Ease of Doing Business for MSMEs: An entrepreneur is not a burden on the society, on the contrary, he/she helps in taking care of the society by employing people, bringing in positive economic changes etc.
- By Manguirish Pai Raikar
Ease of Doing Business for MSMEs: Much has been said about the MSME and its fight against the large companies for its survival. Recently, I came across a survey which highlighted the most common problems faced by this sector. Top of the table was marketing followed by getting and retaining skilled workers, need-based working capital and so on. The fierce competition among manufacturers eyeing the same market with an almost similar product either in the open market or as an original equipment manufacturer leads to price cutting. Disposal of the goods weigh high on his priority list and decision is taken to at least recover the cost.
Impact on Financial Discipline
Poor sales results into slowing down of manufacturing, affecting less utilisation of the assets that in turn yields a meagre return on investment. This cycle leads to either a low or negative bottom line. Another factor that also contributes to the technocrats worry is slow or delayed realisation of his money from the market. The financial discipline goes for a toss and managing the working capital becomes a big issue. Non-availability of funds leads them towards banks, financial institutions and in the worst-case scenario to the loan sharks who charge high rates of interest.
The manufacturer has to pay his workers, government taxes, utility bills and above all the haunting suppliers. This non-receipt of payment in time has become a big problem and even the facilitation council set up by the government which was seen as relief is not rendering the desired results. Vendors are asked if they want to have continuous business relation, they should not go to the facilitation council. If he/she fails to toe the line of the principle then he would neither get the business nor the payment. Some flimsy queries are raised to prove that the supply was not in order which results in litigation.
Competing with Large Firms
MSMEs are a platform for the new recruits to get training and be market-ready. Attrition of workers is a big problem for the MSME sector. Getting a good skilled worker is almost impossible. Retaining the new recruit after training him is an equally herculean task. A lot of efforts, time, and money is being spent by the MSME in training the workers. This sector across the country is the biggest training academy generating skilled manpower. Even though the workers are paid market rate wages which are much above those specified by the government, they leave and join the big industries sometimes even at a lower wage. This is another factor which sometimes results in a slowdown of the manufacturing process in small enterprises.
Government has laid strong emphasis to support the MSME. Accepting the fact that this sector is the largest employer and also the driver of economic growth, the simplification process has been initiated. But still, there is a wide gap between the policy and the implementation. Change of attitude towards the small and marginal entrepreneur is the need of the day. An entrepreneur is not a burden on the society, on the contrary, he/she helps in taking care of the society by employing people, bringing in positive economic changes, supporting social causes besides contributing to the government treasury. It is time to see the change coming in rapidly if we want the growth to achieve the target.
(Manguirish Pai Raikar is the Chairman – MSME at Assocham National Council. Views expressed are the author’s own.)