Time MSMEs start to reinvent themselves and make strides

The absence of a unified voice hampers the formulation of comprehensive policies that cater to the diverse needs and challenges faced by MSMEs across different sectors

While the challenges faced by Indian MSMEs, mainly credit, technology, marketing and innovation have been addressed and mitigated to a considerable extent, there is one challenge which is not only substantial and pervasive, but also perhaps the most formidable that remains unmet. It is a challenge that comes from within and whose remedy lies entirely with the MSME community.

This pertains to the lack of a coherent and coordinated clear voice about their issues, their problems, their perspective and solutions thereof. It is one challenge that the MSMEs must meet and conquer on their own, and that too sooner than later.

The larger and better organised industry and commerce had realised it much earlier, essentially because an organised industry was a legacy of industrialisation in the west, and the models for developing mechanisms of collective bargaining were there to adopt and follow. We therefore saw the emergence of bodies like ASSOCHAM, FICCI and much later CII. Today they represent the power of one symbolizing a collective bargaining and the ability to wrangle out the best deal from politicians, bureaucrats and the media for the businesses they represent. Sadly there are no such counterparts for MSMEs.

The fragmentation and lack of unity among Indian Medium, Small, and Micro Enterprises (MSMEs) in raising their collective voice, therefore, is a significant and urgent structural challenge.

The challenge: There are several aspects of this challenge. They arise partly because of the excessively diversified nature of its constituents, partly on account of the lack of professionalism among the leadership and partly because of a diffidence and indifference to the importance of presenting a collective face.

However, the major factors that drive the current situation comprise the following:

Fragmentation: MSMEs in India are fragmented across various industries, leading to a lack of a unified voice. Each industry segment often has its own association, making it difficult for the government to engage with a single body that can represent the entire MSME sector.

Lack of coordination: Due to this fragmentation, there is no coordination among MSMEs in addressing common issues and advocating policy changes. This results in missed opportunities.

Policy inefficiencies: The absence of a unified voice hampers the formulation of comprehensive policies that cater to the diverse needs and challenges faced by MSMEs across different sectors.

Culture of self-preservation: Hundreds of these bodies exist much against any logic and means of sustenance because they offer an opportunity of self-preservation and self-perpetuation to a handful of their office bearers, whose sole objective is to continue earning a living at industry cost.

Addressing the challenges: Meeting them effectively requires a multi-pronged strategy and more importantly it will need a mindset transformation among those who matter.

Some ways in which a beginning could be made include:

Umbrella organizations: Encourage the formation of umbrella organizations that bring together MSMEs from various industries under one platform. These umbrella bodies can coordinate efforts, consolidate feedback, and represent a unified voice to the government and other stakeholders.

Industry clusters: Promote the creation of industry clusters where MSMEs from related sectors can collaborate, share resources, and collectively address common challenges.

Clusters foster networking, knowledge sharing, and the pooling of expertise, leading to stronger advocacy efforts.

Capacity building: Invest in capacity-building programs for MSME associations and leaders to enhance their advocacy skills, policy understanding, and strategic planning. Empower MSMEs with the knowledge and tools needed to articulate their concerns effectively and engage constructively with policymakers.

Technology adoption: Leverage technology platforms and digital tools to connect MSMEs across different regions and sectors, facilitating communication, collaboration, and information exchange. Online platforms can serve as virtual forums for discussions, sharing best practices, and mobilizing support for collective action. Policy dialogue mechanisms: Establish structured policy dialogue mechanisms where government representatives, MSME associations, industry experts, and other stakeholders can engage in regular consultations. These forums should prioritize inclusivity, transparency, and participatory decision-making to ensure that policies reflect the diverse needs and perspectives of MSMEs.

There is also a need to conduct awareness campaigns to highlight the importance of unity and collective action among MSMEs.

Emphasize the benefits of speaking with a unified voice, such as increased bargaining power, better policy outcomes, and enhanced competitiveness in the global market.

Incentives for collaboration: Introduce incentives such as grants, subsidies, and recognition for MSME associations that demonstrate effective collaboration, advocacy, and impact. Encourage partnerships between government agencies, industry bodies, academic institutions, and civil society organisations to support MSMEs in addressing systemic challenges.

Onus on government: Of course, the government will prefer an apex organisation or just a few of them to deal with. At the time of policy formulation, budget consultations, paradigm transformations in legislation, the government finds it very difficult and impractical to deal with hundreds of organisations, who often in not only different voices but also demand contradictory measures. A meaningful consultation therefore becomes impossible to conduct. Moreover, the loser will eventually be the MSMEs.

A radical proposal shall involve mandating an Apex federation of hundreds of organisations by bringing about a law that mandates such a body. It may appear undemocratic and an avoidable imposition, but the advantages are numerous and instant. Even if by force, MSMEs as a collective will find a credible and powerful voice. The inter-industry contradictions and opposing interests may get reconciled. The horde of office bearers of these hundreds of bodies shall lose the pretext to continue such bodies as the opportunity for self-preservation and self-perpetuation will disappear overnight. And government as several other regulatory bodies like RBI will find it far more convenient and effective to discover a more holistic and credible perspective.

The next viable step: To conclude, Addressing the fragmentation and lack of unity among Indian MSMEs requires a multi-faceted approach that combines organizational initiatives, capacity building, technology integration, policy dialogue, and stakeholder collaboration. By fostering greater cohesion and coordination within the MSME sector, India can unlock the full potential of these enterprises as engines of economic growth, innovation, and job creation.

(The writer is a former I&B secretary of Govt of India)