‘India’s MSMEs must adopt the mantra of going from local to global’

The contribution of micro, small and medium enterprises to India’s economic growth is well-documented. A report by consultancy KPMG and industry body the Confederation of Indian Industry said the entities account for nearly 30% of India’s gross domestic product and 45% of its exports. MSMEs also play a crucial role in socio-economic development, such as employment generation (at 110 million), reducing inequalities, rectifying regional imbalances, and providing low-cost raw material to support large industries and allied sectors.

The progress of less-developed regions and bridging the rural-urban divide depends on the robust health of MSMEs.

Recognizing the immense contribution and potential of MSMEs, the finance minister has allocated a record ₹22,138 crore in the Union budget for FY24 for the MSME ministry. The budget announced many measures to boost the MSME sector, such as extending the emergency credit line guarantee scheme till 31 March, and the RAMP or Raising and accelerating MSME performance programme with an outlay of ₹6,000 crore.

It was, thus, with great pride that Mint took the initiative to host the “National MSME Conclave 2023”—a platform to discuss the landscape of MSMEs and forge the way ahead.

The theme for the event is “Solidifying India’s Position on the Global Stage” with a focus on small businesses, which are the cornerstone of the Indian economy.

Mint has partnered with the ministry of micro, small and medium enterprises, Small Industries Development Bank of India (SIDBI), the National Small Industries Corp. (NSIC ), Micro Units Development and Refinance Agency, and Khadi India.

Mint and Mosaic Digital, business head Shalil Gupta welcomed the dignitaries and guests at the event and lauded the contribution of MSMEs to India’s economic growth and measures taken by the government and other organizations to provide support to them.

The conclave was honoured to have MSME minister Bhanu Pratap Singh Verma, addressing the gathering on “Unlocking the Growth Paradigm for MSMEs”. Congratulating Mint for organizing the event, the minister said the MSME sector is poised for high growth due to the various central schemes. He said even during the pandemic, the Centre had ensured the survival of several MSMEs with the launch of the Emergency Credit Line Guarantee Scheme to provide financial assistance to the sector. Highlighting the importance of Vocal for Local, Verma said: “We must manufacture locally, and local items should be used by our industries. Our MSMEs must adopt the mantra of going from local to global to see a new India emerging on the global stage.”

He said the government was bringing to fruition the ideals of Mahatma Gandhi, Veer Savarkar and Pandit Deendayal Upadhyaya to give impetus to “gram udhyog”. Highlighting India’s economic progress, he said: “Our economy in 2014 was in 10th position globally. But now, in 2022, our economy is ranked 5th globally.”

Growth and progress were the mainstay of the discussions at the conclave. B.B. Swain, secretary, ministry of MSME presented a “general perspective on MSMEs” with immense growth opportunities across sectors. He said MSMEs play a critical role in the economy. “From processing pulses and cereals in their own backyards to producing sophisticated as well as cutting-edge precision equipment, MSMEs in India boast of a highly versatile production profile. I am happy to report that within 31 months of the Udyam registration portal launch 15.3 million MSMEs, which employ over 1.01 million people have registered.”

“MSMEs are growing across sectors and geographies and the figures are just an indication of growth in the formalized sector.” According to Swain, the MSME sector is poised to do extremely well in on account of its abilities that make it highly adaptable and resilient. Its growth will be supported by the government “through policy interventions and address the challenges faced by MSMEs across sectors”. A case in point is the notification issued in October allowing MSMEs to retain the MEME status for up to three years irrespective of an upgradation in categorization.

He spoke about the, “launch of the Udyam Assist platform on 11 January to bring informal micro-enterprises into the formal ambit”. “Over 50 million entities will be under Udyam with this initiative. The ministry also launched the Udyam Shakti portal on 29 June 2022 to facilitate access of MSMEs to schemes of other ministries departments and state governments,” he added.

Public procurement from MSMEs will also increase with the new list including a wider product range. “Incidentally, against last year’s target of 25% procurement from MSMEs the actual figure stood at 36%.”

Swain said if the conclave is held annually, preferably after the budget announcements, it would presented a wonderful opportunity to discuss the post budget situation.

During a discussion on just 25% representation of women in the sector, Mercy Epao, joint secretary at the ministry of MSME said it was a concern. Even the enterprise ownership ratio of men and women was lopsided, and the government is taking initiatives such as the SAMARTH skill development scheme to address the issues. “Our vision for 2047 is to breach it and hope women will have 50- 51% representation.” SAMARTH ensures 20% seats for aspiring and existing women entrepreneurs. That apart, 20% of MSME business delegations sent to domestic and international exhibitions under the schemes for marketing assistance implemented by the ministry will be dedicated to women-owned MSMEs, he said. Women entrepreneurs can also avail 20% discount on annual processing fee on commercial schemes of National Small Industries Corp. in FY23.

Epao said the government was also working on increasing participation of Schedule Caste as well as Schedule Tribe entrepreneurs.

“National Scheduled Tribe and Scheduled Caste Hub announced by the Prime Minister in 2016 October aims to including SCs and STs in the economic growth story of India. When we started our journey in 2016 the procurement from SC-ST stood at less than one billion, but today we are at 13 billion. However, this is still less than 1% and the procurement policy of the Centre, and we are targeting at least 4%, Epao added.

“With registrations on the Udyam portal, wherein enterprises can share if they are SC or ST, there is credible data which can be shared with central pubic sector enterprises and the government ministries and departments, where they can also monitor the procurement from SCs and STs.”

Several other plans and initiatives of the government are also aimed at making SC and ST-owned enterprises a part of the global value chain, such as making them digitally literate, offering vendor development programme and trainings and conducting conclaves to make sure that the government can reach out to the last mile, she said. Besides, the ministry is also working on plans to assist and boost small businesses like tie-ups with leading institutes such as the IIMs and IITs to provide support for innovative ideas where “incubation and business models can be created”, she added.

Intellectual property rights and diversification of design via Divine Design Innovation and the Zero Defect scheme are some of the initiatives that MSMEs will also benefit from.

Considering that economics and finance play a crucial role in the success of an enterprise, Sivasubramanian Ramann, chairman and managing director, Sidbi, shed some light on India’s massive presence in the fintech sector. Giving due credit to the Centre’s fund of funds programme, he said: “The leap of faith taken by the ministry of DPII in 2016 to provide the ₹10,000 crore startup fund to Sidbi...these startups have really surprised us and I think the core of that lies in the fact that the engineering and computing talent of this country has probably come to the fore. A majority of investments by the alternative investment funds, (AIFs) has been in tech and luckily a large amount of it is in areas of biotech, agritech, etc., and has gone to a very good social use. The way technology has been used has really been great and today, we are sitting on more than 800 investments made by various AIFs. We have seen that the return that we are getting is in the region of 3.8 X...so hopefully we’ll see ₹10,000 crore coming back to maybe ₹20,000 crore.”

He said data triangulation plays a major role in funding, especially for MSMEs engaged in exports. “We need to bring in rating agencies within the country and we need to set the standards for ourselves.”

Concluding with his predictions for fintechs, he said: “The future of growth in India is visible to all of us so there’s a large role that ll fintechs have to play across the space from biotech to agritech to the MSME sector…let’s be honest, fintechs have led the way, and prompted the regulators to make better regulations. I would say a constructive friction between fintechs and regulation will continue to happen.”

The conclave concluded that MSMEs are an integral component to India’s growth story and provide the requisite traction to become a $5-trillion economy by 2025. This is a sector that needs to be nurtured to extract its potential and the government is giving it just the right impetus with well-conceived schemes.