MSME SECTOR- Potential and Challenges

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Micro, Small & Medium enterprises (MSME) termed as
“engine of growth “for India, has played a prominent role in the development of the
country in terms of creating employment opportunities. The government, in
conjunction with the Reserve Bank of India (RBI), has now launched a series of
measures to alleviate their distress.

Body:

Potential of India’s MSME sector:

Contribution to GDP: The share of MSMEs in the country’s gross value

added is estimated to be about 32%.
Leveraging Exports: It also contributes about 40% to total exports and
45% to manufacturing output.
Employment Opportunities: It employs 60 million people, creates 1.3 million
jobs every year and produces more than 8000 quality products for the Indian and
international markets.
Diversity: There are approximately 30 million MSME Units in India and is quite
diverse in terms of its size, level of technology employed, range of products and
services provided and target markets.
Fostering Inclusive Growth: MSME is constructing inclusive growth in
numerous ways through promoting non- agricultural livelihood at least cost,
unbiased regional development, large female participation, and providing a
protection against deflation.

The challenges and concerns associated with the growth of MSME sector:

Access to Credit:
According to Economic Survey (2017-18), MSME sector faces a major
problem in terms of getting adequate credit for expansion of business
activities.
The Survey had pointed out that the MSME received only 17.4 per cent of the
total credit outstanding.
Most banks are reluctant to lend to MSMEs because from the perspective of
bankers, inexperience of these enterprises, poor financials, lack of
collaterals and infrastructure.

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 Poor Infrastructure:
With poor infrastructure, MSMEs’ production capacity is very low while
production cost is very high.
Access to modern Technology:
The lack of technological know-how and financial constraints limits the
access to modern technology and consequently the technological adoption
remains low.
Access to markets:
MSMEs have poor access to markets. Their advertisement and sales
promotion are comparatively weaker than that of the multinational
companies and other big companies.
The ineffective advertisement and poor marketing channels makes it
difficult for them to compete with large companies.
Legal hurdles:
Getting statutory clearances related to power, environment, labour are
major hurdles.
Laws related to the all aspects of manufacturing and service concern are
very complex and compliance with these laws are difficult.
Lack of skilled manpower:
The training and development programs in respect of MSME`S
development has been. Thus, there has been a constant crunch of skilled
manpower in MSMEs

Other issues:

Low ICT usage.

Low market penetration.
Quality assurance/certification.
IPR related issues.
Quality assurance/certification.
Standardization of products and proper marketing channels to penetrate new
markets.

Measures needed:

Government of India and banks should design plans and measures to widen easy,
hassle-free access to credit.
The RBI should bring stringent norms for Non-Performing Assets (NPA) and it
will help curbing loan defaulters and motivate potential good debts. Further,
according to critics, the Credit Guarantee Scheme for MSME (CGTMSE) run by
SIDBI is a growing contingent liability and needs to be examined with urgency
Government should provide enhanced development and upgradation of existing
rail & road network and other infrastructure facilities in less developed and rural
areas to boost growth and development of MSMEs

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 There should proper research and development in respect of innovative method
of production and service rendering. Further, the government should promote
and subsidise the technical know-how to Micro and small enterprises.
Government should encourage procurement programme, credit and performance
ratings and extensive marketing support to revive the growth of sick units.
Skill development and imparting training to MSME workers is a crucial step to
increase the productivity of the sector. The government should emphasise
predominantly on skill development and training programs

Conclusion:

MSMEs being the growth engine of economy, there is a need to prepare a roadmap for
sector in addition to the ad-hoc initiatives undertaken. Delineation of the objectives,
vision, and mission is necessary to give clarity on the path to be treaded. An inclusive,
sustainable vision to compete with the global MSMEs, by collaborating the industry
groups, researchers, government and other stakeholders is the need of the hour.

By: ABHISHEK KUMAR GARG

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