Schemes for MSMEs are welcome, but these 3 reforms are essential to push small businesses ahead

Published: March 2, 2020 12:01 PM

Skilling, Labour, Talent for MSMEs: The Indian economy has envisioned to become worth $5 trillion by 2024. The Ministry of MSME has taken upon self to contribute around $2 trillion of it from the MSME sector.

MSME schemes, small business loans, talent for MSMEs, pmegp for micro businesses, msme ministryThe MSME ministry has taken many steps during the past year for technology advancement, skill development and job creation.
  • Dr Niranjan Hiranandani

Skilling, Labour, Talent for MSMEs: The micro, small and medium enterprises (MSME) is the backbone of the Indian economy which generates nearly 70 million jobs, have a network of 30 million units and manufactures more than 6000 differential products. In the recent past, MSMEs have emerged as one of the top employment generators in the past year according to the numbers shared by the Ministry of MSMEs, Government of India. It is no surprise that it has surpassed the much-touted employment generator tech startups that increased from 8,900-9,300 in 2019 generating only 60,000 direct and 1.3-1.8 lakh indirect jobs in 2019. What made it possible is a programme like PMEGP.

PMEGP is a major credit-linked subsidy programme being implemented by the Ministry of MSME since 2008-09. The scheme is aimed at generating self-employment opportunities through establishment of micro-enterprises in the non-farm sector by helping traditional artisans and unemployed youth in rural as well as urban areas. The Indian economy is likely to emerge as one of the leading economies in the world, with an envisioned economy of $5 trillion by 2024. The Ministry of MSME has taken upon self to contribute around $2 trillion of it from the MSME sector. 

To accomplish this, the ministry has taken many steps during the past year for technology advancement, skill development and job creation for the empowerment of MSMEs under the Technology Centre Systems Programme (TCSP), Cluster Development Program (CDP) and various credit schemes.

There are many more steps that are being taken to drive the growth of the sector. This involves making them aware of the intellectual property rights to register their trademarks and patents. Giving procurement and marketing support and opening of Design Clinic under the HRD Ministry and industry bodies like ours provides design support to MSME entrepreneurs including rural and art-based enterprises.

While the MSMEs are grateful for the above steps undertaken by the government of India, labour reform, liquidity and energy availability at globally competitive rates are also essential for MSMEs to move ahead.

Also read: SMEs needs targeted support in light of Coronavirus: Helene Rey, London Business School

Labour Reform – The demographic of the labour workforce is changing into multi-job, part-time/full-time workforce. Hence, it is imperative that the labour laws of India undergo a large holistic reform to understand the 21st century Indian and to balance the needs of protecting the workforce and enhancing the competitiveness of the MSMEs that needs to be urgently undertaken.

Efficient Energy Availability – An area which needs tremendous new focus and attention include the availability of cheaper electricity and natural gas to MSMEs. Currently, power DISCOMs and city gas distribution companies do not permit MSMEs in the industry to procure their own electricity or natural gas and charge them higher rates than their global counterparts (this issue is independent of the fact that fuel is not part of the GST regime as yet which is an added burden on the MSME). This means that even though they are efficient, they are burdened with expensive fuel which seriously harms their competitiveness.

Liquidity – Government needs to urgently assist MSMEs to access efficient energy sources so that they can compete globally. While inverted duty structure is an area that government is already addressing through regulation and bonded warehouse manufacturing, it is crucial that interest rate reduction for MSMEs and assurance of on-time payments from state-owned enterprises is the new norm. With these new areas of focus, MSMEs will thrive towards being a large contributor in the Indian economy of tomorrow.

Dr Niranjan Hiranandani is the President of Assocham. Views expressed are the author’s own.

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