 282270 crore to 1834332.05 crore in between 2001-02 to 2014-15.
Importance of Output Elasticity of Employment
An important objective of development planning in India has been to provide for increasing employment opportunities not only to meet the backlog of the unemployed but also the new additions to the labour force. The economic reforms have aimed at fostering labour intensive production in India. The employment intensity of economic growth can be understood by the size of output elasticity of employment. In other words the concept of output elasticity of employment in a particular sector of the economy helps in understanding the extent of labour absorption capacity of that sector in the Economy. The responsiveness of employment to the changes in macro economic situation (gross domestic product or gross output) and the presence of shift in the responsiveness of employment to the changes in gross output owing to new economic policy introduced since July 1991, needs to be empirically examined by fitting an employment function with an interaction variable to time series data points. The present not is an effort in this direction. From the prospective of the macro production function of the economy, the use of labour with complementary factors of production produces national output or gross domestic product. The demand function for labour can be derived either from Cobb Douglas function production function or Constant Elasticity of Substitution (CES) production function by solving the marginal product of labour equation for labour input variable.
Table – 2 Exports from Micro and Small Enterprises (MSEs) in Relation to Total Merchandise Exports
Financial Year | Total Exports (US $ billions) | Exports of MSE products (US $ billions) | % share of MSE in total exports |
2001-02 | 43.83 | 14.94 | 34.1 |
2002-03 | 52.72 | 17.77 | 33.7 |
2003-04 | 63.84 | 21.25 | 33.3 |
2004-05 | 83.54 | 27.69 | 33.1 |
2005-06 | 103.09 | 33.94 | 32.9 |
2006-07 | 126.41 | 40.31 | 31.9 |
2007-08 | 163.13 | 50.2 | 30.8 |
2008-09 | 185.3 | 66.35 | 35.8 |
2009-10 | 178.75 | 82.49 | 46.1 |
2010-11 | 251.14 | 111.4 | 44.4 |
2011-12 | 305.96 | 131.48 | 43 |
2012-13 | 300.4 | 128.16 | 42.7 |
2013-14 | 314.42 | 132.9 | 42.3 |
2014-15 | 310.35 | 138.94 | 44.8 |
2015-16 | 262.29 | 130.65 | 49.8 |
Source: Union Ministry of Finance, Economic Division (2016), Economic Survey 2015-16, New Delhi. |
Table 2 shows export from micro and small enterprises (MSEs) in relation to total merchandise exports 2001-02 to 2015-16. Total export indicates 43.83 billion in 2001-02 and it increased to 262.29 billion in 2015-16 which is 6 times increased against 2001-02. The MSE total exports 14.94 billion in 2001-02 which rise to 128.16 billion in 2015-16. The percent share of MSE in total exports 34.1 in 2001-02 and it increased to 49.8 billion in 2015-16.
Table – 4. Descriptive Statistics
Table 4
indicates the Descriptive statistics in MSME in India. The average working enterprises is 86887 and employment shows 517194 person. The market value of fixed assets is Rs. 26341 crore. Total input value shows Rs. 24629 crore and net worth average value of MSME sector is Rs. 23025 crore. The standard deviation pointout 261456 in number of working enterprises and employment standard deviation is 1552146. Market value of fixed assets standard deviation is 77649 with gross output standard deviation is 117324. In the case of Skewness 5.45 (statistics) in working enterprises, 4.99 market value of fixed assets and 5.43 in net worth. The standard error of Skewness is 0.39 in all the factors which indicates positive performance in MSME sector. The Kurtosis of Descriptive statistics shows 32 in four factors i.e. Employment, Gross output, Total input, GAV and net worth is 31. The standard error of Kurtosis is 0.77 each in all the factors of MSME sector in India.
Descriptive Statistics |
| N | Minimum | Maximum | Mean | Std. Deviation | Skewness | Kurtosis |
Statistic | Statistic | Statistic | Statistic | Statistic | Statistic | Std. Error | Statistic | Std. Error |
NUMBER OF WORKING ENTERPRISES | 36 | 2 | 1563974 | 86887.44 | 261456.167 | 5.447 | .393 | 31.291 | .768 |
EMPLOYMENT(PERSON) | 36 | 2 | 9309486 | 517193.67 | 1552146.226 | 5.490 | .393 | 31.661 | .768 |
ORIGINAL VALUE OF P&M (VALUE IN CORE | 36 | .0000 | 105024.6100 | 5834.710556 | 18498.6286181 | 4.875 | .393 | 25.271 | .768 |
MARKET VALUE OF FIXED (VALUE IN CORE) ASSETS | 36 | .0000 | 449138.4000 | 26341.022222 | 77648.9121833 | 4.992 | .393 | 26.780 | .768 |
GROSS OUTPUT | 36 | .0000 | 707510.2700 | 39306.126111 | 117324.4134337 | 5.579 | .393 | 32.424 | .768 |
TOTAL INPUT (VALUE IN CORE) | 36 | .0000 | 443313.7000 | 24628.538889 | 73561.9323916 | 5.568 | .393 | 32.331 | .768 |
GAV(VALUE IN CORE) | 36 | .0000 | 264196.5700 | 14677.587222 | 43859.2947341 | 5.560 | .393 | 32.267 | .768 |
EXPORT(VALUE IN CORE) | 36 | .0000 | 67913.8500 | 3772.991667 | 11441.3279547 | 5.337 | .393 | 30.263 | .768 |
NET WORTH (VALUE IN CORE) | 36 | .0000 | 415303.4100 | 23025.194167 | 69571.8872782 | 5.432 | .393 | 31.042 | .768 |
Table 5 point out correlation matrix table of MSME in India. The above table shows positive all the factors of MSME in India.
Table – 5. Correlation Matrix Table
CORRELATION MATRIX TABLE:
| NUMBER OF WORKING CAPITAL | EMPLOYMENT | ORIGINAL VALUE OF P &M | MARKET VALUE OF FIXED | GROSS OUTPUT | TOTAL INPUT | GVA | EXPORT | NET WORTH |
NUMBER OF WORKING CAPITAL | 1 | | | | | | | | |
EMPLOYMENT | 1.00 | 1 | | | | | | | |
ORIGINAL VALUE OF P &M | 0.96 | 0.96 | 1 | | | | | | |
MARKET VALUE OF FIXED | 0.97 | 0.97 | 0.99 | 1 | | | | | |
GROSS OUTPUT | 0.98 | 0.99 | 0.94 | 0.95 | 1 | | | | |
TOTAL INPUT | 0.98 | 0.99 | 0.93 | 0.94 | 1.00 | 1 | | | |
GVA | 0.99 | 0.99 | 0.95 | 0.96 | 1.00 | 1.00 | 1 | | |
EXPORT | 0.99 | 0.99 | 0.93 | 0.94 | 0.99 | 0.99 | 0.99 | 1 | |
NET WORTH | 0.98 | 0.99 | 0.94 | 0.95 | 1.00 | 1.00 | 1.00 | 0.98 | 1 |
SIMPLE REGRESSION ANNALYSIS (EMPLOYMENT AND OUTPUT)
Table – 6. Simple Regression Analysis of Employment and Output
.
Table 6
reveals that simple regression analysis (Employment and Output) of MSME in India. It shows R square is .982. The above calculation found F value (1776.840). It is clear that difference between employment and Output was significant.
Coefficientsa |
Model | Unstandardized Coefficients | Standardized Coefficients | t | Sig. |
B | Std. Error | Beta |
1 | (Constant) | 587.290 | 2911.003 | | .202 | .841 |
EMPLOYMENT(PERSON) | .075 | .002 | .991 | 42.153 | .000 |
a. Dependent Variable: GROSS OUTPUT |
SIMPLE REGRESSION ANNALYSIS (OUTPUT AND FIXEED ASSETS)
Table – 7 Simple Regression Analysis of Output and Fixed Assets
Table 7
shows that simple regression analysis (Output and Fixed Assets). The R square shows .905. The above calculation found F (324.406). It is clear that difference between Output and Fixed Assets was significant.
Coefficientsa |
Model | Unstandardized Coefficients | Standardized Coefficients | t | Sig. |
B | Std. Error | Beta |
1 | (Constant) | 1591.658 | 4271.246 | | .373 | .712 |
GROSS OUTPUT | .630 | .035 | .951 | 18.011 | .000 |
a. Dependent Variable: MARKET VALUE OF FIXED (VALUE IN CORE) ASSETS. |
COBB-DOUGLAS PRODUCTION FUNCTION:
Q = ALβ1Kβ2.
ESTIMATED: Aβ1 &β2.
LN (Q) = LN (A) beta1*LN (L) beta2*LN (K).
Table – 8 Cobb-Douglas Production Function
Table 8
indicates COBB-DOUGLAS production function. The above table calculation found,
| Coefficients | Standard Error | t Stat | P-value | Lower 95% | Upper 95% | Lower 95.0% | Upper 95.0% |
Intercept | -0.53 | 1.09 | -0.49 | 0.63 | -2.75 | 1.69 | -2.75 | 1.69 |
B1 | 0.43 | 0.19 | 2.28 | 0.03 | 0.05 | 0.82 | 0.05 | 0.82 |
B2 | 0.54 | 0.16 | 3.43 | 0.00 | 0.22 | 0.87 | 0.22 | 0.87 |
| LN(A) | -0.53 | | | | | | |
"=EXP() | A | 0.59 | | | | | | |
B1 Coefficient is 0.43 and standard error is 0.19
B2 Coefficient is 0.54 and standard error is 0.16
LN (A) = 0.53
“= EXP = A 0.59
ELASTICITY OF EMPLOYMENT AND EXPORT
Employment elasticity captures the responsiveness of employment of changes in output. There are two common ways of measuring the output elasticity of employment (Mishra and Suresh, 2014). The first method calculates the point elasticity by regressing log-employment on log-output, where the coefficient on the latter is the estimate of elasticity. Since estimation of point elasticity relies on a regression, a researcher requires substantial data points to put it into practice. Often, enough data is not available to run regressions. In such cases, researchers turn to the second method, which calculates the arc elasticity as the ratio of the growth rate of employment and growth rate of output over some period of time. In this paper, we use data on employment from the Employment-Unemployment Survey (EUS) of the National Sample Survey Organisation (NSSO), which is available only every 5 years. This makes regression analysis infeasible. Hence, we compute and work with arc elasticities.
The arc employment elasticity for the aggregate economy is defined as.
Where E denotes employment, Y denotes real output (value added) and Δx stands for change in the variable x.
ELASTICITY OF EMPLOYMENT OUTPUT
Table – 9 Elasticity of Employment
Coefficients |
| Unstandardized Coefficients | Standardized Coefficients | t | Sig. |
B | Std. Error | Beta |
ln(EMPLOYMENT(PERSON)) | 11225.697 | 1636.220 | .772 | 6.861 | .000 |
(Constant) | -106764.877 | 18814.515 | | -5.675 | .000 |
ELASTICITY OF EXPORT
Table – 10 Elasticity of Export.
Table 9
indicates Elasticity of Employment. From the above table calculated value of F (47.070). Unstandardized coefficients B value is 11225.697 and standardized coefficient Beta is .772 which shows elasticity of employment is significant.
Coefficients |
| Unstandardized Coefficients | Standardized Coefficients | t | Sig. |
B | Std. Error | Beta |
EXPORT(VALUE IN CORE) | 92.612 | 12.625 | .792 | 7.336 | .000 |
(Constant) | 88810.256 | 47526.637 | | 1.869 | .071 |
Table 10 shows Elasticity of Export of MSME in India. The above table calculated value of F (53.811), unstandardized coefficients B is 92.612 and standardized coefficients Beta value is .792. It indicates Elasticity of Export is significant.
DESCRIPTIVE STATISTICS
Descriptive Statistics |
| N | Range | Minimum | Maximum | Mean | Std. Deviation | Variance | Skewness | Kurtosis |
Statistic | Statistic | Statistic | Statistic | Statistic | Statistic | Statistic | Statistic | Std. Error | Statistic | Std. Error |
INPUT OUT PUT RATIO OF GROSS OUT PUT & TOTAL INPUT | 35 | 2 | 1 | 3 | 1.86 | .494 | .244 | − .349 | .398 | .971 | .778 |
PERCENTAGE OF EXPORT | 35 | 18.00% | 1.00% | 19.00% | 5.7714% | 5.04151% | 25.417 | .905 | .398 | − .127 | .778 |
RATIO OF NET GROWTH RATE TO TATAL OUTPUT | 35 | 4 | 0 | 4 | 1.23 | .808 | .652 | 2.037 | .398 | 4.434 | .778 |
Valid N (list wise) | 35 | | | | | | | | | | |
In Descriptive statistics shows average input output ratio is 1.86. Percentage of Export average is 5.7714 percent and ratio of net growth rate of total output 1.23. The standard deviation .494 in input output ratio, 5.04151 percent in percentage export and .808 ratio of net growth. The variance shows .244 in input output ratio, 25.417 in percentage of export and 2.037 in ratio of net growth rate of total output. Skewness standard error indicates .398 in all factors and Kurtosis standard error point out .778 each in all three factors. Now the descriptive statistics indicates the positive in MSME sector in India.