In India, excluding micro, small and medium enterprises (MSMEs) from the central government’s internship scheme is a missed opportunity for both the sector and young job aspirants, experts told BW Businessworld. Indian startups and small businesses, which often operate with lean teams, thrive on new perspectives and creativity that interns bring. According to the observers, by not including them in the internship scheme, India risks stunting the growth of this vital sector.
MSMEs are considered the backbone of the economy, accounting for approximately 30 per cent of gross domestic product (GDP), 46 per cent of total exports and employing around 11 crore people. According to a McKinsey Global Institute (MGI) report, the sector contributes 62 per cent to employment, as opposed to 77 per cent in other emerging economies.
Union Finance Minister Nirmala Sitharaman stated during the budget speech that the Centre will introduce a scheme for internship opportunities for the youth in the top 500 companies of India as part of the Union Budget 2024-25. Sitharaman said this scheme will be implemented over the next five years and is expected to benefit 100 million youth. Interns will receive a monthly stipend of Rs 5,000 and a one-time assistance of Rs 6,000. The companies will bear the cost of training the interns via corporate social responsibility.
"Excluding them from a program designed to enhance skills and provide employment opportunities may hinder the overall growth and development of the MSME sector. If one crore youth are to be provided internships solely in large companies, MSMEs will lose access to fresh talent and innovative ideas. By not including MSMEs, we risk creating a disconnect between young job seekers and a significant portion of the job market known for its dynamism and innovation," said Mukul Goyal, Co-founder and Director, Stratefix Consulting.
Scope For The Sector
Experts stated that internships in MSMEs can provide hands-on experience in varied roles, offering insights into different business operations that larger corporations may not provide. Research suggests that skills shortages are a key reason for stagnation in MSME growth, and denying these businesses access to a dynamic workforce could exacerbate this issue.
This exclusion could limit the potential for young professionals to gain exposure to entrepreneurship, creativity, and practical skills that are essential in today’s job market. According to a study by Nasscom, if the sector can successfully integrate skilled interns into MSMEs, it could see an increase in productivity by up to 25 per cent within five years. This sector will generate 20 million jobs by 2025 if supported properly.
Talking about the potential economic benefits of including MSMEs in the internship program, Ravinder Goyal, Co-founder, Erekrut said, "MSMEs would gain access to a pipeline of skilled interns who could potentially turn into full-time employees, reducing recruitment costs. Young minds often bring fresh perspectives and digital skills, which can help MSMEs innovate and improve productivity."
As many interns confront meagre stipends and excessive workloads in several companies, Erekrut's Goyal told BW that interns offer a cost-effective way to supplement the workforce, especially for smaller firms with limited budgets. The scheme in which 30 lakh interns will get Rs 5000 per month for an internship at top 500 companies, how these 500 firms will be identified was not clear.
"While a company may have to pay less to these interns since the government will pay Rs 5000 per month to the interns, there are still significant costs to the companies to employ these interns. This includes identifying projects for the interns, training costs, monitoring costs, reporting costs, and costs related to coordination with the government," said Partha Chatterjee, Dean of Academics, School of Humanities and Social Sciences, Shiv Nadar University.
Given the uncertainty about the details of the scheme and the costs associated with an internship program, it might not be in the interest of an MSME to participate in this scheme. As such, it is prudent to keep MSMEs out for now as the scheme envisages, Chatterjee added.
Domestic Problems And Global Challenges
Many industry leaders in the MSME sector are concerned about their exclusion from the internship scheme. There is a shared expectation that the government should recognise MSMEs’ potential in skill development and job creation. MSMEs are calling for more inclusivity and flexible models that cater to their unique needs.
"The sector views internships as a way to bridge the skill gap and provide youth with real-world experience, which can enhance their competitiveness globally. Excluding MSMEs limits their ability to compete globally, as access to skilled talent is crucial for innovation and growth. MSMEs will lag behind larger firms in developing talent that can adapt to global challenges," Erekrut's Goyal stated.
Industry leaders argue that internships within MSMEs offer unique learning experiences that larger corporations cannot replicate. The close-knit environment often allows interns to take on more responsibilities and gain a comprehensive understanding of business operations.
Moreover, there is an expectation from MSME representatives that their voices should be included in discussions about such initiatives moving forward. They advocate for policies that recognise their contributions and challenges while ensuring equitable access to government programs designed to enhance skills and employment opportunities.
"I am concerned about the potential impact of exclusion on their competitiveness in global markets. Many believe that this oversight undermines the potential contributions of MSME businesses to skill development and employment generation," stated Stratefix Consulting's Goyal.
Integrating MSME In The Scheme
As per the observers, MSMEs can be integrated into the internship scheme by creating a flexible, decentralised model where MSMEs of all sizes can participate. Offering financial incentives or subsidies for MSMEs to hire interns would encourage participation. Collaborating with educational institutions to provide skill-based training aligned with MSMEs' needs will ensure that interns add value from day one, asserted Erekrut's Goyal.
"The internship scheme can bridge that gap if there is an organised job search process for the internship at the end of their internships and MSMEs. These interns, who have the experience of working in top 500 companies, can bring in ideas and ways of doing things to these firms. This will help vitalize the scheme as well as the MSMEs," Chatterjee told BW.
As per recent reports, MSMEs are relatively resilient compared to larger firms, often adapting quickly to market changes. By equipping them with skilled interns who bring fresh perspectives and innovative ideas, these businesses can enhance their productivity and efficiency.
Stratefix Consulting's Goyal stated, "Including MSMEs in the internship scheme could catalyze the realization of this potential. Furthermore, these businesses are more distributed across India, especially in tier-2 and tier-3 cities, providing an opportunity to create jobs in regions often overlooked by larger firms. By channelling interns into smaller businesses, the government can ensure more equitable growth across states, reducing regional economic disparities."
More Changes
Experts also pitched for a framework that simplifies compliance for small businesses looking to participate in such programs, not just the top 500 enterprises. They also advocated for a dedicated MSME internship portal that matches interns with relevant small businesses.
This could involve streamlining application processes and providing financial incentives or subsidies for companies that take on interns. "Needless to say, simplifying paperwork, providing online portals for registration, and offering dedicated support for small businesses navigating this system. I would highly recommend an expansion of the existing Udyam portal, ensuring that internships are offered in both urban and rural MSMEs, thereby broadening the geographical scope of the scheme," stated Stratefix Consulting's Goyal.
Additionally, training programs should be established to help MSME owners understand how to mentor interns effectively. This could involve workshops on best practices for managing young talent and creating productive work environments.
"If a platform is created which brings together all the interns and companies can post their job openings, that will bring down the search cost. Interns can discover interesting roles within MSMEs, and MSMEs can find the skilled people they need. These interns, who have the experience of working in top 500 companies, can bring in ideas and ways of doing things to these firms," mentioned Chatterjee.
Meanwhile, India's ambitious goal to become a USD 5 trillion economy by 2025-26 heavily relies on the growth and competitiveness of MSMEs. Leaving them out of the government's internship scheme is a missed opportunity, not just for these businesses, but also for young job seekers looking to gain valuable experience in diverse settings. By incorporating MSMEs into the internship initiative, India can unlock tremendous potential. This move would enhance skills, drive innovation, and foster entrepreneurship across the country.
