PHD Chamber Calls For Flexible MSME Policy Considering Diverse State Requirements

The PHD Chamber of Commerce and Industry has called upon the government to reconsider the proposed national MSME policy to accommodate the distinct requirements of MSMEs across various states and regions. Highlighting the existence of diverse state-specific policies supporting MSMEs, the report recommended the integration of both national and state-level MSME structures to form a unified and comprehensive policy framework.

The chamber emphasized the need for the government to avoid the ‘one-size-fits-all’ approach, especially in the manufacturing sector, which displays significant diversity across states. Implementing such an approach might unintentionally hinder the adaptability of MSMEs in manufacturing, pushing them into ineffective strategies when dealing with the unique situations in their respective states. The recommended direction involved combining shared objectives with the adaptability necessary to meet state-specific needs.

Non-Uniform Structure Of MSMEs

Notably, the report highlighted the need for specialized attention in regions like the northeastern states, where trade-related enterprises comprise a significant portion (more than 50 per cent). The report also emphasized the non-uniform structure of India's MSME ecosystem, particularly in manufacturing, with notable variations across states.

The report emphasized that while states generally exhibit similar structures in trade and services, they demonstrate considerable variations in the manufacturing sector. Moreover, a majority of states, such as Punjab, Haryana, Delhi, Himachal Pradesh, Rajasthan, Jammu and Kashmir (UT), and Gujarat, showcased differences in their MSME structures compared to the national level. Therefore, it suggests the necessity of state-specific approaches to address the distinct requirements and circumstances of MSMEs in these regions.

The report observed the importance for policymakers to acknowledge regional differences and develop state-specific policies that can efficiently foster the growth of the MSME sector.

The existing scenario poses a complex challenge, as outlined by the chamber in its report, citing multiple issues.

Despite 31 per cent of unorganized firms being registered under diverse schemes like GST, the Ministry of Corporate Affairs, and Udyam, the consolidation of information for government support becomes difficult. This not only adds to their administrative load but also leads to confusion and redundant efforts.

The proportion of registered enterprises accounts for less than 1 per cent of all enterprises, and the existence of small and medium enterprises is limited.

A substantial majority of enterprises operate as own-account enterprises (OAEs), forming a considerable segment often disregarded in policy conversations. Moreover, although small-sized enterprises are abundant, their contribution to the overall enterprise landscape is minimal.

The report highlighted that the existing structure suggests businesses typically commence at a micro-level and struggle to grow, largely influenced by historical policies that favored small-scale industries. Furthermore, government schemes and incentives have inadvertently impeded the expansion of small and medium-sized firms. Rectifying this structural imbalance poses a significant challenge for policymakers.

Draft MSME Policy

In the draft MSME policy released by the Ministry last year, focus areas included standardizing registration procedures, enhancing facilitation councils, uniform loan application formats, promoting technology development among MSMEs, leveraging data analytics, linking clusters with transport infrastructure, and aligning MSMEs with a Fast Track Corporate Insolvency Resolution Process.

In conclusion, the non-uniform structure of MSMEs across regions demands specialized attention and distinct policies to foster growth. The current policy landscape poses challenges due to a lack of inclusivity and historical biases favoring small-scale industries, necessitating a shift in approach to support the holistic growth of MSMEs nationwide.