Despite their economic importance, MSMEs lack in productivity with only around half as productive as large companies, said a McKinsey Global Institute report
Despite their economic importance, MSMEs lack in productivity with only around half as productive as large companies, said a McKinsey Global Institute report
Jun 03, 2024
Mohammed Ramees
The report said Indian MSMEs are just 26 % as productive as large companies
The report said Indian MSMEs are just 26 % as productive as large companies
Image source: Immerse
The MSME productivity gap was measured in the distance between productivity (value added per worker, $ thousand purchasing power parity) of MSMEs and large companies
The MSME productivity gap was measured in the distance between productivity (value added per worker, $ thousand purchasing power parity) of MSMEs and large companies
Image source: Immerse
The gap was wider in other emerging economies vis-a-vis advanced economies, e.g. 94% in Kenya, 75% in Indonesia, 53% in Mexico
The gap was wider in other emerging economies vis-a-vis advanced economies, e.g. 94% in Kenya, 75% in Indonesia, 53% in Mexico
Image source: Pexels
In advanced economies it was 16% in the UK, 48% in Japan and Australia, 39% in Germany, 45% in Italy, etc
In advanced economies it was 16% in the UK, 48% in Japan and Australia, 39% in Germany, 45% in Italy, etc
Image source: Unsplash
Understanding productivity level relative to large enterprises also factored in the size of MSMEs. Micro enterprises trailed large firms by a greater margin in comparison to SMEs
Understanding productivity level relative to large enterprises also factored in the size of MSMEs. Micro enterprises trailed large firms by a greater margin in comparison to SMEs
Image source: Pexels
Reducing the gap could be equal to an average of 10% of GDP in emerging economies. For instance, reducing the gap in India could be equivalent to 11% of GDP
Reducing the gap could be equal to an average of 10% of GDP in emerging economies. For instance, reducing the gap in India could be equivalent to 11% of GDP
Image source: unsplash
To fill the gap, the report called for looking at different sub-sectors as MSME productivity ratios vary across sectors
To fill the gap, the report called for looking at different sub-sectors as MSME productivity ratios vary across sectors
Image source: unsplash
The report suggested going beyond conventional policies such as credit and encouraging training for MSME employees
The report suggested going beyond conventional policies such as credit and encouraging training for MSME employees
Image source: unsplash
Moreover, improving tech access, building management skills, opening access to new markets, etc., can also help MSMEs with better productivity
Moreover, improving tech access, building management skills, opening access to new markets, etc., can also help MSMEs with better productivity