MSMEs In India: ‘Miles To Go Before We Reach A Satisfactory Point’

With a growth rate of 18.74 per cent in 2016-17, micro, small and medium enterprises (MSMEs) have emerged as a dynamic sector in India contributing enormously to the socio-economic development of the country.

Prime Minister Narendra Modi led government has come up with schemes like Credit Guarantee Scheme (CGS), Credit-linked Capital Subsidy Scheme (CLCSS), Cluster Development Programme (CDP) and the National Manufacturing Competitiveness Programme (NMCP) to help the MSMEs. In an attempt to boost the sector, the allocation for the MSME ministry in 2017 union budget was increased by nearly 87 per cent over the budget allocated for the ministry in the previous year.

However, acknowledged as the backbone of the Indian economy, the sector still face issues like shortage of funds, stiff competition from imports and big firms and lack of managerial skills. “While developed countries across the world attained their position by promoting MSMEs, India has so far neglected them. 

Therefore, the central government had taken several steps towards minimizing non-performing units by launching a programme of revival and rehabilitation of such units,” said Kalraj Mishra, union MSME minister earlier this month (June).

A report by Centre for Civil Society titled ‘Regulatory barriers to MSME’ says, “Lack of information and awareness on part of entrepreneurs as to governmental benefits and schemes designed to facilitate their induction into and continuance in the MSME sector could be a cause of their sub-optimal performance.” 

The report also blames poor ranking of India in ease of doing business and the prevalent corruption in the country for slow growth of MSMEs. “The smaller the firm, the likelier it is to be affected by corruption. More MSMEs than larger firms believe that corruption is “part of the way things work in the country,” the report adds.

According Mishra, the MSME sector ( which saw disruption due to demonetization last year) is expected to get a thrust with the goods and services tax roll-out (expected from July 1), as the new tax regime will make tax structure simpler and bring more transparency in the tax process.

Pankaj Mishra, owner of a small enterprise in Varanasi, told BW Businessworld, “Demonetisation hampered our day to day dealing, and we are also skeptical of benefits from upcoming goods and services tax. What we need is low tax burden, less paperwork and if possible, easy loans. I can’t comment on what the current government has achieved in this area but I can certainly say that there are miles to go before we reach a satisfactory point.”

The incumbent government has initiated few good schemes to boost the sector but their results are yet to come on ground. Further, skill development must be promoted to increase productivity and credit facilities through government should be made more accessible to increase the contribution of the MSME sector to the economic growth of the country.