Making MSMEs resilient; Challenges and opportunities

June 27 marks the MSME (Micro, Small and Medium Enterprises) Day. It is a critical sectoras it is contributing immensely to realising the 2030 Agenda and Sustainable Development Goals (SDGs) by creating employment opportunities and income to the people in a huge way. Even during Covid-19, the sector played a key role in taking care of the needs of many sections, particularly the lower middle and middle class people.Their presence is there in our daily life starting from food that we eat, to clothes that we wear and motor cycles and cars, that we drive, which all are enabled by the MSME sector. About 63 million MSMEs that we have today in India and their contribution in our day to day life is so remarkable that we should strengthen the industry by providing necessary help to address their challenges. If at all India has to become a developed nation by 2047, it is the MSME sector that will be pivotal in boosting GDP and employment generation, among others. Therefore, addressing the challenges faced by the sector is of critical significance now.

Moreover, the Union Government has been encouraging the sector with its ‘Make in India’initiative, promotion of Ease of Doing Business, Stand up India and increased availability of credit through banks. Added to it, the Ministry of MSMEs is trying to ensure unhindered credit flow from financial institutions, technology support for development and modernization, access to export markets, infrastructure facility, training and capacity building facility and welfare of the workforce through several initiatives.

Contribution of

MSMEs to GDP:

As per the Ministry of MSMEs data (August 2021), the share of MSME Gross Value Added in all-India GDP at current prices for the year 2019-20 was 30 per cent. The share of MSME manufacturing in all-India manufacturing gross value output during 2019-20 was substantial and registered 36.9 per cent. Further, the share of export of MSME products in all-India exports during 2020-21 was 49.5 per cent which amounts tohalf of the exports.

As per 73rd Round of NSS report on Unincorporated Non-Agricultural Enterprises, employment created during July 2015-June 2016 was 11.10 crore. Further, the Prime Minister’s Employment Generation Programme (PMEGP) reported that the employment generation (number of persons) in micro enterprises during the year 2020-21 was 5.95 lakh. All these statistics showcase the significant employment generation potential of MSME sector to the Indian economy and reveal that the small businesses have an outsized impact on our lives.

The challenges:

However, for all their tremendous positives, the industry players are not free from challenges, which are structural and need to be addressed by the Central and State governments. A major challenge isin raising finances. Realising this lacuna, the Centre is trying to lend a helping hand through MUDRA in the name of Pradhan Mantri Mudra Yojana (PMMY), among several other such schemes. Under PMMY, loans are given up to Rs.10 lakh to the non-corporate and non-farming small and micro enterprises. The loans are provided to income generating small and micro enterprises engaged in trading up to Rs.50000, manufacturing up to Rs. five lakh and services sector up to Rs.10 lakh. Improving the supply chain and logistics is another area that needs attention to promote the sector in the wake of tough global market environment and the current geopolitical crisis. In addition, skilling and reskilling given the lack of technical workforce and more importantly the need for quick digital and technology adoption is paramount.

Further, there is a growing need for brand building and marketing of products manufactured in MSME sector in order to create trust and enhance awareness about their products and services from domestic to international markets.

Another area that requires attention is diversity in MSME sector that need to be promoted further by undertaking inclusive and women-led economic development. Finally, digital transformation of manufacturing and production related industries and value creation processes is an immediate task that should be addressed.

The way forward:

As a way forward, the sector should adopt digitalization and advanced technologies which can help small businesses become resilient. As a result, implications like having flexibility to adapt to disruptions and continue their operations are facilitated by digital technologies that can serve as a tool for businesses in building their resilient capacity and ensuring enhanced access to business tools. Professor Ann Masten from theUniversity of Minnesota defined ‘resilience’as something that connotes “the capacity of a dynamic system to adapt successfully to challenges that threaten the function, survival or future development of the system”. Therefore, the focus of the government is on digitalization and advanced technologies which can enable the MSME sector to withstand to continue their operations during adverse conditions. It is important to mention that larger the support to MSME sector higher will be the output from it. This can contribute towards Aatmanirbhar Bharat and MSMEs will be ready for India@100.

(Dr T. Prabhakar Reddy is advisor, SDS and

Development economist)