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Time To Take Stock And Commit
The 6.3 crore MSMEs in the country present abundant opportunities in terms of large-scale employment creation, leveraging exports and fulfilling the government of India’s ‘Make in India’ campaign
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Micro, small and medium enterprises (MSMEs) play a crucial role in accelerating the Indian economy. Contributing nearly 30 per cent of India’s gross domestic product and employing around 11 crore individuals, the MSME sector forms the backbone of the country and is a crucial node in engineering the economy’s growth.
The 6.3 crore MSMEs in the country present abundant opportunities in terms of large-scale employment creation, leveraging exports, and fulfilling the government of India’s ‘Make in India’ campaign.
India’s MSME sector has faced its fair share of challenges. Much of 2020 and 2021 focused on the disproportionate impact that pandemic-related shocks, such as disruptions in supply chain logistics, had on the Indian MSME sector.
The acceleration of digitization in the age of the pandemic has forced many sellers to adopt digital payments and e-commerce as a means for survival, with 4 out of 10 MSMEs changing their mode of business to adjust to the ramifications of Covid-19 on their operations.
Although MSMEs have shown resilient recovery in the aftermath of the covid-induced shocks, global market uncertainties caused by geopolitical risks and the Ukraine-Russia crises, coupled with the devalued rupee and a hyper-inflated market, pose several additional hurdles that the MSME sector must tackle to overcome this hurdle.
From digital and financial inclusion, leveraging export potential, to capacity building and entrepreneurial skills development, there are multiple facets that must be strengthened in order to fuel the growth trajectory of Indian MSMEs.
India’s supply chain needs to be strengthened to power self-reliant MSMEs that can fulfil India’s ambitions of a USD 5 trillion economy, through developing new capabilities, augmenting existing ones and moulding policy frameworks that are well suited to the changing needs of the dynamic, Indian retail market.
The success of India’s MSME sector requires a favourable policy framework that reduces compliance burdens and improves the ease of doing business for smaller entrepreneurs and more importantly provides visibility on how to increase business presence.
A liberalised FDI and foreign trade policy would certainly enhance the competitiveness of the MSME sector and allow local products from India to reach global markets. The government must also provide financial support and access to capital for MSMEs through schemes such as Credit Guarantee Trust Fund for Micro and Small Enterprises (CGTMSE) and Credit Linked Capital Subsidy (CLCSS).
The Indian MSMEs have started understanding the value of earning consumer trust and being price competitive. As e-commerce marketplaces allow the MSMEs to sell their products directly to consumers, they are benefitting by earning more, manufacturing products according to the consumer feedback and accruing more commercial value.
Moreover, technology has also played a crucial role in connecting local producers with global value chains and led to the enhancement of business operations in the MSME sector. A global e-commerce player like Amazon adds a huge value to Indian small sellers. By being at the right place, by offering products on a marketplace which has the trust of the consumers these sellers are becoming a global brand.
MSMEs are also critical to India’s overall ability to be a key trade player in international markets, contributing to nearly 50 per cent of Indian exports.
In 2021, India was ranked 43rd among 64 nations on the annual World Competitiveness Index. Thus, the Indian MSME sector has got a long journey ahead to become a key, global trade player.
Initiating upskilling programmes for young talent, government support with easing compliances, as well as favourable tax regimes such as GST parity that the government has recently taken cognizance of, can prove to be the building blocks to strengthening the foundation of MSMEs in the country.
As we approach MSME Day 2022, we must take cognisance of the significant growth potential that India’s small businesses are laden with.
The employment opportunities, export capabilities and logistics support developed as a byproduct of the digitisation of businesses must be harnessed in order to build a robust and self-reliant economy.
The current growth of MSMEs is non-uniform and there are significant roadblocks to the growth of enterprises across sectors. Streamlining roadblocks in banking and finance, providing them with smart industrial infrastructure and enabling continuous technological up-gradation are challenges that should be addressed squarely.
The government must maintain a conducive policy and regulatory ecosystem, incentivize remedial measures and growth for MSMEs and simplify the long and arduous filing procedures associated with MSMEs. With a favourable environment to foster the immense potential that these small players can provide, there lies the immense potential for the future prospects of India’s MSME sector.
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.