Context

• It has been observed by some experts that the regulatory framework that has choked MSMEs has contributed to the farm crisis and quota demands in India.

• And that farm loan waivers, migration restrictions and10 per cent economically backward reservation in government jobs does not represent a sustainable approach.

Overhauling India’s MSME sector

• The only way to create millions of jobs with decent wages is a policy re-imagination of the rights, needs, and treatment of formal MSME entrepreneurs.

• The average employer in India is not a formal MSME or somebody large like Marico, Lupin or the Tatas, but an informal MSME because the present regulatory framework are not pro-informal sector MSME.

• Fewer than 2 per cent of our 63 million MSME’s are formal.

Labour market interventions in MSMEs can be by:

• Taking the long view:a 10-year plan is not 10-one-year plans for formalisation, urbanisation, industrialisation, financialisation and human capital.

• Recognise progress made:6 million new formal enterprises and 30 million new social security payers in the last three years), and

• Get bolder with structural interventions that matter most to MSME entrepreneurs.

India’s problem is no longer jobs but wages

• Creating millions of well-paying jobs needs ending killing of millions of MSMEs (small but formal employers that will grow and pay the wage premium because of enterprise productivity).

Formalisation of MSMEs need

• lower regulatory framework,

• labour law rationalisation,

• e-governance, and

• education effectiveness

• all in turn need civil service reform.

Way Forward

• The only solution to helping farmers is having less of them and making the remaining productive — US farms with more than $1 million in sales are only 6 per cent of farms but produce 66 per cent of output.

• The need of the hour is to have enough formal MSME employers.