Time to fix the missing link

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Time to fix the missing link

Tuesday, 19 March 2019 | Ranjeet Mehta

While we must acknowledge the MSME sector’s contribution to the economy, the challenges surrounding it are many and must not be ignored

The significance of 65 million Micro, Small and Medium Enterprises (MSMEs), who create about 120 million jobs and account for 30 per cent of the country’s economic output, cannot be underestimated as it forms the backbone of the country’s industrial landscape, contributing about 49 per cent to exports and 45 per cent to the manufacturing sector. It is also responsible for 30 per cent of the total employment generation in India. The implementation of the Goods and Services Tax (GST) in 2017 defined the economic discourse for the country. This transformational reform measure helped bring many MSMEs, which earlier belonged to the informal economy, into the formal sector. A remarkable 30-mark jump up in the World Bank’s Ease of Doing Business to rank 100 among 190 countries and a much-awaited sovereign credit rating upgrade by Moody’s Investors Service confirmed the reform credentials of the Government like nothing else.

Around 95 per cent of the total industrial products in the world are produced in small workshops run by less than 100 people. For instance, Japan is a developed country but has 84 per cent of small and medium scale industries, which supply all over the world. Why can’t Indian MSMEs supply their products globally? MSMEs in India still face huge challenges and one of them pertains to accessing the market. Most of the manufacturing units are located in rural and small towns and there is a huge market potential in all Indian cities and abroad.

One of the easiest and cost-effective methods of reaching out to international markets is internet. It’s almost unbelievable to know what happens in a minute on the internet. In just about a minute on the web, 46,200 photos are shared on Instagram, a total of $751,522 is spent online, 1.8 million snaps are created and there are 990,000 swipes on Tinder. Google performs 3.5 million searches each minute while 4.1 million videos are viewed on YouTube within the space of 60 seconds. In a social media universe where there are no barriers to entry and almost infinite amounts of competition. The content game has tilted to become a “winner take all” scenario. Since people don’t have the time to look at the 452,200 tweets sent every minute, they naturally settle to things that already have social proof.

The setting up of Government e-Marketplace (GeM) by the Government of India, which facilitates procurement in minimum time at a lower cost with better quality, is one of the most prominent steps to provide market access to MSMEs. It will boost this sector as all central public sector enterprises will have to take membership of GeM to facilitate online procurement of common use goods and services by various Government departments and organisations. By facilitating business between the Government, industry and entrepreneurs online, GeM helps in improving the quality and efficiency of the products and services on offer, particularly the ones sourced from the MSME sector. MSMEs can bid for market tenders free of cost through the e-Procurement portal. This would allow MSMEs to actively participate in various Government Procurement programmes. This would also enable Public Sector Enterprises (PSUs) achieve the mandatory 25 per cent procurement from MSMEs as stipulated in the procurement policy and further contribute to the growth of MSMEs. Further, it will bring new competitive dynamics and competitiveness in the economic system.

Everyone will agree that the MSME sector has been instrumental in the growth of the nation, leveraging exports, creating huge employment opportunities for the unskilled, fresh graduates and underemployed and extending opportunities to banks to give more credit to enterprises in this sector. Internet can be one of the tools that these small businesses can easily adopt to capitalise on Digital India and leverage the internet to market themselves and build an identity; and lead the digital transformation for India. Digital should be able to democratise globalisation — MSMEs with vision should now reach customers all over the world. The online space can open up a whole new avenue of doing business which was just not available earlier. This in turn will lead to a growth of entrepreneurs as well as giving MSMEs an importance in our economy — something that simply is the need of hour.

MSMEs still lack awareness, they need to be completely aware of the various initiatives by the Government and correctly utilise them to their advantage. The key constraining factor needs to be understood by key policy-makers at the State level. Further, Government schemes must be monitored and effectively modified to suit the needs of the MSME industry. Limited outreach of policies and programmes across areas of operations of MSME needs to be addressed by engaging the district administration all over the country and create linkages among stakeholders as well as between firms and end-users.

(The writer is Principal Director, PHD Chamber of Commerce and Industry, New Delhi)

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