The large small sector

Written by Anil T George | Updated: Mar 31 2011, 08:16am hrs
Micro and small enterprises (MSE) is a misunderstood category, ill referred to mean something of BPL (below poverty line) grade. But MSEs' economic contribution easily rivals the Corporates'. Hence the terminology may be upgraded to give it a positive ring. A systemic injustice is that the corporate sector hoards the cream of the country's business talent and hogs all the government-media attention. A corollary is that most productive resources of the country go into making and marketing light products like soaps and sanitary napkins (with much sophistication, of course), while large corporates should ideally concentrate on heavy industries. It is the light or heavy line of production/activity that should decide the classification of an industry, not the level of investment in plant & machinery.

Another problem is that, though officially classified as micro and small, the enterprises are unofficially exposed to the large in the market. The reservation of certain items for small manufacturers has been practically done away with to toe the lines of WTO and liberalisation. But a free and open economy doesnt necessarily mean an uncontrolled and non-monitored one. The government can still visualise and guide the private sector to its desired point of goal, compatible with state planning and projections.

Indian Model

There is no point in wholly importing foreign models. India should have its own growth model, typical and unique to its nature. Agriculture and livestock farming must become priority areas of production planning. The recent food shortage and famine-like situations across the country must have driven this point home. It would be more prudent to direct the resources to agro-industrial sector than to write off farm debt of R40,000 crore. Agri-industries are eco-friendly, efficient in power-water-land use, low in investment outlay but high on generating un/skilled employment, compatible to both urban and rural areas, naturally Gandhian, complementary to women entrepreneurship, and highly supportive to the large-scale sectors.

Marketing Support

Where the MSEs miserably fail is in marketing--branding, packaging and pricing. Small entrepreneurs take upon themselves varied functions like production, management and marketing, including exports and retail marketing. The state should take the marketing responsibilities (not in tokenism as is done now, but in a very large scale), leaving the small units with production responsibilities alone. Just like the milkman who sells to Amul is left to mind his herds, an entrepreneur should be free to focus on his area of strength. That involves using the government agencies and public distribution system and engaging large players in both domestic and international markets.

Rating for Banks

The funding mechanism for MSEs is poor and outdated. Credit terms and criteria fixed by bankers are more or less unworkable and impractical for any industrial operation. The CGTMSE (credit guarantee) scheme is supposed to provide collateral-free loans up to R1 crore to viable units/business plans. But no member bank is found promoting this scheme, when approached. The eligibility criteria fixed for availing of this innovative funding project are not clear and well defined, leaving loopholes for the banker to deny facilities to an applicant. A solution is to have a rating mechanism for banks based on their lending practices.

Babu to Sideline

Bureaucratic impotency is another, yet most important factor that dishearten and demoralise the small entrepreneur. How can a civil servant, arrived on the seat through a public competitive examination, ever run or understand an industry He may be an intellectual and an academician but never an entrepreneur with field experience and practical knowledge of the concerned segment.

Let the government set up an agency under reputed businessmen to mentor and handhold fresh entrepreneurs. Civil servants can monitor it, but let businessmen decide what they want.

The author is an international marketer and consultant