Five challenges the new regime faces for the growth of MSMEs in India

Few years back while I was reading Thomas Friedman’s The World is Flat, a thought kept penetrating my mind as to whether the transformations that were illustrated and explained really resulted in making the world flatter. There was a feel which was somehow hindering the entry of such belief that really the world is getting flatter, whether opening up of the economy has really helped India in appropriate distribution of wealth. Isn’t it a reality that big corporate houses and huge multinational corporations are killing small businesses and the opening up of the economy is in fact resulting in consolidation? This thought kept me busy for few months till I happen to read the views, comments and research papers by Harvard scholar, Pankaj Ghemawat and the world is flat began to sound more like an illusion, a fiction well defended and attributed to the success stories. I began to read comparative literature and kept an eye on the growth of Indian industries, especially small and medium sector and government policies related to this sector. This provided me a kind of learning, I cherish.

Small business or industry is the backbone of any economy, hence the government policy has to concentrate its energy to this sector in order to have equitable distribution of wealth and recognize their contribution in the larger macro-economic hemisphere. It does not require an in depth research to conclude that India has a big market for different kind of products and services. It has lured the world which has resulted in the entry of many multinational corporations to have their operations and respond to the needs of the market. So far as economic growth indicators are concerned India has been performing well which has boosted purchasing power of consumers. There is more money in circulation. In this background it is extremely important to encourage young aspiring entrepreneurs for initiating their ventures through providing them incentives and moral support. Almost all big companies started small. Small business (Micro, small & medium enterprises) sector which contributes to 8% of the GDP through around 45% of total manufacturing output has huge potential to explore and expand. India is at crossroad at this juncture as a new government is expected to occupy office in coming month. If the hope of industry is to be read, market emotions are looking quite bullish. Whoever occupies the office has to put efforts to positively respond to the market expectations. Some of the challenges are listed here.

First, the governments are mandated through Article 43 of the constitution of India to promote cottage industries on an individual or co-operative basis in rural areas. It is observed that the working enterprises operating in rural areas are increasing marginally as compared to the ones operating in urban areas. This is a positive trend and it is required to develop systems, practices and procedures to encourage rural entrepreneurship and provide them with appropriate infrastructural support. The operations of the middlemen have to be regulated so that the exploitation of entrepreneurs is avoided. A supporting platform at the lowest level of governance needs to be created so that the problems are resolved quickly. 

Second, the government has to provide entrepreneur friendly environment and reduce unnecessarily long procedures which restrain a budding entrepreneur to take up initiative. A culture of trust and entrepreneurship has to be developed among youth. Entrepreneurs have to believe that India is a land where they can develop enterprises of their choice and they get a strong feeling as to their belief in the future of their motherland. In order to be an achiever, first they have to be believer. And it is the responsibility of the government to assure them support through providing facilitating environment to make them believe in the power of their dream. 

Third, the availability of finance is being addressed through different government agencies and many schemes, though it is required to see that the approval, disbursement and use of finance is smooth without spoiling the culture of good business. The government has to initiate a mission towards developing networks of people to create and co-create products and services not only for domestic market but for the international market for which export enhancing economic policies have to be framed. 

Fourth, employment and employability are the key issues which the government has to take up seriously. It is not just the number of employed people which is important, rather for sustaining enterprises, the employability is more important. Skill development institutes have to be developed in all parts of the country to assure employability. This is also possible through involving industry houses in imparting training to the unemployed youth. There are many training institutes run by the government at national as well as regional level. Though the national level institutions have done well in imparting training and building networks, however, I have reasons to believe that the training institutions run in the name of MSME institute at district level are not performing their task to the cause. They merely operate as a government department and conduct regular formal training programs, which are more on the paper than effectively contributing towards building entrepreneurs or providing them required skills/training. I suggest that public private partnership in building the institutions of repute in different regions of the country needs to be explored and experimented. Developing relevant skills among the youth and relating it to the need of the market is a challenge which is required to be addressed at local level.

Fifth, the policy should not be just to expand industry and enterprise on concentric basis. It should lead towards equitable distribution of wealth. It should reduce the gap between the rich and the poor. A culture of co-existence and mutuality of small and big enterprises has to be developed in order to look into their interdependence, rather than big and mighty enterprises dominating over their small yet valuable counterparts. Necessary regulatory framework needs to be developed in this regard. 

These are just few challenges apart from many others which shall unfold as one gets into deep. In order to see that the world really gets flatter, the policy which leads to consolidation of business should be discouraged. Apart from having supportive policies it is equally important to have their effective implementation, consistent monitoring and periodic review.

India has produced many successful entrepreneurs in the past and many big business houses of today were initiated as small venture in yester decades or centuries by their forefathers. Their commitment to see India as a developed nation and to contribute to the growth story of India has proven through economic growth indicators that we have done well so far and can do really better in the times to follow. However the concern of devaluation of human values in business, the practices of seeking small favors to compromise the sanctity of nation, and to look at the enterprises with merely meeting selfish ends has somehow created misplaced notion towards entrepreneurs and enterprises. And that is the biggest challenge any government shall have to address if it really remains in power and want to enjoy respect in the eyes of the people of the country.