MSMEs and SMEs are critical to the growth of Indian economy.
MSMEs and SMEs are critical to the growth of Indian economy. Even though they are a major source of employment and industrial output, MSMEs and SMEs operate with severe shortage of skilled workforce and paucity of funds to train their employees. This not only affects their growth and productivity, it also impacts the quality of output and sustainability of business. In order to be consistently efficient and meet global standards, it is imperative for them to overcome the hurdles that stunt their growth.
So, how do we create a stimulating and enabling environment for SMEs? PPP is one of the models that can re-energise the SME ecosystem.
Let’s take the example of the leather industry, which generally depends on outsourced domestic and export business. Typically, an SME in this industry operates with 300-400 employees, often with constraints in finance, technology and skilled workers. There is limited budget, leading to lack of entrepreneurial support for business development, inability to train the workforce, inefficient processes and outdated machinery. An SME that is into footwear and leather goods needs trained workforce that is skilled in tanning, stitching, moulding and skiving. Only skilled workers can handle equipment and machines, maintain work area, produce quality output, and be aware of safety and health issues. It is also important for them to meet the occupational standards defined by the Leather Sector Skill Council. It is not easy to meet such requirements.
Such SMEs look for government support, especially by way of funds and schemes that can ensure their growth and sustainability. Since they operate with thin margins, poor funding and unskilled or semi-skilled workforce, one cannot expect them to face global competition. In addition, because of fund constraints, they cannot reach out to private training providers for skilling programmes. What is needed here is a synchronisation between SMEs, training providers and the government. This can be achieved only if we have a well-thought-out PPP framework with seamless coordination between the three players. Such a tripartite PPP arrangement can not only ensure increase in unit-level productivity for SMEs, but also the real income increase for the workforce in this sector, ultimately leading to higher contribution towards India’s GDP.
While the government takes the ownership of initiating a movement under the PPP model, training providers can be responsible for sourcing and training people based on the National Skills Qualifications Framework (NSQF). Public infrastructure—ITIs, schools, colleges, railway stations, community centres—can be used to deliver training. Classroom training can be blended with technology-based learning. SMEs can lend the machine time, provide logistical support and create the environment for training. The benefits of such a PPP model are huge.
Better outreach and rapid skilling: With the possibility to quickly scale up training, this model ensures that more and more workers get trained and upskilled. Training can be supplemented with hands-on skilling as the companies extend their machinery to make prospective workers machine-ready.
Industry-integrated training: The PPP model has its base in understanding the industry requirements and designing training accordingly. This is the most efficient way to skill people on-the-job with suitable apprenticeship. The NSQF certification at the end of the training prepares them with enhanced employability.
Effective utilisation of government funds: Funding under relevant schemes can be easily channelised and integrated with outcome-based training. Among other things, this can motivate the youth to enrol for skilling programmes in order to get placed in various SMEs.
Enhanced employability: SMEs are the primary source of employment for millions of new job-seekers. When there is voluminous enrolment, the freshers have the opportunity to get trained and skilled on the job. Most importantly, they get exposed to multiple skills as every SME depends on multi-skilled personnel.
Entrepreneurship support: Setting up an SME is the first step towards entrepreneurship. The PPP model can be of help to entrepreneurs who have access to a skilled pool of workers and financial and infrastructural support to realise their business goals and innovative ideas.
We need to create innovative sources of sustained employment and support these with a pipeline of skilled workforce. Strategic implementation of the PPP model can give a head start in overcoming many issues related to dearth of trained human resources in the Indian SME sector.
The author is executive director, LabourNet Services India Pvt Ltd