Ease of Doing Business for MSMEs: Indian Small, Medium Enterprises (MSMEs) have arguably come a long way in becoming globally competitive. Their contribution to Indian exports is about 50 per cent and their contribution to the total domestic product is about 30 per cent. Therefore, MSMEs are important for India’s overall ability to be an influential player in world trade. In 2021, India was ranked 43rdrd Among the 64 countries in the annual World Competitiveness Index compiled by the Institute for Management Development (IMD). However, the country has been in that position for three consecutive years. Experts believe that technology is the key to improving the competitiveness of Indian business.
During a panel discussion on how to build competition for MSMEs at Financial Express Online’s SMExports Summit 2022 on Friday, Ajay Sahai, Director General and CEO of the Federation of Indian Export Organizations (FIEO) said that Has done. And equipment in the previous definition because it would help in the ‘internationalization’ of MSMEs. However, if MSMEs want to increase their share of total GDP, they need to focus on technology, he said.
“Global trade is driven by technology sectors such as the machinery, electronics, and automobile sectors. The combined share of these three sectors accounts for about 35 percent of global imports worth about $ 7 trillion, and our share here is less than 0.9 percent. So, when we talk about MSME, technology is very important. I am pleased that some emerging sectors such as high-end engineering and electronics are seeing new technologies come, ”Sahai added. The session was moderated by Soumyadeep Ganguly, a partner at McKinsey & Company.
Significantly, the government last year discontinued the Credit Linked Capital Subsidy Scheme for technology upgrades through a circular and formulated the MSME Champion Scheme for small businesses to be sustainable, competitive and innovative through financial support.
One of the main reasons for the lack of investment in technology by MSMEs is the burden of compliance, which has declined over the last few years, but gaps like liquidity still exist. Sahai said that while banks claim that there is no shortage of funds on their part and they do not reject any suitable offer, MSMEs have always been fighting to get funds from banks. Therefore, the government needs to look into why the entire credit process from application submission to distribution cannot be digitized from end to end, he said.
Another reason MSMEs invest less in technology is because of lack of funds as a large portion of their funds go to land or building purchases. Here, Sahai suggested providing plug-and-play facility to MSMEs on SEZ and additional land in industrial areas. “We also need to look at providing a marketing platform for MSMEs and get a very detailed mapping of a planned scheme that we have to do in the five-10 year bottom line (in exports) and get a big funding,” he added. .
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Growth in the MSME sector in FY22 could be about 15-17 percent of the revenue behind the recovery in demand after economic activity increased with the gradual easing of the Cowid restrictions, a study by Assocham-Crisil said in April this year. The recovery was reported across sectors including construction, goods, exports and consumption services led by Covid Pack. FY22 growth followed negative sector growth by approximately 10 percent in FY21 and 6 percent in FY20. For the current financial year, the survey estimates an increase of 11-13 percent.
However, to increase from about 15 percent to 25 percent, it is mandatory to focus on some important sectors Tamal Sarkar, Senior Adviser, MSME Cluster Development Body Foundation for MSME Clusters, during the panel discussion, suggested adopting cluster methods to identify key sectors.
“Our approximately 5,000 MSME clusters, apart from handicraft and weaving clusters, have 1,400-1,500 clusters in 14-15 sectors which are quite ‘advanced’ such as machine tools, metal products, leather etc. Some lead firms which are SMEs. So, a policy that can identify more such areas of excellence and give them a special advantage of jumping into the value chain where returns are much higher will spread to other clusters, ”the government said.
For this to happen, MSMEs need to be linked to global lead clusters and global technology companies should come to India to open their centers in these sectors, “he added.
In addition to technology, an overall focus on quality is also important for MSMEs to sustain growth at any level. So, how to create this mentality in MSMEs? Mahesh Desai, Chairman, Engineering Export Promotion Council (EEPC) India, said MSMEs need to be trained on quality as well as more awareness and take them abroad where they have to follow the quality assurance.
“For sustainability, the first thing to focus on is innovation that can be done on the store floor every day. Then there are partnerships (to be formed) with big companies and groups, and finally, it’s about human capital development. Also, there needs to be an industry-institute interface that needs to be improved, ”Desai added.
India ranks 46th in Global Innovation Index by World Intellectual Property Organization (WIPO)M Ranked in 2021 among 48 to 132 countriesM In 2020, 52nd In 2019, and 81St. Behind ICT services exports in 2015, domestic industry diversification, and other factors.