The importance of MSMEs in Indian Economy and Enterprise Creation

Micro, Small and Medium Enterprises (MSMEs) continue to be the largest job creator in the country contributing significantly to the nation’s Gross Domestic Production (GDP) as well as exports. However, several challenges restrict their ability to tap the opportunities to fullest potential. While the challenges are varied in nature including lack of enough govt. support, access to funding, delay in payments by the clients, the biggest factor that restricts the growth of the sector is the lack of access to information, according to majority of the founders, promoters and senior executives of MSMEs who attended the Business Standard Smart Business Seminar in the city. The seminar under the theme – Importance of MSMEs in the Indian economy and Enterprise creation – was organised in collaboration with the Karnataka Small Scale Industries Association (KASSIA).

Speaking at the seminar, M N Vidyashankar, retired IAS Officer and Former Additional Chief Secretary to the government of Karnataka said the success rate of MSMEs in OECD countries (34 countries who are members of Organisation for Economic Co-operation and Development) are much higher. He said almost 95 per cent of all the enterprises in those countries are MSMEs who are responsible for 72 per cent of the job creation. “Given this, I feel that there is a lot more need to be done here including building quality products, providing MSMEs with cheaper power (electricity) and even developing clusters and ancillary units to develop an ecosystem especially to attract large scale investment in the manufacturing segment,” said Vidyashankar who is also a Former President of industry body IESA (Indian Electronics and Semiconductor Association).

Ruing that the government’s support has always been to agriculture sector despite the MSMEs being the largest job creator in the country, H N Ramakrishnaiah, Panel Chairperson, EDP and Skill Development at KASSIA said the government must consider increasing excise duty on imported goods in order to make the MSME sector competitive.

While most of the representatives from the MSME sector attending the seminar highlighted access to capital, especially for the working capital needs, a major problem, K S Srikanth, Deputy General Manager, SIDBI, said there are plenty of schemes through which the government is trying to render supports to the MSMEs including Mudra schemes and Make in India funds. Even SIDBI is setting up ‘contactless banks’ to lend directly to MSMEs and enable faster disbursal. “But the MSME units need to bring in greater deal of financial discipline as well as professional approach in their operations to scale to the next level”, he said.