Despite increasingly challenging market conditions, jolted by adversities ranging from recession to trade wars and a difficult rollout of GST, if there is one sector that has held its head high then, surprisingly enough, it is the Micro, Small and Medium Enterprises (MSME) sector.
For decades now, quite regardless of market uncertainties, these private enterprise driven businesses have continued to fire the nation’s growth engine. And at a time when job crea-tion continues to rage as the number one make or break fac-tor in the upcoming elections, MSMEs stand out as the one big source of solace for providing jobs to millions.
Studies have shown that by 2020 the largest job-ready mar-ket in the world would be India and, contrary to popular im-agination, the highest number of jobs will be created by the manufacturing sector, some say even higher than IT and ITES. Further, it is the medium and small scale manufactur-ing enterprises that will account for a bulk of these oppor-tunities.
In an article focused on the sector the well known business publication Forbes said: “MSMEs are expected to contribute around 30 percent of the GDP by 2020 while providing em-ployment to more than 117 million people, which is noteworthy given that a large section of the workforce in the nation lacks vocational skills.”
However, for all this to happen, the MSMEs would need to be both supported and protected not from competition but from legacy threats like outdated regulations and payment defaults that simply cannot be allowed to persist in a mod-ern business environment. The support has to be in the area of ensuring that MSMEs have far easier access to inexpen-sive funds and skilled labour, which are their life-blood.
The Skill India programme initiated by the government is a commendable step in this direction and in the time to come this and other similar ideas need to be pushed with greater vigour to make India’s youth employable and productive with relevant vocational training. Its right to say that only a ‘kaushal Bharat can be a kushal Bharat’.
On the finance front, MSMEs are typically hobbled by: a) difficult access to funds at a rate that would be viable to their ventures and b) zero protection from delays and defaults in payments by customers, which at times can drive them virtually out of business. In other words, an average MSME is caught in a financial pincer: between expensive and difficult-to-service debts and poor cash flows owing to delayed or defaulted payments. Implemented effectively, the often mooted Trade Receivables Electronic Discount System could be a game changer and secure MSMEs from payment defaults.
Some efforts have been made to address these concerns but if India is serious about finding jobs for its swelling millions of unemployed youth and preventing economic distress and social unrest from spilling over, then it would have to pro-mote the MSME sector with far more zeal particularly with large organisations turning increasingly to automation to stay competitive in an efficiency obsessed business envi-ronment.
What political entities in India must realise is that over the years the narrative required to swing public opinion has changed fundamentally: while caste and community consid-erations might still be important, people are now far more likely to vote on issues that affect their lives, livelihood and economic destinies. And the trending hashtag for that in our times is MSMEs.