Look at the back bone of Indian Economy and an industry sector which provides maximum employment, you will find it is Micro, Small and Medium Enterprises. Two years ago in 2008 entire world was in the grip of economic meltdown and economic conditions of many countries is still miserable including the giant USA. However, in India we did not felt the impact to that extent. In my opinion two factors contributed the most for the stability of Indian economy during this phase, that is, the strong base of MSME in India and timely relief package to industry by the Government. If you look back into the history, you will find that India was regarded as “Golden Bird” mainly because of the excellent quality and designs of the products manufactured by Indian cottage, Micro and Small enterprises. These products were bartered for gold by the merchants from all over the world.
As on date, MSME contributes 8% to GDP, 45% in manufacturing sector and 40% in total exports. 2.6 crore MSMEs produces 8000 different types of products and are providing employment to about 6 crore people. That means, 8.6 crore families in India are directly engaged with MSME Sector. Assuming an average size of the family to be 4 people, more than 1/3rd population of India is directly fed by MSME’s.
The effect of economic meltdown started declining in early 2009 and the economic conditions of MSME started improving from October 2009. In June/July 2009 Export also started improving. The performance of MSME sector has improved considerably now and it is doing well in Garment, Leather and Engineering exports. The performance of this sector is also attributed to the rapid growth in infrastructure, real estate and transport sectors.
Though the sector is Small Scale yet the problems/issues connected with it are big.
In a globalised world economy, the MSME Sector has to face new challenges every now and then. In May this year, MSME sector was subjected to another jolt when economic conditions in E.U. came under pressure. Though MSME were having export orders but devaluation of Euro not only wiped out their profits but subjected them to huge losses. In the third quarter of this year American economy is once again under pressure. It was evident from President Obama’s visit to India recently when he was on the receiving end and Indian Industrialists were proud contributors to help American economy. As such the international market for MSME is not stabilized as yet.
In domestic market also MSME is faced with many challenges. The increasing cost of raw materials, labour and electricity are the main challenges. More than 25% of Garment and power loom MSME are at the verge of closure due to steep rise in the cost of yarn in the recent past.
Due to Mahatama Gandhi National Employment Guarantee Scheme, MSME is finding it difficult to get workers in sufficient numbers. Shortage of power, non availability of industrial land, non availability/affordability of competent and skilled manpower, poor infrastructure, high cost of finance, fluctuations in currency rates and lack of technology support are the other bottlenecks.
The way ahead therefore is difficult for MSME. India is poised to be the developed economy in near future and all indications are for increase in the dominance of our country in the world order. As such MSME sector has great opportunities as well. How do we move ahead is therefore and important question. Synergy of efforts of all concerned i.e MSME Entrepreneurs, Government, Professional and R&D institutions is the answer. Government at the apex level i.e Prime Minister Office as well as Ministry of MSME Govt. of India have already taken a big step in this direction realizing the threats, opportunities and importance of MSME sector. On 26th August 2009, Hon’ble Prime Minister called a meeting of MSME Associations to discuss the issues of MSME sector. I had the opportunity to represent IIA in this meeting. Based on the feed back received from MSME representatives a Task Force was constituted under the chairmanship of Principal Secretary, PMO. In this task force Presidents of prominent MSME association representing North, South, Central and North east regions of the country were also the members. I had the privilege to represent IIA in this Task Force. In a record 3 months time the Task Force submitted its recommendation to the Prime Minister who himself chaired a meeting to get these implemented. Far reaching recommendations on Finance, Marketing, Labour, Rehabilitation & Exit Policy, Infrastructure, Technology, Skill Development and Taxation have been made by the Task Force. The implementation process is on. However, dialogue with MSME Associations on the progress of this implementation process is required to be re-established. We have Shri Uday Kumar Varma ji with us today who is the administrative head of MSME Ministry. I would request him to re-establish this dialogue at Ministry of MSME level with prominent MSME Associations in the country. Planning Commission, (Industry Division) Govt. of India though have constituted an expert group for a regular dialogue with the Industry Association and a meeting of the Expert Group was held on 28th October 2010 under the chairmanship of Mr. Arun Maira, Member, Planning Commission. I alongwith my colleque Mr. Inder Chand Jain from Agra represented IIA in this meeting too. Ministry of MSME Govt. of India and its subordinate offices i.e. D.C. MSME and NSIC are also quite active and we have regular dialogue with them as well. IIA have signed an Mou with NSIC to popularize their schemes among MSME. The field offices/organizations of Ministry of MSME such as MSME development/design institutions are required to be more proactive. State Governments also have an important role in the development of MSME however they lack focus on this vital sector except for few progressive states.
MSME Entrepreneurs have been operating under a protective environment and the traditional mind set has been that their progress mainly depends on the support and protection from the Government. However with opening up of the borders, globalization of the economy, removal of reservations, MSME entrepreneurs today demands good governance and policies to overcome the threats MSME sector is facing from big corporates, multinationals and its counterparts else where in the world. Due to poor market conditions in America and E.U, MSME exporters have to explore new markets elsewhere i.e. Malesiya, Singapore, Thailand, South Corea, Japan, Indoneshia and African Countries. These are up coming markets and can provide better business opportunities. In my opinion, Indian MSME’s need not fear from Chinees counterparts/ markets. We however have to keep a close watch and relations with our counterparts in China. IIA have focused its attention on Chinees market and with the support of Ministry of MSME, Govt of India, we are regularly taking business delegations to CANTON FAIR under the international co-operation scheme of the Ministry. More than 400 MSME entrepreneurs have visited china as IIA delegation so far. IIA is also exploring business opportunities with Latin American Countries. Ambassadors of respective LAC will be making a presentation to MSME’s during Noida Expo 2010 being organized by IIA Noida Chapter on 17th Dec. 2010 at Noida Expo Centre. MSME entrepreneurs today is required to devote more time on developmental activities such as market & Policy watch, networking and new technologies etc. Traditionally the MSME entrepreneur is busy with more urgent operational tasks and do not have time for important developmental tasks. The entrepreneur therefore is required to delegate operational tasks by employing competent staff. Industry Associations have to play an important role in the development of MSME entrepreneurs. IIA is actively working in this direction and have several programme and tie-up to achieve the objective. Todays conclave in collaboration with IIM-Lucknow is one such efforts.
We have been discussing a lot about Industry Institute interaction for decades . However, a tangible break through is yet to come. Their have been reports that inspite of large number of R&D institutions in the country the number of patents registered by MSME are much more compared to all these R&D institutions combined together. The problem in my opinion is that R&D, Professional and Technical Institutions expects MSME Entrepreneurs to come to them and the entrepreneur is hard pressed for time and do not have the awareness and confidence on the capabilities/ facilities available in these institutions. I therefore urge the institutions to deliberately catch hold of few MSME’s and implement the improvement projects successfully. This will have a demonstrative effect and the problem of awareness and confidence will be wiped out. IIA is ready to mediate in this process. We have already started this process with IIT Kanpur where few students under the guidance of their Professors have successfully resolved few problems of MSME. IIA alongwith IIM-Lucknow and IIT Kanpur therefore have started the process and we propose to form-3i forum. Recently we have joined hands with Jaipuria Institute of Management also and propose to extend this forum to 3ij.
MSME world over are the backbone of every economy and it is so in India. Indian Entrepreneurs are great and they have proved it so from time immemorial. I have full faith and confidence that Indian MSME’s will be able to compete with any one in the world and will prove to be NO-1 in times to come.
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