North-East India comprising seven sister states covers 263179 Km/Sq. of India. The region enjoys a strategic geographical location with an international border of 5,182 km. The North-East region is India’s gateway to south-east Asia. This unique geography can become a boon by the expansion of the Micro Small and Medium Enterprises in North-East India. The MSMEs contribution to GDP is almost 29.70% along with a major contribution to the employment generation in India. But the story of North-East Indian MSMEs remains untold. So what is the role of North-East India for MSME sector expansion?
Indian MSMEs have seen a drastic growth after the 1990s industrial revolution and globalization. But, the growth of MSMEs in North-East India has not been at par. As Mr Narayan Tatu Rana mentioned, the empowerment of the MSMEs in the Seven Sister States has the potential to shower wonders. Mr Narayan Tatu Rana also said that India can triumph only when the potential of North-East India for MSME’s sector expansion is tapped. And what is a better way to unleash growth other than development of small scale industries?
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MSMEs Role in the Indian Economy
Micro Small Medium Enterprise is said to be the backbone of the Indian Economy. By contributing to employment, exports, innovation, foreign investments, and growth of the Indian Financial System; MSME sector is the growth engine of the Indian economy. From the household handicraft enterprise to the Fintech lending SMEs, this sector is crucial to unleash India’s growth into a giant economy. The mission is to develop Indian MSMEs’ contribution to 50% of Indian GDP.
The National Sample Survey Office reveals that India has around 700 lakh unincorporated non-agricultural MSMEs engaged in different activities. Gazetted Statutory Bodies like Khadi and Village Industries Commission, Coir Bard, National Small Industrial Corporation Limited, etc., have been in exercise to educate, process, and inspire the youths, entrepreneurs so that they can flourish their career in the Indian MSMEs. Although around 90% of MSMEs are unregistered in India, still this sector has a growth rate of 11.5%. This is way higher than India’s GDP growth. These figures underscore the one-sided MSMEs contribution to the GDP of India.
Despite their comparatively less involvement, the small-scale industries in North-East India can offer opportunities to the local and foreign investors.
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The Northeast states have 200,000 Micro Small, Medium enterprises accounting for only less than 3% of India’s total MSMEs. As the inhabitants have a nature-preserving attitude towards their motherland, land degradation has become a major issue. The establishment of big industries and factories is not an option because of the geographical structure. But likewise, their role can be performed by the establishment of small scale industries in North-East India. Compared to the other states, MSMEs in Assam have shown relatively better growth. Better entrepreneurship assistance, having good rail connectivity at Guwahati & a higher literacy rate are responsible. The state has shown higher entrepreneurial activities, attracting investment at a large scale, benefiting the MSMEs in northeast India.
A holistic strategy for the MSME sector in Northeast India is imperative for the Indian economy to flourish. A long international boundary of 5,182 km directly provides a gateway to higher foreign investment from Southeast Asian nations. The neighboring countries can also become top export destinations for the northeastern MSMEs. Apart from rich demographics and international borders, the region has a rich resource reservoir to create a continuous raw material supply chain.
The North-East MSME Conclave was organized by the Union Minister Narayan Tatu Rane to encourage the development of MSMEs.
Challenges to MSMEs in North East India
The Shukla Commission in its report on ‘Transforming the North East’ (1997) identified the 4 fundamental deficits in Northeast India. The deficits are; basic need deficit, infrastructure deficit, resource deficit, and a two-way deficit of understanding with the rest of the nation. Certain drawbacks hampering the investment in this region are the low working capital formation and low per capita income. Moreover, inadequate infrastructural facilities, poor communication channels, and geographical isolation from the rest of the nation are also major hurdles. The state governments in North east are largely dependent on the Centre’s financial assistance. This directly reduces their capacity to create economic and employment infrastructure for MSMEs expansion. Even the existing small-scale industries in the northeast region regularly face the lack of financial support, inability to secure working capital, lack of resources, transportation barriers, and low level of investments.
The North Eastern Region of the Country is an industrially backward but its role for MSME sector expansion is magnificent. The backwardness is due to the poor transport connectivity, lack of access to raw material, poor markets and marketing support, and lack of infrastructure. But the government has mammoth plans to harness the potential of North-East India for MSME sector expansion. The Government is investing a huge sum of money to bring the North-East Indian economy into the mainstream. Despite all the deficits, the MSMEs in the northeast Indian state have huge potential especially in the Agro-based industry, Tea and Food Processing. Some other beneficial sectors are Crude oil and natural gas, Petrochemicals, IT/ITes, Forest and mineral-based industries, Handicrafts & textile, Tourism, and horticulture.
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Indian Government’s Approach for MSMEs in North East India
The Indian Government is intending to make the North East States a gateway for effective trade and economic relations. So, the Government has implemented policies like the Act East Policy of India to increase the economic engagement of northeast States with Asian neighboring nations.
- To fulfill India’s long-term vision, the Centre is providing skill up-gradation to the existing entrepreneurs and working force. The aim is to enhance their overall performance by skilling.
- The training is provided under schemes such as MSME-Technology Centers, Assistance to Training Institutions (ATI), Skill Up-gradation & Mahila Coir Yojana, and National SC/ST Hub.
- The Assam MSME (Facilitation of Establishment and Operation) Act, 2020 was enacted to provide a business-friendly environment for establishment of enterprises and startups. The act eliminates major stringent permission procedures for the establishment of MSMEs units.
- Out of the total budget of the Ministry of MSME for 2020-21, 10% of funds have been earmarked exclusively for the northeast region. The funds will be used to provide essential help to small scale industries and entrepreneurs.
- The Centre approved another policy named ‘Promotion of MSMEs in North Eastern Region and Sikkim.’ The policy envisages 90% financial assistance to the respective State Governments for setting up new Mini Technology centers.
An All-Round Approach to Leverage the Potential
By these policies, the government is emphasizing the development and promotion of MSMEs in Northeast India. Moreover, the Government’s initiatives have led to the ushering of small scale industries in the backward and hilly areas of these states. The small industrial units established range from food processing Industries, beekeeping, pottery, cane & bamboo, fibre, carpentry & blacksmith and khadi activities.
MSMEs Contribution to the GDP of the nation can achieve marvels by implementation of initiatives on the ground level in true spirit. An all-encompassing approach from the most basic to advanced levels is imperative to channel North East India into the mainstream MSME regime. We need to work upon financial strengthening, raw material availability, and skilling. Besides, there is also a need to channelize their business with the adjoining south Asian countries, attracting foreign investments and exporting our products.