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Indian MSMEs And Spirit Of Enterprise

India’s Micro, Small and Medium Enterprises (MSMEs) are those silent performers who are carrying India’s 5 trillion dollar economy goal on their shoulders.

Photo Credit : dcs-solutions.co.uk

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India is essentially a knowledge-based, entrepreneurship driven economy. India is the world’s third-largest Startup base but its entrepreneurial spirit is not limited to the Startup world; they represent only one aspect of it. The Indian spirit of enterprise is not yet branded and advertised but it catches the attention of the world. A good amount of research is being done by foreign researchers (some do their postdoctoral) on the business communities of India. The real performers often prefer to stay in the background but they do the heavy lifting. India’s Micro, Small and Medium Enterprises (MSMEs) are those silent performers who are carrying India’s 5 trillion dollar economy goal on their shoulders.

Any understanding of India’s growth trajectory is incomplete without an introduction to India’s MSME sector, and the spirit with which they work. There are 63.4 million Micro, Small and Medium enterprise units in India (mainly in rural and semi-urban areas) which contributes around 29% to India’s GDP and 49% to its exports. The MSME sector is called the backbone sector of the Indian economy as it provides employment to over 111 million people and produces over 8000 products, ranging from traditional to high tech precision items. In India, the MSMEs are broadly divided into two categories- Manufacturing Enterprises and Service Enterprises. Both categories have a thriving track record. The top ten states which together account for a share of 74 percent of the total MSMEs in India are- Uttar Pradesh, West Bengal, Tamil Nadu, Karnataka, Bihar, Andhra Pradesh, Gujarat, Rajasthan, and Madhya Pradesh. 

MSMEs constitute around 95% of the total industries in India and their contributions to national income are immense, yet this sector has never demanded any kind of security (financial, social, medical or pension) from the government. They have built a strong community culture based on trust, cooperation and relationship which is today difficult to replicate even in some global MNCs. How this sector has adopted two major and bold economic reforms (within the same tenure) of the government- Demonetization, and GST, is still a matter of research for some.

For Indian MSMEs, their ventures are not just industries but an important part of their heritage, tradition, and life. They are traditional but always open to embrace the new technologies and innovations, whether digital payments, smart banking, online bidding and procurement, e-commerce or online filing of Taxes, they are the fast learners and early adopters of India. Without their endorsement, India’s Digital drive could not have succeeded. 

For the first time, India has a government that believes in ‘Collective Efforts, Inclusive Growth mantra’ and it is reaching out to the MSMEs and non-corporate sector too. Last year PM Modi launched MSME Support and Outreach program and unveiled 12 key initiatives to boost the sector’s growth which includes a 59-minute loan portal, compulsory 25 percent procurement from MSMEs by central public sector enterprises, and simplification of procedures under Companies act. The MSME sector of India is made up of hard-working and risk-taking entrepreneurs and their skilled teams. Modi government has also taken significant moves to ensure social security for the MSMEs and unorganized sector’s employees and establishing the mechanisms to provide them provident fund, pension and insurance kind of facilities. 

Analyzing and comparing the Indian industry and market culture with western societies is one of the most common errors. Not just India, in business and socio-economic culture, entire Asia is different! In the year 1992-93, some interesting findings about India’s entrepreneurial potential first time came into the light when a team of volunteers led by an eminent thinker Swaminathan Gurumurthy (who is currently serving as the part-time Director of the Reserve Bank of India) decided to travel across the country to explore the culture of different industrial clusters of India. Their team conducted close to six years long empirical study and covered over 42 key industrial clusters of India like Ludhiana, Batala, Amritsar, Rajkot, Jamnagar, Surat, Vadodara, Morbi, Tiruppur, Namakkal, Karur, Sivakasi, and Thoothukudi, starting from the North then West and finally to South. Their findings revealed surprising facts about India’s entrepreneurial potential. There are thousands of castes and community based economic clusters spread across India that are providing millions of jobs, exporting products of worth billion dollars to the global markets and creating wealth. This unique entrepreneurship culture of India has produced several traditional business communities like Parsis, Patels, Sindhis, Kutchis, Khatris, Jains, Chettiars, Marwaris and Bohras which have been extremely successful in expanding their global business networks too. About half of the USA’s motels are now owned by Gujarat’s industrious Patel community, which jokingly referred to as the Patel Motel Cartel.

Some of the findings of S Gurumurthy and his team’s research were later quoted by the World Bank and other international agencies in their reports but in India, they failed to catch the attention of the government, policymakers, and media.

India of 2019 is different from India of the 1990s; there is a visible change in India’s capacity and approach. Today, the government of India directly seeks inputs from such dedicated thinkers and incorporates their suggestions in the policy decisions. Budget after budget, the Modi government is easing out the regulations, enabling credit access and facilitating the mechanisms to boost export potential of the MSMEs sector. The government is also encouraging the MSMEs to get themselves register on the National stock exchange.

There are close to 731 districts in India, and each district has something unique to offer to the global markets. India’s Uttar Pradesh state, which has some 75 districts, has come up with ODOP (one district, one product) scheme to spur the entrepreneurial potential of the state, this experiment is an extension of ‘Make in India’ vision, in future other Indian states will also apply the similar kind of improvisations.

India is a young country and there is a youth power behind the scale and speed of MSMEs of India. These young and innovative minds represent aspirational and ambitious India. If we will accelerate and sustain the current momentum of reforms then our dynamic MSMEs will provide a new definition of micro-multinationals to the world.


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