Creating a bankable future for MSMEs

Nov 09 2012, 01:52 IST
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SummaryInstitutional reforms and innovations would enhance credit delivery.

there remains a lot still to be done. On the technology front, government and industry need to invest more in R&D. The government needs to enhance its support to the MSME sector for development, innovation and adaption of technology, without which these units stand no chance of survival on a global platform. Although India has the advantage of a large pool of human resources, the industry continues to face deficiencies in manpower, especially in the skill-set for areas like manufacturing, service, marketing, etc.

So skill development is a key area that needs to be addressed, both by government and industry, in order to ensure a steady supply of human resources with skill-sets for the MSME sector. Establishing ITIs, private skill training institutes and industry-academia tie-ups are the need of the hour.

India continues to be a growing market for cheap exports, which has a direct impact on the MSMEs and their survival. The world over, governments provide supportive measures to their MSME sector through targetted benefits and facilities. In line with this international practice, a wider public procurement policy for MSMEs is essential to ensure a stable market for the MSMEs.

Currently, institutional entitlements like fiscal incentives, power connection, purchase preference, technology support etc are available only to the registered units, which constitute a mere 6% of the total MSMEs. Policy and institutional reforms are needed that would allow unregistered industrial units in the MSME sector to join the mainstream and enjoy all the entitlements.

The government should also undertake measures to implement all recommendations of the Prime Ministers Task Force that include supporting the district industries centres, ensuring enhanced raw material supply and facilitating product marketing support, thereby, giving the sector a stronger platform to operate from, which would eventually reduce their inherent risks and make them more competitive.

PPP and policy support

To address the issues of infrastructure, technology and skilled manpower, a tool that definitely should be considered is public-private partnership. PPPs are arrangements between government and private sector entities for providing public services and related infrastructure. PPPs are characterised by the sharing of investment, risk, responsibility and reward between the partners.

The idea is to induce the investment and enhanced capabilities of each participant to strengthen the delivery and reach of the service already being extended by the government. Even industry chambers need to join hands with the government in a joint effort to build and provide the needed support to the MSME

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