By Saket Dalmia
Ease of doing business for MSMEs: Micro, Small and Medium Enterprises (MSMEs) are the economic and employment backbone of the developing economies. In India, apart from agriculture, a major part of employment generation is done in the MSME sector, which has been significantly contributing as a major partner to the socio-economic development process. Presently, the MSME sector consisting of 63 million units provides employment to over 113 million persons – the highest next to agriculture.
MSMEs are also important for fostering and strengthening the startup ecosystem. They are the catalyst for new ideas to breed. The startup entrepreneurs are being encouraged to become the drivers of economic growth that will have the potential to pull the marginalized people of India out of poverty. As we know, the entrepreneurial route is the most desirable route to create higher employment opportunities and hence all those persons who choose the enterprise path need all the support and encouragement from government, financial and other agencies.
In the backdrop of rising demand for job opportunities due to a large number of young persons entering the job market every year and diminishing job opportunities in government entities and public sector units, it is essential to invent and implement newer areas of job creation models and in this context, the role and potential of MSMEs particularly the micro enterprises assumes importance in terms of generating incremental job opportunities for securing social stability, eradicating poverty and curbing migration from rural to urban locations.
In order to create a large number of incremental job opportunities in the country, multiple strategies and policy measures need to be taken by the government. Since MSMEs have the largest potential for job creation, the under-mentioned support measures by the government will greatly help in over-turning the job situation and facilitating large-scale creation of incremental jobs:
Incubation and Mentorship Programmes
Establishing more incubation centres and mentorship programs can nurture entrepreneurial talent and guide MSMEs in their initial stages. These programs should offer mentoring, business development support, access to networks, and assistance in securing funding. Additionally, collaborations with successful entrepreneurs, industry associations, and academic institutions can create a robust ecosystem for new enterprise creation and MSME growth. For this purpose, an innovative model of an integrated support system should be established for the creation of new business enterprises. The model should hold the promise of achieving multi-faceted goals of sustainable economic development and generation of additional employment opportunities by way of promoting entrepreneurship and setting up of new business enterprises.
Linkage with the MUDRA Credit scheme for assured availability of finance
MUDRA has emerged as a game changer in the field of microfinance. All such trained persons at the Livelihood Incubation Centres should be automatically linked with the MUDRA financing scheme in order to help these incubates access loans for their businesses. It will in turn also strengthen the MUDRA scheme since trained entrepreneurs adequately prepared by the Incubation centres would prove to be more robust and sustainable in running their businesses and meeting repayment commitments. Further, the credit limit under the MUDRA loan should also be enhanced from the existing ceiling of Rs 10.0 lacs to Rs. 25.0 lacs due to the change in the definition of MSMEs.
Improving Startup India Ecosystem
Startup India program is a good initiative of the government, the primary objective of which is the promotion of startups for the generation of employment and wealth creation. The scope of tax incentives and other concessions given to startups under the Startup India scheme needs to be widened to include all startups and new business enterprises registered as MSMEs and all such new enterprises need to be given tax holidays and exemptions from filing returns for a period of first 3 years.
Also read: ‘The solution to rural prosperity is entrepreneurship at scale’
Venture Funding support to Startups
The Startup India program of the government has been very successful but it lacks integration with the funding agencies. Startups recognized by the government need seed funding support to establish and scale up to be able to raise financial resources on their own strength.
It is, therefore, desirable that seed funding support should be provided to all those startups which are recognized by the government. In addition, the Fund of Funds scheme of Rs 50,000/ crore launched by the government through NSIC should also provide venture funding to such startups on a priority basis as they have already been recognized for their growth potential by the government.
Rationalization and Simplification of Labour Laws
The government’s efforts to codification of 44 Central labour laws into 4 codes – pertaining to Wages, Industrial Relations, Social security and Welfare and Safety and Working conditions in order to simplify and ease in filing documents is a major step forward. It is desirable that adequate flexibility should be given to the Industry to devise the terms of employment of workers for example in the case of Employees’ State Insurance, the government could introduce optional ESI or Medical Insurance coverage. Simplification of Employees’ State Insurance, Provident Fund and other labour laws can be implemented for MSMEs. The condition of a certain number of employment from within the State should also be dispensed with.
With the above policy support and incentives, it is certain that we shall be able to create a large number of jobs in the country.
Saket Dalmia is the President of PHD Chamber of Commerce and Industry (PHDCCI). Views expressed are the author’s own.