Relevance of MSME Sector in Reviving Indian Economy

Former Vice Chancellor Prof.M.M. Goel

– Professor (Dr.) M.M. Goel*

It is, indeed, a matter of great satisfaction that the Indian government understands the role of micro small and medium enterprises (MSME) sector in reviving Indian economy. To relieve MSMEs economic plight, the government on May 13,2020 unveiled a major booster dose with massive Rs 3 lakh crore collateral-free assistance or sovereign credit guarantee to MSMEs.

The  key announcements of Atma-nirbhar Bharat Abhiyaan (ABA) includes  Rs 3 lakh crore  loans for MSMEs, Rs 50,000 crore equity infusion through MSME Fund of Funds, Rs 20 crore subordinate debt for MSMEs, Extension of registration and completion date of real estate projects under RERA, Immediate pending refunds issuance to all non-charitable trusts, extension of the due date for ITR for FY’19-20 to November 30, 2020.

The ABA economic package is necessary for the economic predicament of India amidst the pandemic for MSMEs employing  11 crore people, comprises 55 per cent employed in urban locations.

According to some reports, 99.5 per cent of MSMEs fall under the micro category, and are distributed, more or less, equally across urban and rural India. The remaining small and medium size enterprises are disproportionately located in urban centres. India’s 6.34 crore MSMEs have been among the worst-affected companies from the outbreak, and the lockdown measures implemented to halt the spread of the virus.

The MSMEs is the engine of economic growth and  promote equitable development. The labour intensity of the MSME sector is much higher than that of the large enterprises.

 It is pertinent to note that MSMEs have been hit badly due to lockdown imposed by the government to tackle Covid-19 pandemic. However, even before the current crisis, MSMEs growth has been marred by several challenges.  Meaning thereby providing merely a stimulus package may not prove to be effective, until adequate reforms are carried out for solving  the pressing problems and to utilize its potential.

The Finance Minister Ms Nirmala Sitharaman made  the change in the definition of MSMEs with the reasons behind the new definition  which will bring about many benefits by aiding MSMEs to grow in size.  The existing and revised definitions of MSMEs are as under :

As per the revised definition, any firm with investment up to Rs 1 crore and turnover under Rs 5 crore will be classified as “micro”. A company with investment up to Rs 10 crore and turnover up to Rs 50 crore will be classified as “small” and a firm with investment up to Rs 20 crore and turnover under Rs 100 crore will be classified as “medium”.The government plans to raise MSMEs contribution to India’s exports to 60 per cent from 48 per cent at present and also boost the sector’s contribution to the country’s GDP from 29 per cent currently to 50 per cent.

As an honest needonomist, I do not support the change in the definitions as these entrepreneurs want to continue in the same category for corning the benefits under the various schemes. Meaning there by, making the things difficult for new entrants to compete with them. They want to remain small with all kinds of fear which is not healthy and not in the interest of boosting self-employment for the Indian youth.

For becoming job giver instead of job seeker, we have to adopt entrepreneurship based on needonomics which is ethical and nonviolent in nature. Entrepreneurship calls for action-oriented and highly motivated individual who is ready to achieve goals.

To be motivated for self-employment, we have to adopt entrepreneurship in services more than manufacturing with ample opportunities including empowerment of consumers with competitive advantage, convenient, fewer hassles, quick adjustment to market conditions and low cost cloud shops.

To create entrepreneurship, we need to convert Khadi and Village Industries Commission (KVIC) into MNC which can give brand-name to the products under MSME for marketing online and offline.

Entrepreneurs have to ensure quality, timely delivery with guarantee and warranty of the goods and services and use e-marketing through ‘Cloud Shop’ as perfect for micro and small business with website of its own.

Entrepreneurship can be people friendly and socially beneficial only if undertaken in accordance with NAW (Need, Affordability and Worth) approach for online marketing of goods and services.

The experiences of recent years shows that employment in agriculture sector has been declining as well as large industries are also experiencing jobless growth. In such a situation, the main responsibility for job creation rests with unorganized sector including MSMEs and the service sector.

To face the competition in the long run and to be economically viable, the MSME sector needs to improve its productivity and quality, reduce costs (given the higher qualities) and innovate. Every effort need to be made for promoting MSMEs by helping them to increase their efficiency and competitiveness within a market driven economy with full of diversities. For this it is essential that these enterprises no longer follows a protectionary stance, as that has already been shown to be harmful to the sector. In order to prevent the major sickness in MSME sector, new approaches like the cluster approach or harnessing the power of industry associations should be encouraged.

It is essential on the part of the government to be careful in honest implementation of the economic package underABA and overcome the problems of MSMEs.  To emerge and make sustainable contribution to national income, employment and exports, it is imperative to take care of MSMEs for enabling it to take care of the Indian economy in post covid era.

There is always a scope to improve the system with ease in doing business and ease of living.

 There is a case for  ‘needonomics’ as a strategy for ABA by understanding, analysing, interpreting  and adopting as nonviolent, spiritual and ethical in nature for improving the socio-economic conditions of Indians .  We need to become street smart for using more than smart phones. We have to be aware, alert, and awake for the challenges in entrepreneurship and remain enthusiastic with all precautions including   GST and cyber laws. For speedy revival of the economy, we have to replace fear with fearlessness and work without worries (www)- the real www in the virtual world wide web (www)., We need to ensure proper implementation of the economic package under ABA for proving to be panacea for the ills of MSMEs.

*  The writer is Former Vice Chancellor and known as ‘Needonomist’ (economist for needs) among the fraternity of economists  in India