The Micro, Small, and Medium enterprises (MSME) sector is the most crucial sector for a country like India, as it is a major contributor to the country's socioeconomic development. MSMEs have played an essential role in providing employment opportunities and are the second largest employment-generating sector after agriculture. The sector contributes around 33 per cent of the country’s total GDP and is projected to contribute worth USD one trillion to India’s total exports by 2028.
In India, the sector has gained significant importance due to its contribution to the country’s Gross Domestic Product (GDP) and exports. This sector has also contributed immensely with respect to entrepreneurship development especially in semi-urban and rural areas in different parts of the country, reducing the regional imbalances and enabling equitable distribution of the nation’s income and wealth.
Potential And Opportunities
It is well understood by the policymakers that the MSME sector has a lot of potential and opportunities in the domestic and international markets but the sector needs timely hand-holding from Central and State Governments and various departments in easing of regulations and compliances. In spite of many challenges faced by the sector related to the physical infrastructure bottlenecks; constraints in technology adoption; higher logistics costs, inadequate backward and forward linkages; lack of access to credit and risk capital, and the perennial problem of delayed payments, among others, the MSMEs still stand tall and operate against all odds with an aim to achieve significant growth in the country.
India has more than 63 million enterprises, of which only around 20 million of them are Udyam registered and the remaining 43 million are unregistered. Most of these MSMEs might be below the micro category and would be operating with one or two persons managing the whole business by themselves. Due to their lack of knowledge in all domains, inadequate skills or even constrain of time for managing every detail in their business, these enterprises are not able to perform at their optimum level. These unregistered MSMEs need extra attention and hand-holding to integrate with the mainstream economy and supply chain in the domestic and export markets. It is therefore imperative for the Central and State Governments to devise special schemes and policies for these units to make them successively rise in the hierarchy of MSMEs.
Ease Of Doing Business
As the world celebrates MSME Day every year on the 27th of June, this year our prime focus should be to address the problems of these unregistered MSMEs and bring them into the formal channels. We should also provide them a platform to showcase their products and services to the international markets thereby boosting their capacity building, and growth and making them globally competitive.
Further, as the Government has been promoting ‘ease of doing business through various measures, as a result of which, there has been an overall jump achieved in the EODB index, MSMEs still continue to grapple with many issues that are preventing them from realising their full potential. India still lags in areas such as enforcing contracts (163rd) and registering property (154th). It takes 58 days and costs on average 7.8 per cent of a property’s value to register it, longer and at a greater cost than among OECD economies, and it takes three times longer for a company to resolve a commercial dispute through a local first-instance court, as compared to OECD countries. In this regard, it is recommended that the Government should encourage and incentivize the use of digital contracting and dispute resolution. This would enable MSMEs to better and speedier enforcement of contractual commitments. The process of enforcement of contracts should also be simplified through an MSME-specific mechanism such as a dedicated ADR mechanism, virtual MSME tribunals, etc. Such a mechanism could result in quick arbitration with respect to delayed payments and other disputes which in turn would address the issue of working capital to a great extent.
Lastly, MSMEs are also important for fostering and strengthening the Startup ecosystem. They are the catalyst for new ideas to breed. Startup entrepreneurs should be encouraged to become the drivers of economic growth that will have the potential to pull the marginalized people of India out of poverty. As we know, the entrepreneurial route is the most desirable route to create higher employment opportunities. The young persons who choose the enterprise path need all the support and encouragement from the state, financial and other agencies.
Conclusion
It would be difficult for India to fulfill its ambition of becoming a self-reliant $5 trillion economy without the contribution of the MSME sector. Is because of India’s growing MSME sector that it has made the country the fifth-largest economy globally. With the right support and policies, the Indian MSME sector will provide much-needed thrust to the Indian economy and will be instrumental in making India a global superpower. It is a widely accepted fact that with improvement in ‘Ease of Doing Business’ the MSME sector will help achieve the ‘Make in India’ target which aims to increase the pie of the manufacturing sector in India’s GDP from the current 16% to 25%. It would be fair to conclude that India’s vision of achieving higher economic growth and prosperity for all including people at the bottom of the pyramid would be spearheaded by its resilient and dynamic MSME Sector.
