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Right Aligning CSR Funds For Growth Of MSMEs

Large corporates can help blend skill development with the education system which is required on a priority basis

Photo Credit : Shutterstock


As the world's fastest growing economy, India is rapidly expanding its global footprint. A huge domestic market, favourable demographics and a stable government point towards economic upswing in the coming years. With focus on skill development and local manufacturing, the country can achieve double-digit GDP growth and become self-sufficient in developing critical technologies in various sectors.

The government has already launched several ambitious initiatives such as Make in India, Skill India and Digital India to increase industrial activities, build stronger skills, improve information infrastructure, and provide more funding for research and development. Another big ticket campaign called Start-up India is being fine-tuned to foster a culture of entrepreneurship and innovation.

All these are likely to boost micro, small and medium enterprises (MSMEs) which form the backbone of the Indian economy. With 38 per cent share in the gross domestic product (GDP), MSMEs employ over 100 million workers, produce more than 6,000 products and contribute nearly 40 per cent to exports out of India, as per the report published by the Ministry of MSME . However, this vital sector faces enormous challenges.

A recent survey conducted by Avian Media and PHD Chamber in Delhi NCR has identified various challenges faced by the sector including effective management of resources, stringent conditions of raising finance, lack of skilled manpower, lack of technology upgradation, difficulty in procuring raw material from domestic as well as foreign markets, multiple taxes, lack of quality infrastructure, operational challenges and low focus on research and innovation, among others.
On the other hand, MSMEs can become active partners in Corporate Social Responsibility (CSR) - an area which has not been previously explored. These units offer far more sustainable models than NGOs or non-profits, which are dependent on grants. As is well-known, the New Companies Act 2013 mandates CSR 2 per cent of the three year average net profits for select companies.

The core principle of CSR implies that every rupee spent needs to be measureable. The long-term goal of every CSR programme is to be self-sustainable within a given timeframe. In the light of this, there is an opportunity to build synergies and make MSMEs a key recipient of the CSR funds, according to the survey report.

This is an opportunity for large corporates to align their resources and introduce MSMEs to new ideas, investments, methods, processes, technologies and capacity building besides facilitating investments, fostering innovation, enhancing skill development and building world-class infrastructure - thereby, enabling the country to emerge as a global, low-cost manufacturing hub.

This would also divert some portion of CSR monies to core areas of MSMEs improving the overall business environment, creating millions of new job opportunities and boosting productivity, besides producing high-quality, sustainable products and services for the end customers. The breakthrough would as a result meet the requirements of local and global markets.

Large corporates can help blend skill development with the education system which is required on a priority basis. Hence, linkages between universities and businesses need to play an important role in innovation dynamics.

The corporates can also facilitate in the formation of manufacturing clusters with shared infrastructure for allied industries, and extend support in R & D activities. An increased level of associations between large enterprises and MSMEs is bound to increase economic activity and help achieve the national goal of inclusive, equitable growth for overall prosperity for 1.2 billion Indians.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house. Unless otherwise noted, the author is writing in his/her personal capacity. They are not intended and should not be thought to represent official ideas, attitudes, or policies of any agency or institution.

Tags assigned to this article:
csr activities msmes gdp growth economy

Sharmistha Ghosh

Ms. Sharmistha Ghosh, Director, Advocacy - CSR and Development Communications, Avian Media

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