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Make in India: Strengthen MSEs’ Support Machinery

By V. N PRASAD*

The ‘Make in India’ programme of September 2014 to attract foreign and domestic investment in the indentified manufacturing sector and the more recent proposal for ‘Start-ups’ could spur development of Micro and Small Enterprise (MSE) sector.

The ‘Make in India’ and ‘Start-ups’ initiatives, augur well for MSE sector. For their success, the Government aims to establish a business -enabling environment. These schemes provide space for creative-minded and first generation entrepreneurs to set up sustainable business ventures. These offer avenue to give shape to their ideas, besides generating employment opportunities for others. The continuing revolution in information and communication technologies, in fact, has widened the business opportunities to discerning entrepreneurs. The recharged MSE sector could eventually contribute to the ‘Made in India’ products.

MSE Sector

Several of sectors identified for thrust under the ‘make in India’ programme do have a large presence of MSEs.  MSEs are said to be producing over 6000 items, ranging from components for sophisticated /high-tech industries to mass consumption items. With about 95 percent of the total enterprise population being small enterprises, the sector is not only central to the economy but is also an effective tool to address the twin problems of unemployment and poverty. It is recognized that 45 per cent of the value of manufactured products and over 8 percent of Gross Domestic Product (GDP).come from the sector.  36 million MSEs provide employment to over 80 million persons.

Several export products such as handicrafts; gem & jewelry, coir items; ready-made garments; pharmaceuticals; sports goods and builders’ hardware come predominantly from this sector. MSEs, in fact, account for 40-45 per cent of export earnings of the country MSEs.  What is to be appreciated here is that only a small number of MSEs are presently in export trade.

Such an extensive sector did not evolve on its own, but is an outcome of deliberate and concerted efforts spread over several decades.  The governments, over the years, have put in place both a sound policy, with unique features such as reservation of products for manufacture by small enterprises, and a wide network of institutions to build a robust sector.

Towards this, the Micro, Small and Medium Development Organisation (former SIDO) alone has established about 100 field offices in the form of Small Industries Service institutes, rechristened  as MSME Development Institutes–MSMEDIs, Technology Centers ( formerly Tool Rooms)/prototype development centers, training institutes, etc. In addition, all States have had established Small Industries Corporations, and some even Export Corporations to help MSEs’ export their products, besides District Industries’ Center (DICs).  The National Small Industries Corporation (NSIC) provides the much needed marketing support, apart from the help in improving the technology, Small Industries Development Bank (SIDBI) attempts to bridge the demand-supply gap with regard to finance.  The more recently established MUDRA bank, tasked to help micro enterprises, is another move to improve MSEs’ access to fiancé.

MSEs have had greatly benefited from all these institutions in terms of:

  • technical support,
  • training & skill development,
  • quality maintenance,
  • raw materials supply
  • marketing support
  • access to finance
  • infrastructure
  • technology development,
  • getting information, and
  • receiving government programmes.

 Issues

The sector, over the past two decades, saw a gradual dilution, and in some cases withdrawal, of the pre-1991 support programmes (e.g. reservation policy, quantitative restrictions on imports, etc.), stressing the sector.  While the enterprises lost the earlier protective net, the institutional network, the patronage. Both the enterprises and the Government-funded support-institutions have to wade through the competitive environment on their own.

Even the enterprises that supply goods and services to highly local and neighborhood market  are now exposed to intense competition in terms of finding buyers for their products/services and surviving in the market  The recent spurt in the ‘on-line shopping’ has only further exacerbated MSEs’ woes.

According to 4th All India Census of MSMEs, the “lack of demand”, was the most important reason for sickness among enterprises, which also can be interpreted as their inability to push products in the market. The other problems cited by them include lack of (i) access to finance, (ii) information on host of aspects like policies & programmes, markets, etc., (iii) support in improving technology, and (iv) marketing support. These signify that the delivery mechanism in the respective areas needs attention.

The promotional agencies, on the other hand, are focusing more on strategies to continue their own existence instead of effectively supporting MSEs to face the new atmosphere and harness the prospects it offered.

Support system

As a part of the ‘Make in India’ program, fresh investment in terms manpower and facilities could be made in the network of support institutions to enable them to effectively strengthen MSEs’ to build their capacity in tune with market requirements. The rejuvenated sector could attract new investments and generate employment. The MSMEDIs and technology Centres need to be made specialized agencies rendering skill development and technical support services to MSEs. The last January initiative of the Ministry of MSME to establish MSME-Samsung Technical School at select MSME Technology Centres to provide technical skills to unemployed youth is a welcome move in the direction of improving skills of future workforce.

Forging greater linkage between a large enterprise (LE) and a small one in the marketing, enlisting the Corporate world’s support to develop more small ‘export companies’, transforming Small Industry Associations and the present DICs into Small Business information Centres (SBICs) and Small Enterprise Promotion Agencies (SEPAs) respectively, and encouraging entrepreneurs to establish MSE support services’ entities are other areas that need to be woven into the proposal to revitalize MSEs.

Given the effective support, the sector can substantially contribute to building a ‘strong India’ – its present place in the economy is testimony to that effect.

 

 

Mr. V. N Prasad is an economist and SME expert. He has  vast experience working on  projects related to micro, small and medium enterprises.  He is the Principal Advisor Institute for Enterprise Research & Development(IERD), Editorial Advisor, GSME News.  Formerly Senior Economic Advisor, World Association for SMEs. He can be reached at vnpj@yahoo.com

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