See discussions, stats, and author profiles for this publication at: https://www.researchgate.

net/publication/379862062

Performance and futuristic scenario analysis of secondary agriculture based

MSMEs in Bengaluru district of Karnataka

Conference Paper · April 2024

DOI: 10.5958/0974-0279.2023.00025.3

CITATIONS READS

0 13

2 authors:

Ashwitha A S Gowda Ritambhara Singh

University of Agricultural Sciences, Bangalore Dr. Rajendra Prasad Central Agricultural University
2 PUBLICATIONS 0 CITATIONS 74 PUBLICATIONS 121 CITATIONS

SEE PROFILE SEE PROFILE

All content following this page was uploaded by Ritambhara Singh on 16 April 2024.

The user has requested enhancement of the downloaded file.

Agricultural Economics Research Review 2023, 36 (Conference Number), 167-178
DOI: 10.5958/0974-0279.2023.00025.3

Performance and futuristic scenario analysis of secondary

agriculture based MSMEs in Bengaluru district of Karnataka

Ashwitha A S Gowda1 and Ritambhara Singh2*

Department of Agricultural Economics, Post Graduate College of Agriculture, Dr. Rajendra Prasad
1

Central Agricultural University, Pusa, Samastipur, Bihar 848 125, India

2
Agribusiness Management, School of Agribusiness and Rural Management, Dr. Rajendra Prasad
Central Agricultural University, Pusa, Samastipur, Bihar 848 125, India
*Corresponding author: ritambharasingh@rpcau.ac.in

Abstract Micro, small, and medium enterprises (MSME) are an important sector in the Indian economy.
With their potential to generate both income and employment, the MSME sector has scope to significantly
contribute to economic growth. The performance of secondary agriculture-based MSMEs in Bengaluru
district of Karnataka and the effect of government support is examined in this study. It also constructs
possible futuristic scenarios for the MSMEs, and perceived performance under each scenario. Broad
results show that half of the 30 selected secondary agriculture-based MSMEs in the study area were high
performers. Government support has a positive influence on their performance. Among various scenarios
generated, Scenario A with high government support and domestic demand was found to be the most
favorable for their growth and upliftment. However, in order to scale up MSMEs, these enterprises need
incubation support, and technology and a right positioning of their products in the market.

Keywords Secondary agriculture, MSME, Performance, Future scenarios, Government support

JEL codes Q16, O3, Q28, L66

Introduction enterprise is called a medium enterprise when its

With more than six crore micro, small, and medium
enterprises (MSMEs) in the country (PIB, 2022), this
sector, which includes manufacturing, processing and
services; has emerged as a dynamic sector under the
Ministry of MSMEs, Government of India.
Manufacturing enterprises in this sector are involved
in the production of goods; food processing units are
the ones that feed the supply chain of local enterprises,
and service enterprises provide services. In terms of
investment, MSME by definition consists of
establishments whose investment in machinery and
plant have a ceiling. Thus a micro enterprise has an
investment of not more than Re. 1 crore and has a
turnover not exceeding Rs. 5 crore. A small enterprise
is one where investment does not exceed Rs. 10 crore
and the turnover does not exceed Rs. 50 crore. An
investment is not more than Rs. 50 crores and it has a
turnover not exceeding Rs. 250 crores.
For developing economies, including India, the small-
scale segment plays a significant role in the socio-
economic upliftment of country. A changing nature of
tastes, preferences, and income creates, demands that
are met by secondary agriculture based MSMEs. The
GOI Committee on Doubling Farmers’ Income also
suggested promoting and practicing secondary
agriculture to enhance farmers’ income, via value
addition, alternative enterprises, and converting waste
to wealth.
The secondary agriculture based MSMEs help in the
development of rural areas as they afford an opportunity
to improve the manufacturing and service sectors,
which generate more employment for both the non-
168 Gowda A A S and Singh R
skilled and skilled workforce. It not only plays a crucial
role in providing large employment opportunities but
also helps in industrialization of the rural and backward
areas, thereby reducing regional imbalances, assuring
more equitable distribution of wealth and national
income. MSME provides employment to 60% of the
working population i.e., 1109.89 lakh and contributes
nearly 29.2% of the country’s GDP. The contribution
of MSME in India is higher in terms of the whole sector
rather than by individual categories. As this sector has
around 80% of enterprises in India, labor intensity is
greater in this sector. Under the Udhyam Registration
Portal, 84,23,452 individuals have registered as
employees of the MSME sector in the year 2022-23
alone, which can be seen as an indicator of robust
employment generation by this sector. By contributing
42.67% from exports (up to Aug 2022), 38.47% to
manufacturing, and 26.3% of Gross Added Value to
the country’s GDP, it forms a pillar for the country’s
economy (PIB,2022). Around 20% of these enterprises
are located in the rural areas, providing employment
opportunities to about 40% of India’ total labor force
(Mukherjee, 2018).
MSMEs are present in almost all the states, but they
are not evenly spread. In some states, MSMEs are
important contributors to the economy while in others
they are slower to progress (Jena et al., 2018). The
state of Karnataka, which is our study area, has
implemented many schemes for the development of
MSMEs with the support of the centre. As of 2021,
38.34 lakh MSMEs are present in the state with
Bengaluru having the highest number. It is said that
the MSMEs are major employment generators,
providing employment to 70.84% of the total working
population in the state. According to the Udhyam
portal, the registered employees have been increasing
over the years in Karnataka. During 2022, 7,73,214
individuals have registered as MSME employees in
the state. The state holds the fifth position for state
level distribution of MSMEs having a share of 6% to
total MSMEs in India (MSME Annual Report 2022-
23).
Bengaluru, the capital city of Karnataka, is identified
as an innovation cluster by the World Economic Forum
(District Industrial Profile, MSME-DI). As most of the
MSMEs in Bengaluru district are involved in agri and
food- processing, it creates a healthy ecosystem. Spice
processing, juice and jam/jelly units possess a high
potential for growth in the state along with textile,
automobile and pharmaceutical-based enterprises.
The state has immense opportunity for growth and
innovation as the manufacturing sector is enabled by a
talented and skilled labor force, by an institutional
environment, and an enhanced infrastructure supported
by business climate. The new industrial policy for
2020-25 of Karnataka focuses on the development and
promotion of MSMEs. The state government hopes to
generate employment and reach the third position in
merchandise exports among other states in the coming
five years. This would attract investments of about five
lakh crore rupees and maintain a 10% per annum
industrial growth (NIP, 2022).
Need for the study
The Central Government, many state governments and
the ICAR have been working to push secondary
agriculture-based enterprises to enhance income and
employment opportunities. The present study is solely
based on an analysis of secondary agriculture-based
MSMEs. It delves into performance indicators to
evaluate the MSME sectors and conducts a Futuristic
Scenario Analysis of MSMEs which is useful to
formulate policies. Like other studies, this study is also
subject to limitations. The secondary agriculture-based
MSMEs included are mainly Type A Secondary
agriculture (value addition to primary agriculture
system). An exploratory research may be conducted
which includes both Type B (alternate enterprises) and
Type C (enterprises that uses waste and residues of
primary agriculture) secondary agriculture-based
enterprises (as classified by the Dalwai Committee
Report in its Volume IX submitted to the Government
of India in 2018).
Material and methods
Bengaluru district, our study area, has a major
concentration of MSMEs.We have taken 30 secondary
agriculture-based MSMEs in both urban and rural areas
in the district, based on a snowball sampling method.
The Guildford methodology i.e., normalized rank order
method was used to develop effective scale which is
used to construct a performance index of MSMEs. The
index was constructed based on six performance
dimensions namely, efficiency, risk and returns factor,
social performance, investment, growth performance
and scale/size of the enterprise. Initially, 12 dimensions
 Performance and futuristic scenario analysis............
were listed on the basis of a literature review. It was
ranked by authors for their relevancy test on a Likert
scales, for example: the most relevant were assigned a
value of 5; relevant with value 4; somewhat relevant
with value of 3; less relevant was given a value 2; and
not relevant was assigned value 1. Relevancy
weightage was calculated using the following formula,
The dimension with a relative weightage of more than
0.9 was considered as a relevant dimension. These
pretested dimensions were then ranked by
entrepreneurs and these ranks are converted to rank
values using the formula:
Ri = (n – ri +1),
Where, n is the number of items that were ranked, ri is
entrepreneur’s rank for each dimension. Normalization
of ranks approach was used to calculate the centile
positions of each dimension by the formula,
P = [(Ri – 0.5) × 100]/n.
The rank values of a particular dimension are then
multiplied with c values assigned to a particular centile
position values and then added to get Cj value.
Scale value, Rcfor different dimensions is calculated
using the formula,
Rc= (2.357*Rj) – 7.01,
Where Rj is calculated by dividing Cjby number of
judges.
Sub-components were identified under each dimension
and statements were prepared on each. These
statements were then ranked by 30 enterprises on the
Likert scale of five-point continuum. Relevancy
percentage, relevancy weightage and mean value are
calculated for the same dimensions.
Measurement of the performance index
In this study, performance of secondary agriculture-
based MSMEs is analyzed by developing a
performance index. The scale values are calculated by
using the Guilford method to compute the performance
index. Individual respondent’s performance index is
calculated using the formula,
PI = [ (R1/M1) × S1 /S + (R2/M2) × S2 /S + …+ (Rn/
Mn) × Sn /S] × 100,
169
Where,
PI = Performance index
S1, S2,…..Sn = Scale values of the particular dimension
of the index.
R1, R2,…..Rn = Performance score obtained by the
particular MSME respondent for a particular
performance dimension.
M1, M2,….Mn = Potential score obtained by MSME
respondent for a particular performance dimension.
S = Total scale value of all the dimensions.
The performance index for MSMEs was calculated
using the above formula and then MSMEs were
classified into different categories according to Sturge’s
rule, based on their performance index (Shirur, 2018).
According to Sturge’s rule, MSMEs were classified
into six different categories, namely, very high, high,
upper medium, lower medium, low and very low.
Sturges’ rule
According to Sturges’ rule number of the category
depends on the number of samples (Sturge, 2008). As
the Sturges’ value was 6, MSMEs were classified into
six categories based on the range of score. A range
value between the highest and lowest performance
index score was taken. This then divided by six to know
the range value of each category.
Measurement of dimensions of performance index
Similar to a classification of the MSMEs according to
performance index, MSMEs are further classified under
different dimensions of the performance index i.e.,
under scale/size; risk and return; business growth;
business environment; efficiency indicators; and
investment into low, medium and high category.
To study the effect of government support on MSME’s
performance, a regression model was used. Perceived
performance of secondary agriculture-based MSMEs
was regressed on scale and size, efficiency indicators,
investment, risk and return, growth performance and
social performance. A linear model was found to be
the best fit to run the regression. Different indicators
of the performance index were taken as independent
variables. The mean scores are obtained for each
indicator by taking the average value of all the
statements under each respective indicator. The scores
170 Gowda A A S and Singh R
were then converted into binary values 0 & 1 based on
mean score and composite mean. The mean score above
the mean of total mean scores (composite mean) were
given the value 1 and the score below the composite
mean was given the value 0. For the variable,
government support, a dummy variable was assigned
i.e., with support and without support were given the
value 1 & 0, respectively.
Y = a + b1X1 + b2X2 + b3X3 + b4X4 + b5X5 + b6X6 +
b7X7 + e,
Where,
Y = Performance index
A = Constant
X1 = Scale & size
X2 = Investment
X3 = Social performance
X4 = Efficiency indicators
X5 = Risk and returns
X6 = Growth performance
X7 = Government Support
b1, b2, b3, b4, b5, b6, b7 are regression coefficients of
X1, X2….X7
e = Error term
Futuristic scenario analysis
Based on the extant literature, two major dimensions
viz. domestic demand and government support were
selected to construct four future scenarios. These
scenarios were constructed considering its high-high,
high-low, low-high and low-low conditions of two
dimensions, respectively. Government support was
selected as a dimension as it finds greater importance
in protecting the MSMEs in the initial stages. This
provides the MSMEs with comparative advantage with
large and well-established enterprises. Domestic
demand was selected as a dimension as it is one of the
important criterions for the MSMEs to stay in the
market and attain growth.
The following scenarios were taken:
Scenario A: High government support-high domestic
demand,
Scenario B: High government support-low domestic
demand,
Scenario C: Low government support-high domestic
demand, and
Scenario D: Low government support-low domestic
demand
Statements were prepared considering the situation with
two dimensions and were ranked by the entrepreneurs
in the Likert scale of strongly agree to strongly disagree.
The high perception statements and results from the
study were considered for constructing four future
scenarios.
Results and discussion
General profile of the respondents
In all, 30 units were surveyed out of which, only 10
percentwere small (investment between Re 1 crore and
Re 10 crores), and the remaining were micro (less than
Re one crore investment). Majority of the MSMEs (43
percent) were 3 to 5 years old. Four units were more
than 15 year old. Seven of these were in the rural areas
and 23 were in the urban locality. An urban location
helps them in having better market linkages and access
to infrastructure. Also, as more than half of the units
were found to have owners between 35-45 years old,
mostly graduates and post graduates, who are self
driven and motivated and are ready to bear associated
risks. We find gender disparity as female run enterprises
lag. In all, 70 percent of owners were males. In order
to understand the MSME performance, several
indicators were identified as follows.
Step 1. Identification of indicators
A total of 12 indicators were listed in final to indicate
the performance of the secondary agriculture based
MSMEs.
• Scale/size of unit
• Infrastructure/ machinery employed
• Socio- capital indicators
• Efficiency indicators
• Good manufacturing/cultivation practice
• Incremental expansion
• Risk and returns
• Business environment
• Business expansion
 Performance and futuristic scenario analysis............ 171

• Investment
• Business growth
• Customer satisfaction
Step 2. Relevancy of scale items by judges
A group of 20 judges consisting of social scientists
was selected to standardize the scale items and were
asked to rate the scale items in a five-point continuum
scale of most relevant (MR), relevant (R), somewhat
relevant (SWR), less relevant (LR) and not at all
relevant (NR), with the scoring of 5, 4, 3, 2 and 1,
respectively. The selected 12 indicators were rated by
judges for their relevancy and a relative weightage was
calculated for the scores to retain the most relevant
variables.
Relevancy was calculated using the formula,
(see Table 1). Six indicators were selected out of twelve
indicators listed. The selected indicators are Scale and
Size (SS), Efficiency Indicators (EI), Risk & Return
(RR), Business Environment (BE), Investment (IN) and
Business growth (GP).
Step 3. Ranking of the selected indicators
Thirty secondary agriculture-based MSMEs were
asked to rank the selected indicators according to their
importance.
Step 4. Item analysis
Based on the responses received by the judges, the
data were transformed and tabulated in Table 2.
Tabulation of frequency of ranking for each component
was done accordingly. For example, the indicator, scale
and size was ranked by 30 secondary agriculture-based
MSME entrepreneurs. It was ranked one time as first,
six times as second, eight times as third, six times as
fourth, six times as fifth and three times as sixth.

Step 5. Computing the scale values

Indicators with more than 0.9 Relevancy weightage
were selected for the construction of performance index
Guilford recommended centile position values (P) to
calculate the scale values of each indicator. After
calculating the centile position values, C value
(determined to each centile position) was recorded and
Rj values were worked out using the formula,
Rj= Cj/Σfi,

Table 1 Relevancyweightage, relevancy percentage and mean possible scores of the components

Sr Indicators Relevancy Mean possible Relevancy Remarks

No. % score weightage

1 Scale/Size of unit 93 4.67 0.93 Selected

2 Infrastructure/ Machinery employed 89 4.44 0.89 Not Selected
3 Socio-capital Indicators 78 3.89 0.78 Not Selected
4 Efficiency Indicators 91 4.56 0.91 Selected
5 Good manufacturing/ cultivation practice 87 4.33 0.87 Not Selected
6 Incremental expansion 82 4.11 0.82 Not Selected
7 Risk & return 91 4.56 0.91 Selected
8 Business Environment 91 4.56 0.91 Selected
9 Business Expansion 87 4.33 0.87 Not selected
10 Investment 91 4.56 0.91 Selected
11 Business Growth 98 4.89 0.98 Selected
12 Customer Satisfaction 89 4.44 0.89 Not Selected
172 Gowda A A S and Singh R

Table 2 Calculation of scale values of all the dimensions of performance index

Ri Ri2 SS EI RR BE IN BG P C

1 6 1 11 3 0 10 5 30 91.67 6
2 5 6 0 6 5 4 9 30 75.00 6
3 4 8 7 5 6 4 0 30 58.33 5
4 3 6 8 8 1 7 0 30 41.67 5
5 2 6 3 2 12 0 6 30 25.00 4
6 1 3 1 6 6 5 10 30 8.33 4
Σfi 30 30 30 30 30 30 180 -
Cj 148 157 151 137 159 148 900
Rj 4.933 5.233 5.033 4.567 5.300 4.933 30
Rc 4.618 5.325 4.854 3.754 5.482 4.618

Table 3 Computed scale values of six indicators Scale validity was established by Cronbach’s alpha test.
The alpha value of 0.82 indicates that the data set and
Sl. No. Indicators Scale values Rank
scale is valid and reliable. Internal consistency was
1 Scale and Size 4.618 IV done by using the correlation matrix with an individual
2 Efficiency Indicators 5.325 II indicator of scale. Correlation values were above 0.64
3 Risk and Returns 4.854 III for all the indicators which indicates a high construct
4 Business Environment 3.745 V validity. The scale values for six indicators ranged
5 Investment 5.482 I between 3.745 to 5.482, of which Investment has the
6 Business Growth 4.618 IV highest value (5.482), followed by Efficiency
Total 30.00
Indicators (5.325), Risk & Returns (4.854), Scale &
Size (4.618), Business Growth (4.18) and Business
Environment (3.745).
Where,
Among the six indicators, Investment was the most
Cjis the summation of multiplied value of frequency important indicator with the highest scale value (5.482)
of ranking of each indicator with its respective C value. contributing to the successful performance of MSMEs.
C value proposed by Hull0 was used for respective R&D investment, infrastructure and machinery
ranking. investment, capital and resource productivity,
efficiency optimization were included as components
Ri = Rank given by judges to six indicators of investment. This finding is similar to Bhatia and
Ri2 = Reverse ranking Aggarwal (2018) who found that investment on
tangible assets has a significant positive impact on
Σfi = Total number of judges for each component (total performance. All these components have a significant
frequency of ranking) role in the performance of MSMEs. Along with
Rc = Scale values investment, the Efficiency Indicator (5.325) also
influences the performance of MSMEs. Resource use
P = Centile Position = ((Ri – 0.5)/n) * 100 efficiency, cost efficiency, administration efficiency,
Rc=2.357*Rj-7.0 technology efficiency were included as determinants
of the efficiency indicator that influence performance
In the case of indicator, scale and size,
of MSMEs which helps them in creating continuous
Cj = (1X6) + (6X6) + (8X5) + (6X5) + (6X4) + (3X4) competitive advantage, taking appropriate risks,
making innovations and creating value (Civelek, 2015).
= 148
Risk & Return factor was ranked third with a scale
Rj= 148/30 = 4.933.
value of 4.854. Risk and return as components of
 Performance and futuristic scenario analysis............
financial management are correlated, i.e., increase in
one will increase the other. Return on equity, and proper
risk management components were also included under
this indicator which significantly influences the
performance of MSMEs. Under the fourth ranked
indicator, Business Growth, innovation, incremental
expansion, business expansion and R&D investment
components were included. The indicator, Scale & Size
is also considered one of the important indicators of
performance with the scale value of 4.618. Increase in
size and scale of the enterprises will enable them to
have comparative advantage over smaller enterprises.
Business Environment was ranked last among the six
indicators with the scale value of 3.745. Components
like political, social, economic and legal environment
were included in business environment, which are
necessary for proper functioning of an enterprise.
Firm’s environment affects the strategic decisions that
are necessary for positive profitability and growth of
an enterprise (Roper, 1999).
Step 6. Developing performance index
Performance index was calculated after obtaining the
scale values for the indicators. The performance index
is calculated using the formula:
PI = [ (R1/M1) × S1 /S + (R2/M2) × S2 /S + …+ (Rn/
Mn) × Sn /S] X 100
Where,
PI = Performance index
S1, S2,…..Sn = Scale values of the particular dimension
of the index.
R1, R2,…..Rn = Performance score obtained by the
particular MSME respondent for particular
performance dimension.
M1, M2,….Mn = Potential score obtained by MSME
respondent for particular performance dimension.
S = Total scale value of all the dimensions.
MSME units were distributed into six groups (based
on Sturges’ rule) according to their performance index.
Table 4 represents the distribution of MSME units
according to their performance index, namely,
very low category has MSMEs with a performance
index range from 48.36 to 50.46,
low category has MSMEs whose performance index
ranges between 50.46 and 52.56,
173
Table 4 Distribution of units according to performance
index (Based on Sturges’ Rule)
Category Score Range Number Percentage
Very Low 48.36 – 50.46 1 3.33
Low 50.46 – 52.56 - 0
Lower Medium 52.56 – 54.66 3 10
Upper Medium 54.66 – 56.76 10 33.33
High 56.76 – 58.86 15 50
Very High 58.86 – 60.96 1 3.33
lower medium group has MSMEs whose performance
index value ranges from 52.56 to 54.66,
upper medium group contains the MSMEs whose
performance index value ranges from 54.66 to 56.76,
high category has MSMEs which has performance
index value between 56.76 to 58.86, and
very high category has MSMEs whose performance
index value ranges from 58.86 to 60.96.
The performance index revealed that 50% of selected
MSMEs were high performers while upper and lower
medium performers were at 33.33% and 10%
respectively.
Measurement of dimensions of performance index
Different indicators were used to calculate the
performance index of secondary agriculture-based
MSMEs. Scale and Size, Efficiency Indicators, Risk
and Returns, Business Environment, Investment and
Business Growth were the indicators that are closely
connected to their performance. The MSME units were
distributed on the indicators of performance index and
grouped into low, medium and high categories based
on the mean values.
As shown in Table 5, with the exception of Investment,
a majority of the MSMEs were medium performers in
the other five indicators of performance, namely,
Business Growth, Scale and Size, Risk & Return,
Efficiency Indicators and Business Environment,
whereas in Investment a majority of the MSMEs were
high performers. In the case of Scale and Size indicator,
13.33% of MSMEs were found to be low performers,
76.66% of MSMEs were medium performers and 10%
of the MSMEs were high performers. On the Efficiency
indicator dimension, majority of the selected MSMEs
were medium performers i.e., 66.66% followed by high
174 Gowda A A S and Singh R

performers, 20% and low performers, 13.33%. The Table 5 Distribution of secondary agriculture-based
same trend was observed in Risk and Return category MSMEs according to different dimensions of
with a small variation in percentage of respondents in performance index (n=30)
each category i.e., 10% of the respondents were low Indicators Category Frequency Percentage
performers, 73.33% were medium performers and
16.66% were high performers. The dimension, Scale and size Low 4 13.33
Business Environment showed that 56.66% of the Medium 23 76.66
respondents were in the medium performance category, High 3 10
36.66% were in high performance category and 6.66% Efficiency Low 4 13.33
of respondents were in low performance category. A indicators Medium 20 66.66
majority of the respondents were found to be high High 6 20
performers (46.66%) in the Investment dimension, Risk & returns Low 3 10
followed by medium performer, 43.33%, and low Medium 22 73.33
performers, 10%. On Business Growth, 10% of the High 5 16.66
respondent units belonged to low performance Business Low 2 6.66
category, 63.33% of the respondent units belonged to environment Medium 17 56.66
medium performance category, and 26.66% of the High 11 36.66
respondent units belonged to the high performance Investment Low 3 10
category. Medium 13 43.33
Using the same criteria, the performance index showed High 14 46.66
that a majority of the performers were high performers, Business growth Low 3 10
followed by medium and low. However, the MSME Medium 19 63.33
units were categorized into six categories based on High 8 26.66
Sturges’ rule on the basis of the performance index
(see Table 4). More than half of the respondent units
unit increase in scale and size, the performance
showed a high level of performance, 53.33%, whereas
increases by 0.14 unit. This indicates that as business
both the medium performance categories accounted for
grows, it solidifies and becomes less vulnerable to
43.33% of respondent MSME units and 3.33% of
external threats. The larger firms with high production
percent of the MSME unit were found to be low on
levels will have a greater competitive advantage
performance. Optimal size of unit, efficient business
(Mansikkamaki, 2023). The second indicator,
environment, high investment, high returns contribute
Investment also has a positive and significant effect
to the high performance of the MSMEs.
on the performance of MSMEs i.e., for every unit rise
in investment, the performance of an enterprises
Impact of Government support
increases by 0.19 unit. Results of this study are like
The dependent variable, performance index of MSMEs those obtained in Xuan and Thu (2023), Kamungeet
was regressed on the independent variables, Scale & al. (2014) which explain that investment increases
Size, Investment, Business Environment, Efficiency competition and improves business environment. This
Indicator, Risk and Return, Business Growth and may lead to more growth as well as better performance
Government Support to know the impact made by and a high investment on infrastructure encourages
government. The result indicates that all the better performance.
independent values have a positive and significant
Furthermore, Business Environment impacts the
effect on the performance index with Multiple R value
performance of MSMEs positively, i.e., improvement
of 0.96. The R2 value was 0.93 which explains that
in the Business Environment by one unit, increases
93% of the total variance of performance is explained
the performance by 0.17 unit. Results are in line with
by the independent variables.
the studies conducted by Gharbi et al. (2014), which
The indicator, Scale and Size has positive impact on found that business environment is the necessary
performance of MSMEs. Results show that with one condition for successful operation. The technological,
 Performance and futuristic scenario analysis............
Table 6 Impact of different dimensions of performance
index and government support on performance of
secondary agriculture-based MSMEs
Sl. No. Indicator Coefficient
1 Scale and Size 0.14*
2 Investment 0.19**
3 Business Environment 0.17**
4 Efficiency Indicator 0.24**
5 Risk and returns 0.26***
6 Business Growth 0.15*
7 Government Support 0.16**
Note * Significance at 10%; **Significance at 5%; *** Significance
at 1%
socio-cultural and institutional environment have a
positive impact on the performance of MSMEs and
deteriorating Business Environment will lead to their
poor performance (Kappel et al., 2011). Efficiency
indicator also has a positive and significant impact on
performance of MSMEs. Results indicate that, for one
unit increase in the Efficiency Indicator, performance
will increase by 0.24 units. Efficiency of an enterprise
with respect to technology, innovation, resource use,
cost, etc. has positive influence on its performance.
Risk and Returns also have a positive and significant
impact on their performance. A one unit increase in
the Risk and Return factor would increases the
performance by 0.26 units. Risk and return are directly
related to each other i.e., increase in one will
subsequently results in an increase in the other (Noor
et al. 2014). Business Growth also has positive impact
on performance i.e., findings have shown that one unit
increase in Business Growth factor will increase the
performance by 0.15 unit. Firm’s growth is essential
and considered important when we craft the
profitability side of performance (Mansikkamaki,
2023).
The results explained that government support has
positive impact on performance of secondary
agriculture based MSMEs i.e., one unit increase in
Government Support increases the performance by 0.16
unit. Zhang and Ayele (2022) also found that the
Government Support exerts a positive and significant
impact on the performance of MSMEs.
175
Futuristic scenarios
Four futuristic scenarios were constructed considering
two dimensions government support and domestic
demand. These scenarios were developed to the
situations when these two dimensions are in low-low,
low-high, high-high, high-low condition.
Business as usual Scenario
In the business as usual scenario, government can be
seen pushing MSMEs towards growth through various
supporting schemes and incentives. Considering the
success rate of existing MSMEs in the market, startups
have been emerging. They are producing homogenous
products. Changing taste and rising income levels are
increasing the demand for these products. This is
having a positive impact on production and
employment levels also. Even though the government
is promoting and supporting MSMEs, it will be difficult
for them to stay in the business in the long run since
they lack product differentiation and innovative
products (Shrotriya, 2019).
In Fig.1, futuristic Scenario A, represents a scenario
where there is high government support as well as high
domestic demand. Among all scenarios, Scenario A is
the most desirable for MSMEs as both dimensions are
taken to be high. When domestic demand is high, price
tends to rise, which induces high production. This in
turn increases employment to meet the needs of
growing demand. With exposure to many government
schemes which invest on innovation and new products,
secondary agriculture-based MSMEs starts producing
different products to stay in the competition and avail
high income/ profits. The number of MSMEs increases
in this situation as profit from this sector is high. It
follows a competitive pricing strategy to overcome
competitors so as to have more profits. Youngsters
shifting to entrepreneurial activities will have greater
opportunity to prosper amidst support from the
government, creating job opportunities for others.
Enterprises will follow product differentiation in order
to have competitive advantages over other enterprises
and to have market power.
Scenario B represents a situation when there is high
government support and low domestic demand.
Demand for products depends on the purchasing power
of an individual and as the taste and preference change,
176 Gowda A A S and Singh R

Table 7 Mean score and perception of different futuristic scenario statements by respondents

Sr. No. Statements Mean score Perception

Scenario A: High Government Support and High Domestic demand

1 Production increases as the demand is high 4.57 High
2 Employment increases 4.50 High
3 MSMEs earns higher profits 4.50 High
4 There is a scope for new products and innovation. 4.60 High
5 Increase of MSMEs in number 4.57 High
6 Product diversification brings economies of scale 4.63 High
7 Competitive pricing strategy is followed for higher profits 4.53 High
8 More public investment 4.27 Low
Scenario B: High Government Support and low Domestic Demand
1 Production decreases 4.67 High
2 Employment decreases 4.40 High
3 MSME suffers from reduced income. 4.73 High
4 More R&D investment backed up by government support 4.47 High
5 High government support increases the fund flows into the MSME sector 4.03 Low
6 Export Increases 4.10 Low
Scenario C: High Domestic Demand and Low Government Support
1 Production increases 4.60 High
2 Increased employment to meet the demand requirements 4.43 High
3 Increase in income 4.43 High
4 Private fund flow increases. 4.40 High
5 Product innovation for long term growth 4.50 High
6 Media based promotion increases 4.03 Low
Scenario D: Low Government Support and Low Domestic Demand
1 MSME falls into loss situation 4.63 High
2 Production decreases 4.63 High
3 Employment decreases 4.50 High
4 Shut down of units due to loss 4.47 High
5 Problem of raw material losses 4.53 High
6 Introduction of new product lines to attract demand 4.20 Low
7 Fails to find export market 4.30 Low

the demand for products might decrease. This may
cause MSMEs to decrease production to avoid losses.
Decrease in production will reduce demand for
employees and hence employment will reduce. Facing
less domestic demand for products, income from the
MSMEs will decrease in this scenario. With high
support available from government, MSMEs will go
for more R&D investment assuming that new and
innovative products will attract consumers in the
market.
Scenario C represents a situation where government
support is low and domestic demand is high. Rising
levels of income among population will lead to increase
inthe product demand and higher income. As
government support is low in this scenario, private
party or private supporting agencies will pitch in to
provide support, credit and other facilities. MSMEs
will go for more product innovation to grab more
market share and stay in competition.
Scenario D is a situation where both dimensions,
government support and domestic demand are low.
Even if the MSMEs are backed up by private agencies,
it will be difficult for them to survive. There may be
chances of private party withdrawing support or
 Performance and futuristic scenario analysis............
Figure 1 Futuristic Scenarios
investment from the MSMEs considering its low
demand for products (this happened during covid-19).
MSMEs will start incurring losses, cut down production
to avoid further loss or may shut down . This leads to
lay-offs of the employees and potential loss of raw
materials and hence depict the most unfavorable
scenario for their growth.
Conclusion
As India is moving towards a high growth and
sustainable economy, it promotes bio economy, circular
economy and the secondary agriculture. It marks the
necessity of secondary agriculture-based MSMEs to
perform well to contribute to achieving the goal of a
sustainable economy. From a primary survey of 30
MSME in Bangalore, this study finds that investment
is an important indicator of performance with the scale
value of 5.325. In all, 50% of the MSME units were
high performers and two-third were upper medium
performers in the study area. Government may work
177
towards improving their performance with the help of
private sector and state extension machinery.
Government should fund for skill development and
incubation centers, which will enhance the performance
of secondary agriculture-based MSMEs. Promotional
initiatives should be taken by the government to
encourage region-specific traditional products from
different MSMEs. In the case of futuristic scenarios,
Scenario A with high government support and
domestic demand is found to be the most favorable
scenario for the growth and upliftment of MSMEs. By
contrast, Scenario D with low government support and
low domestic demand will have the gloomiest
economic status. MSMEs backed up by government
support can function well when there exists good
demand for their products. Product innovation and
differentiation are the key factors to maintain a
continuous demand for the products produced by the
MSMEs along with right positioning and branding of
products.
 178 Gowda A A S and Singh R
References
Bhatia, and K Aggarwal. 2018. Impact of investment in
intangible assets on corporate performance in India.
International Journal of Law and Management 60 (5):
1058-1073. https://doi.org/10.1108/ijlma-05-2017-
0127
Civelek, M E, M Cemberci, O K Artar, and N Uca. 2015.
Key factors of sustainable firm performance: Astrategic
approach. Zea E-Books, Book-34.
Guilford, J P, Psychometric Methods, Tata McGraw-Hill,
New Delhi, 1954. https://doi.org/10.1177/
001316445501500220
http://digitalcommons.unl.edu/zeabook/34?utm_source=
digitalcommons.unl.edu%2Fzeabook%2F34&utm_
medium=PDF&utm_campaign=PDFCoverPages
Ishengoma, E K, and R Kappel 2011. Business environment
and growth potential of micro and small manufacturing
enterprises in Uganda. African Development Review 23
(3): 352-365. https://doi.org/10.1111/j.1467-
8268.2011.00291.x
Jena, N R, L R Thatte, and V G Ket. 2018. Performance of
the micro, small and medium enterprises (MSMEs)
manufacturing sector in select states in India: The
concept of MSME Manufacturing Business Facilitator
(MSME-MBF) Index. Academy of Entrepreneurship
Journal 24 (1): 1-22. https://jaipuriamba.edu.in/wp-
c o n t e n t / u p l o a d s / 2 0 2 1 / 1 2 /
jim_quest_jul_dec_2017_new.pdf#page=66
Kamunge, M S, A Njeru, and O I Tirimba. 2014. Factors
affecting the performance of small and micro enterprises
in Limuru Town Market of Kiambu County, Kenya.
International Journal of Scientific and Research
Publications 4 (12): 1-20. https://www.academia.edu/
download/46191940/SMES.pdf
Laouiti, R, S Gharbi, and N Liouane. 2014. The effect of
business environment on firm performance Exploratory
Study: Case of Tunisian enterprises. International
Journal of Management and Information Technology
8 (3): 1430-1439. https://doi.org/10.24297/
ijmit.v8i3.1979
Mansikkamäki, S. 2023. Firm growth and profitability: The
role of age and size in shifts between growth–
profitability configurations. Journal of Business
View publication stats
Venturing Insights 19: 372. https://doi.org/10.1016/
j.jbvi.2023.e00372
Ministry of MSME, Government of India. 2022. Annual
Report 2022-23. https://msme.gov.in/sites/default/files/
MSME-ANNUAL-REPORT-ENGLISH%202020-
21.pdf
Mukherjee, S. 2018. Challenges to Indian micro small scale
and medium enterprises in the era of globalization.
Journal of Global Entrepreneurship Research 8: 1-19.
https://doi.org/10.1186/s40497-018-0115-5
New Industrial Policy 2020-25. https://ebiz.karnataka.
gov.in/kum/PDFS/Industrial%20Policy%202020-
25.pdf
Noor, J A M, and A I Abdalla. 2014. The impact of financial
risks on the firms’ performance. European Journal of
Business and Management 6 (5): 97-101. https://
www.academia.edu/download/68508098/10917-
13219-1-PB.pdf
Press Information Bureau, “Contribution of MSMEs and
Cottage Industry to India”. https://pib.gov.in/
PressReleaseIframePage.aspx?PRID=1884734
Roper, S. 1999. Modelling small business growth and
profitability. Small Business Economics 13: 235-252.
https://doi.org/10.1023/a:1008104624560
Shirur, M, N S Shivalingegowda, M J Chandregowda, and
R K Rana. 2018. Performance analysis of South-Indian
mushroom units: Imperative policy implications for
their preparedness for global competitiveness. Current
Science 115 (11): 2141-2146. https://doi.org/10.18520/
cs/v115/i11/2141-2146
Shrotriya, V. 2019. Product differentiation: key to success
in marketing. International Journal of Research and
Analytical Reviews 6 (2): 560-567.
Xuan, V, N Thu, and N Anh. 2020. Factors affecting the
business performance of enterprises: Evidence at
Vietnam small and medium-sized enterprises.
Management Science Letters 10 (4): 865-870. https://
doi.org/10.5267/j.msl.2019.10.010
Zhang, Y, and E Y Ayele. 2022. Factors affecting small and
micro enterprise performance with the mediating effect
of government support: Evidence from the Amhara
Region Ethiopia. Sustainability 14 (11): 6846. https://
doi.org/10.3390/su14116846