MSMEs Key To Making India A Global Production Hub

As India moves towards becoming a $5-trillion economy, the International Monetary Fund (IMF) has forecast a modest 6.8 per cent growth for the country in the current financial year. Not only that, the UN agency has warned that the country's fiscal space is at risk and called for an ambitious and well-communicated consolidation.

The Narendra Modi government has set an aspirational goal of India becoming a $5-trillion economy by 2025. However, as the country strives to get to this goal, the economy is facing headwinds and has slowed to a 5-year low of 6.8 per cent rate of growth.

Manufacturing Hub Debate

India can emerge as a manufacturing hub especially with the ongoing policy reforms like the Performance Linked Incentive (PLI) scheme. The Ministry of Defence is pushing for defence exports. The reduction of imports and the objective of self-sufficiency has led to a larger participation of the private sector in the defence sector in design and development.

It is argued that the extension of PLI schemes to design in manufacturing and solar power equipment would expand capacities as well create more opportunities. 

A recalibration of customs duty for electronic goods would enable growth of domestic manufacturing and also encourage procurement from SC/ST entrepreneurs as part of the public procurement policy.

Ways to Create Wealth

There are three broad areas which can be presented for wealth creation:

a) The slowdown in many parts of the world provide an opportunity to position India as an attractive investment destination. Export plays a critical role in Atmanirbhar Bharat. The Modi government has taken a lot of steps to inspire, promote, motivate and push exports of traditional goods through “One District One Product,” and cluster approach. 

The MSME sector in India continues to demonstrate remarkable resilience in the face of global and domestic economic and geo-political circumstances. But MSMEs also need handholding to get to the level where they can engage successfully in international markets as well as address growing domestic demand for high quality goods and services.

b) To enhance India’s share in global trade, and sustain it, especially in the wake of tough business environment, domestically and internationally, it is imperative for us to enhance our levels of competitiveness and also give due importance to technology and innovation. 

The Ministry of MSME has launched a zero defect zero effect policy to boost and encourage Indian MSMEs to be more productive.  The scheme is an extensive drive to create proper awareness among MSMEs about zero defect, zero effect (ZED) manufacturing and motivate them for systematic innovations for sustained growth.

c) The next ten years will bring fundamental changes to our work methods. To adapt, employees in almost every role and industry will need to acquire new skills. Capacity building by investing in human capital and skilling will particularly help.

Wealth creation isn’t possible without nurturing private enterprises and entrepreneurs, investors and consumers.  A conducive business ecosystem and supportive regulatory climate can go a long way in ensuring sustained wealth creation in the country. Interlinkages between the sectors would help increase the success rate of manufacturing units.

Bolstering the MSME Sector

While infusion of liquidity could help the distressed MSMEs recoup the losses in the short term, in order to really hit the ground running and help the economy realise its potential, strategies and policy actions with a long-term vision in mind need to be enacted urgently. The focus has to be widened from survival in the short-run to building a productive and competent MSME sector for the future.

The MSME sector can be used as a catalyst to exploit the opportunity and realise the dream of making India a global production hub. MSMEs are the harbinger of entrepreneurship and innovation which are important pillars for lifting the nation’s capacity in shifting towards the manufacture and exports of sophisticated high-tech products and help move up the global value chains. 

To build and sustain competitive manufacturing enterprises, both large and small, and to realise the vision of Make in India for the world, MSMEs need to be strengthened and supported. 

To make the best of the opportunities arising from the biggest challenge of this century, Indian economy needs a thriving MSME sector. The substantial contribution that the sector has made to the economy has got it to be acknowledged as the “backbone”. It is also true that this backbone has been hit severely by the pandemic and as the economy tries to stand up on its feet, strengthening of the backbone assumes an imperative task ahead for the policymakers.

The author is Founder & Chairman, DICCI

Milind Kamble

Guest Author The author is Founder & Chairman, DICCI