MSME sector is the backbone of the Indian economy as it contributes to the major export industry. MSME industry is perceived as a blessing in disguise for creating employment for low profile jobs and envisaging gradual growth. The Indian government plans to enhance the percentage of export from 48 to 60 percentage. Automobile industry giant players are exporting fifty per cent of their production, and with the joint venture of technology, India can do better. India is financially and technically capable of big foreign projects. The infrastructure and cost management is the barrier for the Indian MSME industries that need to be liberalized with reforms at this right time. Pandemic has curtailed investment and production. So, the Indian government had exempted custom duty and allotted double the money for the financial year 2021-22. There are productive plans from central and state governments for promoting MSME.
The ICAI had recently announced three initiatives for strengthening the MSME sector. The three initiatives of ICAI are the MSME portal, MSME exchange and MSME course. The different schemes of the Indian government are shared with the MSME ecosystem through MSME exchange. MSME portal is the website of ICAI for MSME where the budding entrepreneurs can register and make use of the expert advice of chartered accountants. The courses offered are to address the challenges of MSME and train chartered accountants to make MSME a competitive business. Globalization and large enterprises are the reason for the problems faced by MSME in the form of the skilled labour force, finance, infrastructure and technology. As the industry is facing internal challenges there is a requirement to support MSME. This blog revolves around the importance of MSME which is worth spreading.
How to make MSME as competitive globally?
The data from RBI shows that the scheme introduced for the MSME to survive during the pandemic crisis have benefitted only 53 per cent of the total MSME. This sector enhances the employment for the village population. The report from World Bank interprets that the economic activity of the MSME sector from countries like the Middle East, Asia, and Africa contribute to 35 percentage. It also supports more than sixty per cent of employment opportunities. The asset-based definitions in the policy such as investment and turnover prevent the sector to grow. The new definition of MSME states that units with one crore investment and 5 crore turnover are called micro-unit. Small units come under the criteria of 10 crore investment and 50 crore turnover. Medium units come under the limit of 20 crore investment and 100 crores turnover.
The global supply chains are now formed with Indian market players. India depends on China for imports, and it is now substituted with the dealings of other countries like Thailand, Singapore, the Philippines and Thailand. Globally Indian service industry has skilled labour than the manufacturing sector. This skill gap needs to be filled with the training of personnel in the manufacturing sector. The knowledge of the micro-market develop the local network and also encourage partnership with foreign networks. The asset definition, skilled labour, local network and foreign network develop the competitive element in the MSME sector.
IT and financial support for MSME
Frankly speaking, the MSME ecosystem needs much more than technical support and financial support. Filling the gap is the best way to promote the MSME companies. The start-ups from India Flipkart, Phonepe, MakeMyTrip, Paytm, OYO, and Netmeds have reached the global markets. They have re-arranged the demand in the existing market. The IT support and financial support work as the rope to upgrade the MSME industry. IT and financial support in the form of shared service are helpful to tackle the competition from cash-rich big players. If the government provide the IT infrastructure and expert advice in the form of shared service then it will be a strength to the MSME. For instance, in the manufacturing sector, software support is needed for designing. The manufacturers of small auto components require software support for the best cost control strategy and improved quality. As India possess a huge young working population, it is possible to make India a manufacturing and services hub. As per the data from the manufacturing sector in India, FY21 has more FDI with an increase of fifteen per cent.
Financial support can be implemented through transparency and better credit flow. When analysing the credit flow with other countries like China, South Korea, Thailand, and Malaysia India receives only six percentage of Bank Credit out of Total GDP. The international finance Corporation says that the demand for Finance in the MSME sector is 32.5 Lakh Crore, and out of it, the availability of credit is only 14.6 Lakh Crore. The MSME units such as Gems and Jewellery, RMG, Jute Industry, and agro-products, Leather and leather products, and other sectors of exports are facing liquidity problems because of lack of credit availability. The government and organizations supporting MSME need to help the units in accessing raw material, designing the product, helping with the production process, and marketing.
Bottom line
The shared service for the expert advice of chartered accountants and IT infrastructure solve the challenges faced by the MSME. Apart from the capital requirement, manpower requirement, and infrastructure requirement, there is a requirement for expert guidance that helps in the long run to save the MSME units. The growth of MSME is essential for creating decent jobs, increasing GDP and controlling the daily wage rates. MSME units develop the rural and urban areas that end with equality in terms of income. In the post-pandemic scenario, MSME units are the backbone of India that support economic growth.
