Introduction:

Micro, Small & Medium enterprises (MSME) termed as “engine of growth “for India, has played a prominent role in the development of the country in terms of creating employment opportunities. The government, in conjunction with the Reserve Bank of India (RBI), has now launched a series of measures to alleviate their distress.

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Current crisis faced by MSME sector:

• The Covid-19 pandemic has left its impact on all sectors of the economy but nowhere is the hurt as much as the Medium, Small and Micro Enterprises (MSMEs) of India.
• All anecdotal evidence available, such as the hundreds of thousands of stranded migrant workers across the country, suggests that MSMEs have been the worst casualty of Covid-19 induced lockdown.
• MSMEs were already struggling — in terms of declining revenues and capacity utilisation — in the lead-up to the Covid-19 crisis.
• The total lockdown has raised a question mark on the existence of many primarily because these are not firms that have too much cash to wait out the crisis. That explains the job losses.
• According to a recent survey for “small and medium” firms in manufacturing, only 7% said they will be able to survive for more than three months with their cash in hand if their business remains closed.
• A big hurdle to restarting now is the lack of labour availability.

Potential of India’s MSME sector:

• Contribution to GDP: The share of MSMEs in the country’s gross value added is estimated to be about 32%.
• Leveraging Exports: It also contributes about 40% to total exports and 45% to manufacturing output.
• Employment Opportunities: It employs 60 million people, creates 1.3 million jobs every year and produces more than 8000 quality products for the Indian and international markets.
• Diversity: There are approximately 30 million MSME Units in India and is quite diverse in terms of its size, level of technology employed, range of products and services provided and target markets.
• Fostering Inclusive Growth: MSME is constructing inclusive growth in numerous ways through promoting non- agricultural livelihood at least cost, unbiased regional development, large female participation, and providing a protection against deflation.

The challenges and concerns associated with the growth of MSME sector:

• Access to Credit:
  • According to Economic Survey (2017-18), MSME sector faces a major problem in terms of getting adequate credit for expansion of business activities.
  • The Survey had pointed out that the MSME received only 17.4 per cent of the total credit outstanding.
  • Most banks are reluctant to lend to MSMEs because from the perspective of bankers, inexperience of these enterprises, poor financials, lack of collaterals and infrastructure.
  • According to a 2018 report by the International Finance Corporation, the formal banking system supplies less than one-third (or about Rs 11 lakh crore) of the credit MSME credit need that it can potentially fund
  • most of the MSME funding comes from informal sources and this fact is crucial because it explains why the Reserve Bank of India’s efforts to push more liquidity towards the MSMEs have had a limited impact.
• Poor Infrastructure:
  • With poor infrastructure, MSMEs’ production capacity is very low while production cost is very high.
• Access to modern Technology:
  • The lack of technological know-how and financial constraints limits the access to modern technology and consequently the technological adoption remains low.
• Access to markets:
  • MSMEs have poor access to markets. Their advertisement and sales promotion are comparatively weaker than that of the multinational companies and other big companies.
  • The ineffective advertisement and poor marketing channels makes it difficult for them to compete with large companies.
• Legal hurdles:
  • Getting statutory clearances related to power, environment, labour are major hurdles.
  • Laws related to the all aspects of manufacturing and service concern are very complex and compliance with these laws are difficult.
• Lack of skilled manpower:
  • The training and development programs in respect of MSME`S development has been. Thus, there has been a constant crunch of skilled manpower in MSMEs

Other issues:

• Low ICT usage.
• Low market penetration.
• Quality assurance/certification.
• IPR related issues.
• Quality assurance/certification.
• Standardization of products and proper marketing channels to penetrate new markets.

Measures needed:

• Government of India and banks should design plans and measures to widen easy, hassle-free access to credit.
• The RBI should bring stringent norms for Non-Performing Assets (NPA) and it will help curbing loan defaulters and motivate potential good debts. Further, according to critics, the Credit Guarantee Scheme for MSME (CGTMSE) run by SIDBI is a growing contingent liability and needs to be examined with urgency
• Government should provide enhanced development and upgradation of existing rail & road network and other infrastructure facilities in less developed and rural areas to boost growth and development of MSMEs
• There should proper research and development in respect of innovative method of production and service rendering. Further, the government should promote and subsidise the technical know-how to Micro and small enterprises.
• Government should encourage procurement programme, credit and performance ratings and extensive marketing support to revive the growth of sick units.
• Skill development and imparting training to MSME workers is a crucial step to increase the productivity of the sector. The government should emphasise predominantly on skill development and training programs

Conclusion:     

MSMEs being the growth engine of economy, there is a need to prepare a roadmap for sector in addition to the ad-hoc initiatives undertaken. Delineation of the objectives, vision, and mission is necessary to give clarity on the path to be treaded. An inclusive, sustainable vision to compete with the global MSMEs, by collaborating the industry groups, researchers, government and other stakeholders is the need of the hour.