Micro, small and medium enterprises (MSMEs) constitute over 90% of the total enterprises in most economies. They are credited with generating the highest rates of employment growth and they also account for a major share of industrial production and exports. In India too, MSMEs play a pivotal role in the overall industrial economy of the country. With agility and dynamism, they have shown admirable innovation and adaptability to survive the recent economic downturn and recession.

The process of liberalisation and market reforms since 1991 has brought about intense competition for them both in the domestic and overseas markets. This has made it imperative for them to overcome the challenges that they face and improve and sustain competitiveness through lower cost, improved quality, making available wider choices by initiating various measures including innovation and upgradation of technology. We can identify four thrust areas for further increasing competitiveness of Indian MSMEs, viz, government policies, technology, skills development and finance.

The Indian government has realised the crucial role played by MSMEs in economic and social development. It is committed to their growth and development and enhancement of their competitiveness so that these enterprises contribute to accelerate the expansion of productive employment in the country. The government is formulating policies and designing/implementing support measures in disbursal of credit, technological upgradation, marketing, entrepreneurship development, etc, and undertaking effective advocacy for these purposes. Some of the initiatives taken by the government include:

*Enactment of the Micro, Small and Medium Enterprises Development Act, 2006, which aims to facilitate the promotion and development and enhance their competitiveness.

*Creation of the Udyami Helpline, the call centre of the ministry of MSME, to satisfy the long-felt need for a single-point facility for MSMEs for a wide spectrum of information and access to banks and other MSME-related organisations.

*Signing of long-term agreements with several countries ? Tunisia , Rwanda, Mexico, Uzbekistan, Lesotho, Sri Lanka, Algeria, Sudan, Cote d?lvoire and Egypt ? to open doors for new opportunities for the Indian MSME sector by way of new markets, joint ventures, sharing of best practices and technology collaborations, etc.

*Announcing a comprehensive package for promotion of micro and small enterprises, comprising several proposals for providing requisite support to MSMEs in areas relating to credit, cluster-based development, infrastructure, technology and marketing. The package also provides a thrust on capacity building of MSME associations and support to women entrepreneurs.

*Launching of the National Manufacturing Competitiveness Programme (NMCP), which is the nodal programme to develop global competitiveness among Indian MSMEs.

*Setting up of a task force to reflect on the concerns and issues and formulate an agenda for action. The task force classified the common issues into six major thematic areas? credit, marketing, labour, rehabilitation and exit policy, infrastructure, technology and skill development, and taxation. It then constituted separate sub-groups for detailed examination of each. Recommendations of the task force are presently in the process of being implemented.

MSMEs also need to leverage information and communications technology (ICT) not only to facilitate communication but also to gain a competitive edge and improve efficiencies. However, surveys and studies conducted by PricewaterhouseCoopers show huge gaps in ICT deployment for Indian MSMEs. The challenges faced in ICT adoption by MSMEs include suitability of IT applications, price affordability and skill sets and training issues. These challenges have spurred IT firms to think out of the box to create products and services that are more relevant, affordable and address the real-life challenges of the MSMEs. Companies like Google, Amazon, and Salesforce.com have come up with cloud computing solutions to deal with data storage, scalability and computation issues for MSMEs that look for more affordable IT solutions. Similarly, Indian MNCs have come up with new integrated offerings of hardware, network and consulting for MSMEs.

Availability of the appropriate skills set is also imperative for the growth of Indian MSMEs. MSMEs continue to face a deficit in manpower with skills set required for manufacturing, marketing, servicing, technology, etc. Skill shortage is also the most important external barrier to innovation for them. Measures like the Skills Development Initiative are being taken by the government to support skills training and upgrade for MSMEs. Companies such as Microsoft are also providing appropriate tools, training and technology to amplify high-end skills for them and increasing their competitiveness .

Last, but not the least, the importance of appropriate financing for ensuring sustainable growth of MSMEs cannot be overemphasised. Steps need be taken to allow banks to achieve the priority sector lending targets with very low levels of risk. One way for MSMEs to signal their credit worthiness is also to acquire a credit rating from an independent credit ratings agency.

While initiatives of the kind mentioned above are necessary, it is also important for MSMEs to be made aware of the facilities/concessions/incentives available to them. It is also important to give wide publicity to stories of successful companies and the challenges overcome by them so that budding entrepreneurs can be both motivated to give their best and also be aware of the obstacles ahead.

The writer is executive director, PricewaterhouseCoopers India. (With inputs from Krishnakumar Sankaranarayanan and Manisha Sachdev, PwC India.)