- The financial crisis plaguing the MSMEs post-COVID19 has trapped the sector into a vortex of unprecedented challenges
- Prime Minister Modi urges MSMEs to take full benefit of the production linked incentive (PLI) scheme
- Awareness about the government schemes is scarce in the MSME sector
- The divide between large manufacturing & MSMEs in India is wide with very little technological transfer
The Micro Small and Medium Enterprises (MSMEs) sector has been a significant contributor to the socio-economic development of India. The sector has gained over the years, due to its contribution to the Gross Domestic Product (GDP) of the country and exports. MSMEs have consistently fostered the spirit of entrepreneurship, especially in semi-urban and rural areas of India.
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Prime Minister Narendra Modi has urged the micro small and medium enterprises (MSMEs) to take full benefit of the production linked incentive (PLI) scheme and he emphasized that it would make a major impact on the country’s ecosystem by creating the anchor units in every sector that will need a new supplier base across the entire value chain. The PM appealed to the industry to take advantage of the PLI scheme and zero in on ‘Best Quality Goods’ for national consumption and global export.
Under the PLI scheme, the industries are stewarded towards innovation by adapting to the needs of the fast-changing world, increasing our participation in R&D, upgrading labour skills, and harnessing new technology. Earlier, Niti Aayog had recommended that the Production-Linked Incentive (PLI) scheme be extended across sectors for medium-sized industries with investment above Rs 100 crore. The initiative aimed to extend support to micro, small and medium enterprises (MSMEs) battered by the COVID19 pandemic.
Aakash Shah, President, Merchant’s Chamber of Commerce and Industries(MCCI), explains, “The PLI scheme is critical for the Indian manufacturing sector to develop a symbiosis between large manufacturing units and the MSMEs that operate in this sector. The divide between large manufacturing and MSMEs in India is wide with very little technological transfer in the MSMEs. This has led to a perpetual reliance of the large manufacturing units on imported components both for quality assurance as well as overhead cost considerations”.
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He believes, “What started initially as an initiative under the National Policy on Electronics in 2020, has now been scaled to cover ten sectors covering food processing, electronics, textiles, speciality steel, automobiles and auto components, solar photovoltaic modules and white goods such as air conditioners and LEDs”, he added. The MSME sector has suffered a setback post-COVID 19 and is slowly recovering says Darshana Thakkar, a working professional in the MSME industry for more than 22 years and now managing her consultancy firm MSME Transformation. By the veracity of her relevant industry experience, she guides the various MSMEs to increase their profitability.
“The MSMEs are presently facing a dire financial crunch. That is one key issue”, says Darshana. “Most of the MSME entrepreneurs are not aware of the PLI and other government schemes, and those who are aware do not know how to approach the right departments and how to take the benefit,” adds Darshana. She explains that this is where her consultancy comes in—to bridge the gap between government schemes and industry awareness by simplifying the application procedure and help the industries yield high revenues overcoming the pandemic-induced dry spell.
However, Darshana is apprehensive about the second wave of Covid that will probably inflict a fresh round of losses on the sector. The concern of migrant workers who are again returning to their home towns creates a déjà vu situation for MSMEs that have already begun to grapple with the repercussions. A sector that generates employment for nearly 40% of the country’s unorganized workers who form the backbone of the nation’s economy was hit the hardest by the lockdown. A complete halt in work has pushed many industrial units into bankruptcy.
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The sector is now confronted with the herculean challenge of amassing a huge inflow of investment to recover. Although the central government’s allocation for the MSME ministry in 2021-22 has doubled, a significant part of it is for the guaranteed emergency credit line (GECL) facility which provides liquidity and credit guarantees to MSMEs. However, most of this sector is informal and unregistered, so there is a high possibility that the loans will not be utilized much by the sector.
The onus of generating jobs should not squarely rest on the private sector. Government should also boost the health of the MSMEs and enable them to digitize the small businesses which would further help them join the mainstream and become beneficial in creating new jobs.