Indian MSMEs through innovative entrepreneurship has changed the economic structure of our country. The importance of MSME in the Indian Economy had surpassed all previous records. The MSME sector generates the highest employment in India after the agricultural sector by employing over 11 crore Indians in its 6.3 crore enterprises. It is the vision of the country’s supreme leader to increase the MSMEs’ contribution to 50% of India’s GDP. No one can deny the importance of MSME in the national goal of growth with equity and inclusion. But, despite witnessing immense growth in recent years, the sector still lags in key segments. Thus, a holistic approach on how to boost MSMEs growth and address the issues is the need of the hour.
Healthy growth of the MSME sector will also be accompanied by the enhancement of their contribution to Indian GDP, manufacturing output, exports, increasing foreign investment inflow, and employment generation in India. The government has also welcomed the up-gradation of already set up enterprises to another higher level. The Sure-sort framework that deals with the growth of MSME in India rest on these five pillars.
- Credit Availability
- Skill Development
- Technology
- Innovation
- Infrastructure
All these reasons are major hindrances to why Indian MSMEs are lagging despite their potential to achieve sky-high success.
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Credit Availability
Credit is the basic requirement for any entrepreneur to establish his unit as a micro-medium enterprise. The Indian government has implemented various credit lending facilities for small and medium enterprises. Yet, around 80% of the total 63.4 million MSMEs in India lack access to formal credit lending channels. As per the Association of Chartered Certified Accountants (ACCA), the credit from the Non-Banking Financial Corporation (NBFC) significantly contributed to the growth of the MSME sector in India during the past few years. But as of now, it has dropped by a gigantic 30%. Moreover, the outbreak of the COVID-19 pandemic has further disturbed the financial stability all over the world, including Indian MSMEs.
MSMEs need funds to create working capital, grow their business, expand operations, and create employment. Access to credit remains the top challenge for an enterprise in scaling their business. Prevailing high-interest rates and collateral requirements are the factors hampering the credit flow to MSMEs. The PHDCCI’s Chairman said that the upcoming budget for the financial year 2022-23 must focus on enhancing credit availability. This is possible by ensuring hassle-free credit channels to the MSMEs sector and reducing costs of doing business. With an improvement in credit availability, the MSME sector will flourish like never before.
Skill Development
There is an entrepreneur in every nook and corner of India with exceptional business ideas but zero technical know-how. This lack of entrepreneurial knowledge has been a major constraint in the growth of Indian MSMEs in scaling and branding. The study of Entrepreneurship Development has been initiated in the curriculum of Universities and at a basic level in Schools. The inclusion of entrepreneurship as a subject helps to inculcate skills and aids in the capacity development from childhood. Further, skilled entrepreneurs with the required expertise will know how to set up, manage, and organize a business. If this initiative continues successfully, India can expect more entrepreneurs and start-ups in the coming years.
The MSME Minister initiated the Entrepreneurship and Skill Development Programme (ESDP) to educate about entrepreneurial knowledge, awareness about the scope of the MSME sector, provide skills, and endure motivation among the youths of the nation. The objective behind this scheme is to motivate & encourage every sector of India including SC, ST, Women, and Physical Handicapped to consider entrepreneurship as one of their career options. Enterprise Facilitation Centers (EFC) have also been established to provide professional business development advice to MSMEs. EFCs serve both upcoming as well as established MSME units to build better skills for more profit generation.
Technology
Technology is a well-known boon for the growth of small-scale industries due to its ability to revolutionize the sector and cut down operational costs. IT, for example, has created a significant impact on our lives, and the evolution of fin-tech has changed the ways of doing business inducing the growth of SMEs in India. The intensity and scale of technology usage can be the magic ingredient behind the reforming of the structure of Indian enterprises. Technology continues to play a crucial role in determining the growth of small-scale industries in India by reducing the cost and expanding the market reach.
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All over the world, businesses have adopted technologies such as Big Data, Artificial Intelligence, Internet-based business, Internet of Things, Machine Learning, and data-enabled systems. Technology adoption is a fail-safe option to make the Indian MSME sector more efficient and competitive. However, the MSMEs growth in India is still pale as compared to the developed nations due to the lack of understanding and hesitant attitude towards technology. As a result, the Indian MSMEs are still lingering on the traditional business methods instead of incorporating tech systems into the mainstream. For that reason, all these issues can be resolved by organizing technology awareness campaigns amongst entrepreneurs.
Collaboration between technology professionals and MSMEs can be an excellent way to create an environment to transform the traditional conventional business methods by Intelligence technologies. The Ministry of MSME has been actively working to mitigate such trivial issues and to facilitate MSMEs to understand the features of technology and its adoption in their business sector. The Ministry had also launched a robust Information and Communications Technology (ICT) based portal known as ‘Champion’. The “Creation and Harmonious Application of Modern Processes for Increasing the Output and National Strength” called “Champion,” is envisioned to help, guide, ease and expand the scope of the MSMEs sector in India. This will allow them to stand along with the worldwide Enterprises and achieve wonderful heights.
Innovation
The world is changing at a high speed with the new advancements in technology. To compete with foreign companies and start-ups, we require innovation at every step to keep our standards and quality of business at a pace.
Innovation is a way to enhance technology and its usage, moreover, it also plays an important role in making MSMEs adaptive to the use of technology to compete globally. For example, Business Incubators (BI) play an important role in supporting and promoting individual innovators and helping them to become tech-based entrepreneurs. BIs are helpful to shape innovative ideas in the development of technology in the business sectors. Proper infrastructure is needed to develop innovative ideas for the up-gradation of technology for the business sector in India.
The MSME Ministry had launched numerous schemes with the objective to support individual innovations building towards the adoption of technology among the MSMEs in India. The Ministry has developed 18 Technological Centers (TC) all over India also called MSME Tool Rooms. These Tool Rooms are widely established at Aurangabad, Ahmedabad, Bhubaneswar, Guwahati, Hyderabad, Indore, Jamshedpur, Kolkata, Jalandhar, and Ludhiana. These technological centers provide access to advanced technologies, technical advice, and technical education to the youths of the country.
Some other schemes for the advancement in the innovations and upgrading of technologies are:
- The Incubation Scheme
- Technology Up-gradation & Quality Certification
- Science and Technology Scheme for Coir, etc.
Moreover, NITI Aayog is aggressively working through the implementation of the Atal Innovation Mission and the creation of Incubation Centres. A two-way technology transfer along with an enthusiastic MSME base is what India needs to create an innovative mindset among entrepreneurs.
Infrastructure
The MSMEs sector is considered an engine in the growth of the Indian Economy. For the growth of the MSMEs sector, the required development and changes are prima facie embedded in the infrastructure. Despite unlimited interventions, Indian MSMEs still grapple with a lack of skilled manpower, high competition, lack of infrastructure, and lack of opportunities. To envisage the quadrupling of MSME growth in India, the Ministry of MSMEs adopted a cluster development approach.
A cluster is basically a group of enterprises located in a contiguous area producing similar products or services. The objective behind the cluster approach is:
- To create & upgrade infrastructure facilities in the cluster of MSMEs (new unit or old units, both).
- To establish common facility centers for the Cluster.
- Building capacity among the groups of MSMEs through self-help groups, consortia, etc.
- To address common issues like technology, lack of skills, access to capital, market access, etc.
The Infrastructure Development Centre set up through the cluster approach can mitigate the infrastructural issues to a large extent. Further, IDCs can also improve facilities such as power distribution, raw material, transport, banks, common service facilities, drainage & pollution control facilities, telecommunication, etc.
Our goal for the growth of Indian MSMEs will be fulfilled by an all-encompassing strategy covering these five pillars. The MSME Ministry is encouraging innovations for technological advancement to stimulate the growth of SMEs in India. The Government should also focus on organizing awareness campaigns regarding the protection of inventions under Intellectual Property Rights (IPR).
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Written by,
Prasad P. Patkar