Apart from marketing, MSMEs need to focus on financial management

India's micro, small and medium enterprises (MSME) have been marred with unprecedented events for 18 months, with many businesses facing financial and operational constraints. Central government's recent announcement with Factoring Regulation Bill and One District One Product (ODOP) has once again shifted the spotlight on the MSME sector. Bizz Buzz spoke with Ravi Nandan Sinha, Director of Development, MSME Business Forum India, to understand the potential of recently announced schemes and the recovery period for small business in India

Since the demand to clear dues of MSME stands still, which existing options do you think can be used to address to the capital needs of small businesses?

We need to look at this from two perspectives; Government's and MSMEs. For capital needs government has formed Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE), and there are various other schemes, stand-up India, start-up India, schemes from SIDBI. For once, let's give benefit of doubt to our policy makers and ask our MSME have we done our homework in studying these MSME schemes?

If you (MSME) do not have clear credit history, then how will the lender offer you any funds? You can't blame the institution for doing everything for you. It is the depositors' money that is being lent, you have to fit into a checklist.

Other than marketing MSMEs need to focus on financial management. MSMEs have to come with their concrete cash flow plans, management system, their business needs to be understood well. MSME business needs to make consortium (NSIC Consortia and Tender Marketing Scheme).

To lower the crushing debt in the MSME, government is actively engaging NBFCs to ease the burden. What would be the long-term implications of the same?

Earlier this month, Finance Minister Nirmala Sitharaman had spoken on the approval of Factoring Regulation Bill. When an MSME submits his bill, the money is paid after 60 to 90 days. This means that business won't have money for those 60-90 days period. Now, the government says the invoice, that an NBFC can discount and give the money in advance.

NBFCs can improve cashflows. Government should push forward these PSUs to mandatorily register (for NBFCs). The acceptance of NBFCs as a credit option will grow in a couple of years from now.

Finance Minister has asked states to set-up MSME Chambers in every district. What kind of state participation one may expect (apart from awareness programs)?

If we see State like Uttar Pradesh, they have started an MSME grievance cell. A State can display crucial role if they listen to the grievance of the MSME. Secretary from Ministry (MSME) has been writing letter to all the PSUs saying that don't hold the payments of MSMEs. Now the States should also put the same pressure.

Earlier it was the centre which used to govern things. Now the focus on MSMEs have been decentralised, which means state need to play an important role. After so many years, government has started with initiative called One District One Product (ODOP). If a district is good at a particular product, they can become export hub.

In your opinion, can One District One Product (ODOP) scheme invite some sort of disruption?

No, I don't think so. We need to understand and tap into the potential of a district. This is the time to talk about that one product which is the biggest potential of that district or region. Every district has its own strength which needs to be talked about. Through ODOP, India's export will rise. We will put our footprints on the global market with this scheme.

What role can government play in reviving exports within the MSME segment? Or is it a global call for our products that would increase in exports?

India has taken advantage of these situations where exports of quality products are in demand. We have to give full marks to the policy makers in setting up some great export-oriented policies. We have already said that certain items categorically won't be imported in order to give a chance to the Indian segments to produce that. Export is booming not just because of the quality of the product but also because of policies.

What would be the impact on manufacturing segment now that festivities and local demands are rising from other states?

Given the acceleration of the vaccination drive, the demand for local products will increase. Festivities period start from August mid and go on till next year March-April. This will make MSMEs come back on the road. The factories that had shut will resume productions, the markets will open slowly and steadily.

According to World Economic Forum, it will take five years, for the MSME in developing countries, to cover-up the losses they have faced due to subsequent lockdowns and restrictions owing to the pandemic. But we could be recovering at a faster pace reason being, Indians by nature have a saving habit. And these savings are usually circulated in the market when people spend on festivities shopping. But let's not forget that we are still under economic slow-down.

What is the level of dependency of local business on e-commerce giants such as Amazon and Flipkart for online business and sale?

MSME have not 100 per cent mitigated towards e-commerce, but e-commerce is the future. Pandemic has shown (MSME) the footfalls in lot of market place. We have to adapt. People have not adapted. Platforms like Amazon are more clients oriented than supplier focused. Giants such as Amazon and Flipkart have given the businesses an idea of e-commerce.

MSME is facing the challenge of lack of awareness on policies and schemes, financial and risk management. Do skill development courses in India need an upgradation?

The time has come where, instead of talking only about skill development, you have to talk about intervention of experts to hand-hold towards transformation. It is time we have to get experts to hand-hold MSMEs, to mentor and transform this sector. This is missing.

Will provisions such as self-assessment and documentation be a beneficial factor for small business, since govt agencies have limited staff to oversee assessment?

It is a very positive step towards ease of doing business. An entrepreneur will not have to stop his work and go to government institution to take signatures. This is a very welcoming step in terms of ease of doing business.

Most of the exhibitions, seminars have switched to online mode. What disadvantage does this bring to small business owners who cannot participate at these online exhibitions?

There is still caution towards pandemic and the unpredictable environment, MSME is still not ready to accept that the world is shifting to the virtual, digital mode.

Should interest rates be altogether waived off or reduced for micro level businesses?

It is not feasible. I don't think it is possible. But there should be some relaxation on GST on certain businesses. Lot of products which are still being dabbed at 18 per cent should be reduced to 12 per cent.