Small and medium-sized enterprises (SMEs) are the growth engines of the global economy, making up around 90 per cent of all businesses globally, comprising roughly 70 per cent of employment and, by some estimates, contributing up to 90 per cent of global GDP. In the Indian context, the micro sector with 63.05 million estimated enterprises accounts for more than 99 per cent of the total estimated number of MSMEs.
The aforesaid data points demonstrate the vast footprint and the immense contribution that MSMEs make in overall nation-building and growth. While MSMEs, undoubtedly, have been prominent in the pre-Covid-19 era, the disruption due to the pandemic has resulted in both threats and opportunities for MSMEs and the overall industry.
Challenges such as disruption in the MSME supply chain, a spike in commodity prices translating into higher working capital requirements, the stress of margins due to depressed demand and pendency in payments are amongst a few of the repercussions emerging from the pandemic affecting the sector. However, amidst the present unprecedented scenario, it’s the government’s consideration for the stressed sector, empathetic view by the key concerned stakeholders of the sector and the resilience portrayed by MSMEs that has provided much impetus to the overall sector.
The MSME sector will play a central role in writing the growth story of the country and therefore, I would like to highlight the key imperatives which will form the foundation of small businesses and the overall industry.
The first area of employment generation is crucial for overall growth. India is a consumption-driven economy, and consumption is directly linked to employment and we as an industry need to identify the unmet needs of consumers not only in India but the world over. MSMEs in India can play a vital role as important growth engines of the economy and as employment generators positively impacting the bottom of the pyramid.
The second area is that of competitiveness. Technology, finance and market access are important determinants of MSME competitiveness and the government’s initiatives under Atmanirbhar Bharat provides a great start. The focus should be on the adoption of new-age technologies and digitisation of systems, processes, and operations in all operational aspects to save time and cost and enhance the finished product for business continuity.
The third area is trade. India has the potential to emerge as a major export hub. Trade policy must not be looked at only from the lens of export and import. It plays an important role in attracting FDI and integration into global value chains. It is encouraging that India is in FTA talks with the UK, EU, and UAE, which should further boost exports in the medium term as India possesses trade complementarities with these countries.
The fourth area is technology and R&D which seems to be omnipresent and extends to all facets of business. The new normal will witness the increasing role of technology solutions in businesses where R&D will play a significant role in increasing the share of technologies and bridging the gap between MSMEs and new-age tools. Thus, the focus today is to work on technology and reap the benefits of the country’s existing digital infrastructure, which can have a positive ripple effect on GDP growth and create a large number of jobs.
The key learnings from the recent past have drawn special attention towards how technology can help in business continuity and enhance business efficiency. It is a well-known fact that leveraging technology for MSMEs is the only sustainable solution in all aspects of their ecosystem development, including engagement with stakeholders, marketing, supply chain management, product innovation, etc. It will also encourage women entrepreneurs to increase their role in businesses. The digital payment solutions that reduce the dependency on banks’ physical infrastructure have further made payments accessible anywhere and anytime.
The MSME sector is focussing on transforming businesses and making itself future proof. In this shifting paradigm, the government plays an essential role in supporting it by developing the digital infrastructure and creating technology to enhance competitiveness. By launching the single window system of grievance redressal in the form of Champions Portal, real-time input is derived through information and sentiments analysis. These inputs and interventions help the ministry to formulate more pragmatic policy action.
To mitigate the problems of delayed payments, Trade Receivables Discounting System (TReDS), an electronic platform, was launched as a joint venture between SIDBI and NSE. The platform facilitates financing of trade receivables of MSMEs through multiple financiers.
The pandemic has taught small businesses to think beyond geographical boundaries, diversify their customer base and increase their horizon in the market through e-commerce platforms.
Last but not the least is the fifth area of climate change and sustainability. As more and more countries focus on green products, technologies and processes, India needs to keep pace to be able to export to these lucrative markets. Technology has accelerated our world towards becoming a small global village which is inclusive and integrated with more inter-dependency and volatility. Therefore, we need to keep re-balancing to attain the equilibrium of our coexistence which calls for re-calibration, redesigning standards, directions, foolproof governance structures and priorities with frequent engagements and sharing of responsibilities for a common global purpose of sustainable business and prevent the adverse impact on the climate for the larger good.
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