Challenges faced by MSME’s in India

The MSME sector has grown tremendously in the last few years in India, and it has enormous
potential for growth in the future years while eliminating poverty and unemployment, which
are two of the biggest bottlenecks for growth. Despite the potential it possesses, the Micro,
Small, and Medium Enterprises are not free of challenges.

In spite of the high growth rate and good prospects, the MSMEs have faced certain
challenges that have obstructed its way of achieving its true potential. Following are some of
the challenges faced by them.

Technological Backwardness:

This is one of the biggest constraints faced by MSMEs till date. The MSME in India lacks up
to date information and are often unaware of the latest technological developments in the
global market. Sometimes they lack managerial skills, knowledge, and technology-intensive
education to run a competent MSME. This challenge is most prevalent in rural parts of India.
It is believed that technology can play a pivotal role for MSMEs because of the competition it
faces from neighbouring countries. Therefore, MSMEs must look into this matter very
seriously. Technological up-gradation is a must if Indian MSMEs are to become competitive
lest it makes them obsolete, and their existence is put under threat.

High Cost of Credit:

Another challenge that haunts this sector is their inability to access adequate and timely credit
at a reasonable cost. Quite a few researchers have indicated that MSME in India are hindered
by poor credit availability. Now, if we look to understand the reason behind this, we know
that there is a high-risk perception among the banks regarding this sector, and the transaction
costs are also high for loan appraisal. The players of MSME are not in a great position to
provide collateral to get loans from banks.

Procurement of Raw Materials:

The availability of economic resources is critical for any business development. It has been
one of the growing concerns of this sector as procurement of raw materials is done within
local territory due to their financial limitations.

Inadequate Infrastructure Facilities:

Having good infrastructure facilities is essential to the growth of a business, and lack of
infrastructure facilities such as electricity infrastructures negatively affect the productivity
and the profitability of manufacturing SMEs. The availability of infrastructure and skilled
manpower will ensure the competitiveness of MSMEs. MSMEs are either located in
industrial estates or are operational in urban areas or have come up in an unorganized manner
in rural areas of the country. The infrastructure facilities in such areas are poor and not
reliable.

Lack of Skilled Manpower:

Although India is having a big pool of human resources, the industry still faces a deficit in
manpower with the skills set required for manufacturing, marketing, etc. A set of skilled
personnel will save time and effort as they use their expertise and talent, and knowledge in
their respective fields.

Inadequate Access to Market:

In India, MSMEs have struggled to have access to the market due to a number of reasons like
inadequate capital, inadequate use of marketing tools, etc. Thus, it makes it difficult for
MSMEs to sell products to government agencies.

Conclusion
Recently the government of India announced a stimulus package of 3 lakh crore rupees
collateral-free help to the MSME in India as part of the Atmanirbhar Abhiyan.
However, if adequate reforms are not implemented to solve the pressing challenges,
providing a stimulus package may not be effective.

Opportunities for MSME’s in India

1) Leveraging the E-Commerce Trend:

MSMEs now can make their presence in the online world by going digital. For many years,
the MSME sector was struggling with the intense competition, but going digital can give
them the required edge.

2) Adoption of Technology:

Since social media, mobile phones, and cloud technology is the talk of the town now,
MSME’s can take help of these platforms. Embedding the social and cloud platform will
open up vast opportunities for revenue growth and operational efficiency.

3) Taking Advantage of Government Schemes:

MSMEs need to receive benefits of Government initiatives such as ‘Make in India’, ‘Startup
India’ and ‘Skill India’. These schemes introduced by the government are aimed to promote
an entrepreneurial culture to grow the current MSME status.

4) Abundance of Fintech Firms:

With the number of Fintech firms and lenders on the rise, MSME’s will have the opportunity
to get accessible and affordable financing options. MSMEs always had to worry about the
gap in their cashflows while taking the MSME loan from the traditional lender. But now, they
will be able to focus on their business entirely, as enhanced speed, transparency, and quick
MSME loan facilities are about to increase significantly.

Following are the business needs catered by the MSME loan:

 Launch of a new product range

 Business expansion
  Paying out salary to employees

 Warehousing needs

 Purchasing new equipment

 Credit for marketing and advertising activities

Getting easy access to loans is not the only decisive factor, many lenders now do not require
the borrowers to put their personal or business assets on the line to qualify for financing.
Funding now has become faster as there is no need to pledge collateral, less paperwork, and
minimal documentation.

Conclusion

Progressive changes will take place in the Indian MSME sector based on the trends
mentioned above. With a significant rise in technology and innovation, a business-friendly
atmosphere for the MSMEs will become a reality.