Micro, Small and Medium Enterprises which are the backbone of the Indian economy in terms of their contribution to the country’s GDP, Exports, employment generation and inclusive growth, require to be nurtured effectively so that they maintain their health. The COVID-19 pandemic has been a setback to the sector and its impact is expected to push many entities into a long battle for survival. The Government has a taken a lot of fiscal, regulatory and stimulus measures which are expected to provide some relief to the MSMEs.
The Micro, Small and Medium enterprises (MSMEs) are considered to be backbone of economic growth. They promote development all over the world. In India, with a bid to promote the growth of these industries, the MSMED Act was passed in the year 2006. Enterprises essentially work in the informal space and cater to the needs of large industrial houses, both in the public as well as the private sector.
The promotion of inter-firm linkages between large firms and MSME through sub-contracting and setting up ancillary units both in the public and private sectors has been an important dimension of India’s MSME policy. Any growth of ancillary units and sub-contracting would be advantageous to the MSME sector by way of assured marketing, covered technical assistance, finance, and supply of raw materials and training.
Many measures have been taken in order to promote the growth of these industries. National Small Industries Corporation Ltd. (NSIC) was established 1955 by the Government of India to promote, aid and foster the growth of small-scale industries in India. It offers several technical services to SMEs through its Technical Services Centers, Extension Centers, Software Technology Parks and Technology Transfer Centers.
Small Industry Development Organisation (SIDO), established in 1954, provides a wide spectrum of technical services to the small industries sector. Testing, tool room services, technology up gradation, modernization, quality improvement, training for entrepreneurship development, assistance for exports, pollution and energy audits etc are the facilities provided by it.
CHALLENGES FACED BY MSMES
Despite the sector’s strategic importance in overall industrialization strategy and employment generation, as well as the opportunities that the Indian territories provides, the MSME sector faces several challenges. Technological hindrances and financing problems have been associated with the sector since long. Also, constraints such as high cost of credit, poor adaptability to changing trends, lack of access to international markets, lack of skilled manpower, inadequate infrastructure facilities, including power, water, roads, etc., and regulatory issues related to taxation (state and central), labor laws, environmental issues etc. are obstacles to its growth process.
Many MSME units still access credit through the traditional borrowing models. While such a model works well with micro enterprises requiring low investment, small and medium enterprises would need higher investments and hence these traditional/ conventional methods of borrowing may not be feasible.
Many measures have been introduced for improving access to finance, however, there should be a change in the way MSMEs function. It shouldbe adapt themselves to the digital mode. The traditional lending system by banks is based on financial statements and collateral of the borrower.
There is a need for infrastructural development – overall facilities such as railways, waterways, roadways and airways, proper channels of telecommunication, adequate supply of power and sector specific facilities such as Tool Rooms, Testing Labs, Design Centres, etc. that is support from various other sectors.
Of late, the availability of online trade platforms is also emerging as a key enabler for MSME exports. Traditional handicraft clusters and independent artisans and entrepreneurs can stay connected to the world and operate in the global market via e-commerce platforms. However, since most of the micro units operating in the country still use conventional techniques, they may not be able to utilize the platform, due to lack of knowledge and awareness.
The Ministry of Corporate Affairs (MCA) is the regulator for all the Companies and Limited Liability Partnerships (LLPs) registered in India.
a. MSME Form-1:This form has been notified by the MCA in January 2019. This form is to be filed by those specified companies whose outstanding payment to MSMEs suppliers is exceeding 45 days.
This contains the following details:
1. amount of payment due; and
2. reasons for the delayed payment
The form will enable the regulators to seek data about the overdue to the MSMEs, thereby protecting the interest of groups of small companies or business.
Companies Fresh Start Scheme (CFSS)
According to Companies Act, they are required to follow statutory compliances annually. These include the Annual Return, Financial Statements and all the other necessary forms, documents and reports that are specified.
Non – compliance of the same results in the imposition of penalties and fines. However, given the present scenario, the world is on a lockdown currently due to the unprecedented situation regarding public health and safety caused by the COVID-19 pandemic. And hence, MCA has launched the CFSS (Companies Fresh Start Scheme), 2020. The time for complying with the law – filing of forms and returns has been extended so as to ease the situation considering the tough position being faced. The scheme has also been extended to filing of overdue pending forms irrespective of their delay. The pending filing compliances can thus be completed without any hassles. Immunity is granted from additional fees as well as prosecution with respect to delayed filing.
Large portion of the traditional and village industries is in the un-organised / informal sector and includes industries like handloom, handicraft, leather, cottage match, vegetable oil, gud/khandsari, sericulture and pottery. The traditional industries also include Ayurveda and yoga. Yoga had also percolated to a significant extent into the urban – semi-urban belt and is a fast-growing market. The focus is now on building immunity and what better than Yoga to boost resistance power and fight the pandemic?
Another important sector is the handloom sector which plays a very important role in the village industry economy. These handlooms are exported to many countries including the US and UK. Indian handicraft items are also increasingly being exported and are much sought after products in the international market. These include woodware, hand printed textiles and scarves, embroidered and crocheted goods, shawls, zari and zari goods, imitation jewellery and miscellaneous handicrafts such as lace, toys, etc.
Local industry bodies like the Council of Leather Exports, Handloom Export Promotion Council (HEPC), and Export Promotion Council for Handicrafts (EPCH) need to work in tandem with central and state government to promote these products in markets at international level which are not yet tapped.
ROLE OF WOMEN ENTREPRENEURS
Women entrepreneurs should be encouraged to participate in the MSME growth story. There are nearly three million MSME’s with full or partial female ownership.
There is considerable emphasis on promotion of women entrepreneurs and encouraging greater participation of women in the Indian MSME growth story. Many programs such as Entrepreneurship Development Programmes (EDPs) are organized for women. There are various programmes and schemes of MSME Ministry, NSIC, KVIC and Coir Board for conducting exclusive training programmes for women. Grants and special concessions are provided for women under the Trade Related Entrepreneurship Assistance and Development (TREAD) and Rural Employment Generation Programme (REGP).
Incubation cells can be developed to provide MSMEs with mentoring and technology support, and shared R&D facilities.
A WAY FORWAD
To help MSMEs in exporting their products, the following facilities/ incentives are provided:
Amidst the crisis, the Government needs to give an extra push to MSMEs in order to ramp up export of consumer goods so as to reap the advantages of comparative advantage that can be available in the post pandemic scenario.