MSME meaning is The Micro, Small and Medium Enterprise (MSME), the sector considered as the most vibrant and dynamic sector of the Indian economy over the five decades. The major characteristics of Indian MSMEs is a high contribution to domestic production, significant export earnings, low investment requirements, operational flexibility, location wise mobility, capacities to develop appropriate indigenous technology, import substitution, contribution towards defense production technology-oriented industries and competitiveness in domestic and export markets help them tap opportunities in various sectors. This sector not only source of providing large employment opportunities at comparatively lower capital cost than large industries but also it helps in the industrialization of rural & backward areas, which ultimately helps in reducing Regional imbalances, assuring more equitable distribution of national income and wealth. MSMEs are similar to, large industries as ancillary units and contribute enormously to the socio-economic development of the country.Micro Small and Medium Enterprises have played a significant role in the economic development of the various countries. India certainly is no exception. The sector which has such a remarkable contribution to economy need to look into the other side i.e. the challenges. India being a democratic country government rests with larger responsibility. So in the article we have discussed the challenges and the role of government and its effactiveness.