In order to boost job creation in India’s micro, small and medium enterprise (MSME) sector — the second largest employer in India after agriculture, there is a need to adopt a cluster development approach by the government, according to economists. “Smaller enterprises working in a cluster will develop economies of scale and become cost-efficient, thereby improving their productivity and competitiveness,” industry body FICCI said in its latest economic outlook survey among economists, since “a majority of employment opportunities are created by SME.”
The survey, which pegged India’s potential GDP growth rate for FY20 settling at the higher end at about 7.5 per cent, stressed on strengthening MSMEs to be among the key areas that require urgent attention. The other areas of focus, according to surveyed economists, are boosting agriculture, undertaking factor market reforms, and improving avenues for infrastructure financing.
Developing clusters gain significance as MSMEs are expected to generate around 1 crore jobs in the coming four-five years, as per a report by Nomura Research Institute. Moreover, strengthening MSMEs in clusters of artificial Jewellery, sports goods, scientific instruments, metal utensils, machine equipment like textile machinery, electric fans, rubber, plastic, leather & related products, bicycle parts and auto components, textile, wood, paper, food, minerals etc. can create an additional 75 lakh – 1 crore jobs in the next four-five years through partial substitution of imports.
Economists highlighted the need for the government to ensure “strong and stable policies” to help Indian SMEs integrate with global value chains. The industry body had earlier suggested setting up of “an exclusive Export Facilitation Centre for MSMEs” to boost their exports. Also, economists sought expansion of technology and incubation centres for MSMEs across India.
Further, to boost employment in the manufacturing and services sector, economists identified easing or reducing the cost of doing business and regulatory reforms for businesses along with labour reforms and sector-specific special packages.
Employment generation by MSMEs over the past four years grew 13.9 per cent, according to a CII survey, wherein micro-businesses created the highest number of jobs are likely to continue to be on top in the next three years. The net job additions in four years among more than 1 lakh MSMEs stood at 3,32,394 — a 3.3 per cent increase per annum in these four years.