Introduction

• Policy makers often romanticize MSMEs over large employers because it believes that MSMEs are a source of massive job creation, are the salvation of less-skilled job seekers, and embody solid middle-class values.
• However, MSMEs view the Indian state as a bully rather than an ally, because of its 60,000-plus employer compliance universe that changes 5,000-plus times a year and 3,300-plus possible filings for enterprises.
• Therefore, there is a need for massive regulatory rationalization, simplification and digitalization because no MSME can possibly keep track of 60,000 plus regulatory compliances.

India’s next wave of Ease of Doing Business (EODB)  should have three vectors—

1. rationalization (cutting down the number of laws),
2. simplification (cutting down the number of compliances and filings) and
3. digitization (architecting for true paperless, presence-less and cashless).

Rationalization could start with clustering the 44 labour laws into a single labour code.

Simplification would include replacing our 25-plus different numbers issued by various government arms to every employer with a unique enterprise number (an Aadhaar for enterprises).

Finally, we must move away from the current approach to digitization as a website and shift to open architecture-based API frameworks, where multiple players compete in providing services to employers.

Other concerns:

• MSMEs remain, by their predominantly informal nature, vulnerable to structural and cyclical shocks, at times with persistent effects.
• Some of the critical issues that hamper their development were absence of access to easy finance and credit instruments, serious regulatory constraints, lack of access to modern and affordable technology, lack of basic infrastructure, lack of access to modern marketing and distribution networks, shortage of skilled labour and inflexible and archaic labour laws.
• The micro, small and medium enterprises (MSMEs) have been impacted adversely by the twin shocks of demonetisation and goods and services tax (GST).

Conclusion:

India is expected to emerge as one of the leading economies in the world over the next decade and the Micro, Small & Medium Enterprises (MSME) segment is expected to play a significant role.

The development of this segment is extremely critical to meet the national imperatives of financial inclusion and generation of significant levels of employment across urban, rurban and rural areas across the country. Further, it can nurture and support development of new age entrepreneurs who have the potential to create globally competitive businesses from India.