MSME MCQ Quiz - Objective Question with Answer for MSME - Download Free PDF

Key Points

• The Stand-Up India Scheme aims to promote entrepreneurship among SC/ST and women entrepreneurs.
• Non-Individual enterprises are eligible to avail the benefit of this scheme provided certain conditions are complied with.
• Besides Primary Security, the loan may be secured by a guarantee of Credit Guarantee Fund Scheme for Stand-Up India Loans (CGFSIL) as decided by the banks.
• This scheme facilitates bank loans between ₹10 lakh and ₹1 crore to at least one SC or ST borrower and at least one woman borrower per bank branch for setting up a greenfield enterprise.

Additional Information

• Greenfield Enterprises:
  • Refers to new enterprises that are being established for the first time.
  • The Stand-Up India Scheme primarily focuses on facilitating bank loans for setting up such enterprises.
• Non-Individual Enterprises:
  • These are enterprises that are not owned by a single individual but may involve partnerships, companies, or other forms of business entities.
  • The scheme allows such enterprises to avail benefits provided they comply with certain conditions.
• Credit Guarantee Fund Scheme for Stand-Up India Loans (CGFSIL):
  • This is a guarantee scheme to ensure that the loans provided under the Stand-Up India Scheme are secured.
  • Banks can use this guarantee to mitigate the risk associated with lending to new entrepreneurs.
• Primary Security:
  • This refers to the main asset or collateral that is provided by the borrower to secure the loan.
  • This could be the machinery, land, or any other asset that is used in the business.

Answer: B

Key Points

• Statement 1 is incorrect: MSME provides for preference procurement by government agencies from MSMEs [Act: Page-8, point 11]  but the act doesn’t allow for any exclusive production for manufacturing by MSMEs.  
• Statement 2 is correct: The new definition, announced in Atmanirbhar package 2020, increased the limits for classification of MCMEs.
  • These were intended to pave way for strengthening and growth of the MSMEs. Also, the provision of excluding the exports from counting of turnover will encourage the MSMEs to export more and more without fearing to loose the benefits of a MSME unit

The correct answer is Board for Industrial and Financial Reconstruction.

Key Points

• The Board for Industrial and Financial Reconstruction (BIFR) was established in 1987 under the Sick Industrial Companies (Special Provisions) Act, 1985.
• The primary aim of BIFR was to determine the sickness of industrial companies and to undertake appropriate measures for their rehabilitation.
• BIFR provided a mechanism to expedite the revival of sick units and prevent industrial sickness.
• The board consisted of experts from various fields including finance, industry, and law to ensure comprehensive rehabilitation strategies.

Additional Information

• Sick Industrial Companies (Special Provisions) Act, 1985 (SICA)
  • SICA was enacted to address the growing problem of industrial sickness in India during the 1980s.
  • The act aimed to identify sick industries and expedite their revival or closure.
  • It provided for the establishment of BIFR and Appellate Authority for Industrial and Financial Reconstruction (AAIFR).
• Industrial Sickness
  • Industrial sickness refers to the state where a company is financially unviable and unable to meet its financial obligations.
  • Common causes include mismanagement, obsolete technology, inadequate financial planning, and market competition.
• Rehabilitation of Sick Units
  • Rehabilitation involves financial restructuring, technological upgradation, and management overhaul to restore the unit's viability.
  • It may include measures such as capital infusion, debt restructuring, and operational efficiency improvements.
• BIFR Abolishment
  • BIFR was abolished in 2016 with the introduction of the Insolvency and Bankruptcy Code (IBC).
  • The IBC provides a unified framework for resolving corporate insolvency and bankruptcy.

The correct answer is Sick Industrial Companies Act.

Key Points

• In December 1991, the Sick Industrial Companies Act (SICA) was amended to include public enterprises under the purview of the Board for Industrial and Financial Reconstruction (BIFR).
• The amendment was part of the broader economic reforms initiated by the Indian government to revitalize the industrial sector.
• The primary objective of SICA was to detect sick and potentially sick companies at an early stage and to expedite their revival.
• BIFR was established under SICA to address the problems of industrial sickness and to determine measures for their rehabilitation.

Additional Information

• Board for Industrial and Financial Reconstruction (BIFR)
  • BIFR was set up in January 1987 under the Sick Industrial Companies Act (SICA).
  • Its purpose was to determine the preventive, ameliorative, remedial, and other measures which need to be taken concerning sick industrial companies.
  • The board was also empowered to consider measures for the revival and rehabilitation of potentially viable sick industrial companies.
  • It could also recommend the winding up of non-viable companies.
• Sick Industrial Companies (Special Provisions) Act, 1985 (SICA)
  • SICA was enacted to detect and deal with sick and potentially sick companies in India.
  • It aimed to provide timely detection and corrective actions to revive the sick industries.
  • The act provided for the constitution of the BIFR to perform such functions.
  • SICA was eventually repealed in 2003 with the introduction of the Sick Industrial Companies (Special Provisions) Repeal Act, 2003.
• Industrial Policy Reforms of 1991
  • The 1991 reforms marked a significant shift in the economic policy of India, moving towards liberalization, privatization, and globalization.
  • These reforms included deregulation of industries, reduction of import tariffs, and reforms in the financial sector.
  • The objective was to promote competitive efficiency and to integrate the Indian economy with the global market.
  • The reforms aimed to reduce the role of the public sector and encourage private sector participation in the economy.
• Economic Reforms in India
  • The economic reforms of 1991 were initiated in response to a severe balance of payments crisis.
  • The reforms included measures to stabilize the economy and to create a more open and market-oriented economy.
  • Key reforms included fiscal consolidation, liberalization of trade and investment policies, and financial sector reforms.
  • The reforms have significantly contributed to the growth and development of the Indian economy over the past three decades.

The correct answer is All of the above.

Key Points

• Small scale industries (SSIs) are significant for employment generation, especially in rural and semi-urban areas where they provide job opportunities to a large number of people.
• SSIs contribute to a more equitable distribution of national income and wealth by providing opportunities for entrepreneurship and self-employment.
• These industries generally have fewer industrial disputes due to their smaller workforce and often more personalized management approach.
• SSIs contribute to the overall industrial output and exports of the country, thereby playing a crucial role in the economic development of India.

Additional Information

• Small Scale Industries (SSIs)
  • These are industries with a limited scale of operations and lower investment in machinery and plant.
  • They play a crucial role in the socio-economic development of a country by creating jobs, increasing production, and contributing to exports.
  • SSIs foster entrepreneurship and innovation by providing opportunities for new entrepreneurs to enter the market.
  • They help in the diversification of the industrial base and reduce regional imbalances by promoting industrialization in rural and backward areas.
• Employment Generation
  • SSIs are labor-intensive and provide numerous job opportunities, especially in developing countries where employment opportunities are limited.
  • They help in absorbing the surplus labor available in rural areas and reduce migration to urban areas.
• Equal Distribution of National Income
  • By promoting entrepreneurship and self-employment, SSIs ensure a more equitable distribution of national income and wealth.
  • They contribute to reducing income disparities and enhancing the standard of living for a larger section of the population.
• Industrial Disputes
  • SSIs generally have fewer industrial disputes due to their smaller size and more personalized management approach.
  • This leads to a more harmonious working environment and higher productivity.

• The National Board for Micro, Small, and Medium Enterprises meets once every 6 months in a year.
• It was established on 15 May 2007, having 47 members.
• It is responsible for examining the factors affecting the development and promotion of MSMEs.
• It also gives advice to the Central government about the use of funds constituted in Section 12.

The correct answer is Micro, Small and Medium Enterprises.

Key Points

• The Micro, Small and Medium Enterprises (MSME) sector has emerged as a highly vibrant and dynamic sector of the Indian economy.
• The Micro, Small and Medium Enterprises Development (MSMED) Act was notified in 2006 to address policy issues affecting MSMEs as well as the coverage and investment ceiling of the sector.
• The Minister of Micro, Small and Medium Enterprises is Narayan Rane and the Minister of State is Pratap Chandra Sarangi.

Additional Information 

• Micro, Small, and Medium Enterprises (MSMEs) play a vital role in the growth of the Indian economy by contributing 45% of industrial output, 40% of exports.
• It employs 60 million people, creates 1.3 million jobs every year, and produces more than 8000 quality products for the Indian and international markets.
• There are approximately 30 million MSME Units in India and 12 million persons are expected to join the workforce in the next 3 years.
• It is very important to empower the SME sector to utilize the limited resources (human & economic) they have in an optimum manner.
• The SMEs need to be educated and informed of the latest developments taking place globally and helped to acquire skills necessary to keep pace with the global developments.
• To counter the challenges faced by the SME sector and grab the opportunities in the market, various key strategies need to be adopted to promote and support the SME sector.
• Thus the only way to create millions of jobs with decent wages is a policy re-imagination of the rights, needs, and treatment of formal MSME entrepreneurs.

The correct answer is 1(C), 2(A), 3(B).

Key Points

• CPSEs are classified into 3 categories: Maharatna, Navratna, and Miniratna.
• Eligibility Criteria to be considered for grant of Maharatna status:
  • Having Navratna status.
  • Listed on the Indian stock exchange with minimum prescribed public shareholding under SEBI regulations.
  • Average annual turnover of more than Rs. 25,000 crore, during the last 3 years.
  • The average annual net worth of more than Rs. 15,000 crore, during the last 3 years.
  • Average annual net profit after tax of more than Rs. 5,000 crore, during the last 3 years.
  • Should have a significant global presence/international operations.
  • There are ten ‘Maharatna’ CPSEs: Bharat Heavy Electricals Limited, Coal India Limited, GAIL (India) Limited, Indian Oil Corporation Limited, NTPC Limited, Oil & Natural Gas Corporation Limited, Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL), Power Grid Corporation of India (POWERGRID), and Steel Authority of India Limited.
• Eligibility Criteria to be considered for grant of Navratna status:
  • The Miniratna Category – I and Schedule ‘A’ CPSEs, which have obtained ‘excellent’ or ‘very good’ rating under the Memorandum of Understanding system in three of the last five years, and have a composite score of 60 or above in the six selected performance parameters, namely,
    • net profit to net worth,
    • manpower cost to total cost of production/services,
    • profit before depreciation, interest, and taxes to capital employed,
    • profit before interest and taxes to turnover,
    • earning per share,
    • inter-sectoral performance.
       
• Eligibility Criteria to be considered for grant of Miniratna status:
  • Category –I CPSEs should have made a profit in the last three years continuously, the pre-tax profit should have been Rs. 30 crores or more in at least one of the three years and should have a positive net worth.
  • Category-II CPSEs should have made a profit for the last three years continuously and should have a positive net worth.
  • These CPSEs shall be eligible for the enhanced delegated powers provided they have not defaulted in the repayment of loans/interest payment on any loans due to the Government.

The correct answer is Both a and b.

• Investment in Infrastructure is necessary for growth.
• To achieve the GDP of $5 trillion by 2024-25, India needs to spend about $1.4 trillion (100 lakh crore) over these years on infrastructure.
• The challenge is to step-up annual infrastructure investment so that lack of infrastructure does not become a binding constraint to the growth of the Indian economy. To implement an infrastructure program of this scale, it is important that projects are adequately prepared and launched. 
• NIP is expected to enable well-prepared infrastructure projects which will create jobs, improve ease of living, and provide equitable access to infrastructure for all, thereby making growth more inclusive.
• NIP also intends to facilitate supply-side interventions in infrastructure development to boost short-term as well as the potential GDP growth. Improved infrastructure capacities will also drive the competitiveness of the Indian economy.
• The NIP has been made on a best effort basis by aggregating the information provided by various stakeholders including line ministries, departments, state governments, and private sector across infrastructure sub-sectors, as identified in the 'Harmonised Master List of Infrastructure'.
• All projects (Greenfield or Brownfield, under conceptualization or under implementation or under Development) of project cost greater than Rs.100 crore per project were sought to be captured.

Key Points

• The NIP captures the infrastructure vision of the country for the period FY20-25. This is the first-ever exercise undertaken in the country. However, it is recognized that financing of the National Infrastructure Pipeline would be a challenge.
• It is hoped that a bouquet of well-prepared projects would attract investment from Central and State Governments, Urban Local Bodies, Banks and Financial Institution, PE funds, and private investors, both local and foreign.

The correct answer is Micro Enterprise.

Key Points

• In the revised definition, the investment limit has been revised upwards and additional criteria of turnover have been introduced.

Micro -

• Investment in Plant and Machinery or Equipment
• Not more than Rs.1 crore and Annual Turnover; not more than Rs. 5 crores. Hence the correct answer is option 3.

Small -

• Investment in Plant and Machinery or Equipment:
• Not more than Rs.10 crore and Annual Turnover; not more than Rs. 50 crore.

Medium -

• Investment in Plant and Machinery or Equipment
• Not more than Rs.50 crore and Annual Turnover; not more than Rs. 250 crore.

The correct answer is 5 crores to 75 crores rupees.

Confusion Points

• As Per the official question as answer key provided by WBCS the correct answer is option 1.
• However, as per the data available as per the MSME the limit of the annual turnover for small enterprises is not more than 50 crore.

Key Points

• In line with energising MSMEs in the country, the Cabinet Committee on Economic Affairs (CCEA) under the Chairmanship of Prime Minister Shri Narendra Modi approved the upward revision of the MSME definition for laying down effective implementation under the Atmanirbhar Bharat Package. 
• Updated Classification of Micro Small Medium Enterprises are as follows:

The correct answer is 2020.

Key Points

MSME Development (MSMED) Act, 2006 classifies MSMEs based on the

• Investment in plant and machinery for manufacturing units
• Investment in equipment for service enterprises.

Micro. Small and Medium Enterprises Classification 2020

• The centre also removed the distinction between the manufacturing and services sector in MSME definition.

Here’s a table with the current definition of MSMEs and the revised definition announced by the government:

The correct answer is Self-help group.

Key Points

• Self Help Groups (SHGs) are small groups of poor people. The members of an SHG face similar problems. They help each other, to solve their problems.
• SHGs promote small savings among their members. The savings are kept with the bank. This is the common fund in the name of the SHG. The SHG gives small loans to its members from its common fund
• SHG is an informal group registered under any Societies Act.

Important Points

• Major Functions of an SHG
• Savings and Thrift:
  • All SHG members regularly save a small amount. The amount may be small, but savings have to be a regular and continuous habit with all the members.
  • “Savings first — Credit later” should be the motto of every SHG member.
  • SHG members take a step towards self-dependence when they start small savings. They learn financial discipline through savings and internal lending. 
• Internal lending:
  • The SHG should use the savings amount for giving loans to members.
  • The purpose, amount, rate of interest, schedule of repayment etc., are to be decided by the group itself.
  • Proper accounts are to be kept by the SHG.
• Discussing problems:
  • In every meeting, the SHG should be encouraged to discuss and try to find solutions to the problems faced by the members of the group. Individually, the poor people are weak and lack the resources to solve their problems. When the group tries to help its members, it becomes easier for them to face the difficulties and come up with solutions.
  • Taking bank loans: The SHG takes loans from the bank and gives it as loans to its members.

The correct answer is 1 and 3 only.

Key Points

• In 1955, the Village and Small-scale Industries Committee, also called the Karve Committee, noted the possibility of using small-scale industries for promoting rural development. 
• Hence, Statement 1 is incorrect.
• A ‘small-scale industry’ is defined as the maximum investment allowed on the assets of a unit.
• This limit has changed over a period of time. In 1950 a small-scale industrial unit was one which invested a maximum of rupees five lakh.
• It was believed that small-scale industries are more ‘labor-intensive’ i.e. they use more labor than the large-scale industries, therefore, generate more employment.
• For this purpose, the production of several products was reserved for the small-scale industry; the criterion of the reservation being the ability of these units to manufacture the goods.
• They were also given concessions such as lower excise duty and bank loans at lower interest rates.

Important Points

•  The Micro, Small, and Medium Enterprises (MSME) are classified into two enterprises as per the Micro, Small & Medium Enterprises Development (MSMED) Act, 2006. Hence, Statement 2 is correct.
• These are
  • Manufacturing Enterprises
  • Service Enterprises