Role of government in promoting MSME

Sitting in her office Ruchika Kumari is very tensed, it was only 2 years ago, she decided to leave her job and start her own business of manufacturing fan blades, although she earned profit instantly but now the MNCs to whom she has vendor withheld payment on grounds of below-par manufacturing. She was just on call from her creditor which was reminding of her EMI’s due date. There is extra pressure on her as she is a woman, vulnerable to societal abuse if there is a failure.                  

“Government shall work in welfare when needed, otherwise what is the purpose of it”

Small and medium enterprises are regarded as the soul of India’s development story, around 39% of India's production and 80% of India's export is because of our robust MSME sector. Driven by spirited aspirational Indians, MSME is regarded as robust, efficient, and frugal in its operations. But then why MSMEs need government for their efficient workings?

MSME is regarded as a gateway for budding entrepreneurs. They are mostly specialists in the field of engineering or management who are either innovators or are guessing on a future boom based on their analysis. Due to which they are regarded as somewhat amateur but of great potential. According to an economic survey, India ranks 3rd in the creation of new enterprises in 2018-19 in the world.

What this ranking tells us is many enterprises are being started in India on regular basis but only a few of them succeed. This is where one needs government support, government’s handholding and this hand-holding needed to be multidimensional as each MSME, in the world of PT Nehru (about Indian population) has its own unique problems.

The problem which needs permanent attention is the lack of awareness among MSMEs owners about their right to entitlement and various government schemes. Unlike big corporate, MSMEs can’t afford staff ranging from the legal sphere to, R&D sphere which can update MSMEs about their due rights. Therefore it is the call of time that awareness generation programs must be started by the government about the legal rights of MSMEs and at the same time about various government schemes of it.

Just take the example of the national e-procurement portal, it acts as an online procurement mechanism of various government departments and PSUs, and special preference is given to MSMEs. But according to a recent report, the e-procurement portal is just providing only 40% of its desired procurement. The reason for the lack of usage of the portal is the second issue where the government needs to help MSME.

As we know that various reports are being published in newspapers regarding delay of payment by PSUs and government departments to their vendors, therefore MSME tends to view govt. and its departments with suspicion while conducting any business. Hence govt. shall start paying its due sticking to fixed time so that there is enough liquidity in the market and at same time industries don’t miss out their EMI dates. In addition the govt. can initiate structural measures for MSMEs improvements.

As we know that MSMEs work with an unorganized workforce, despite popular perception of it being cheap, there is a hidden cost involved in unorganized sector. The workers in due course of time learn skills, as the employment is not contractual or permanent, any moment of the skilled labor will lead to the extinction of skilled labor which now is to be replaced by another unskilled person, what can be done?

The labor laws of the country are very rigid, a lot of compliances and inspections make small business owners go for informal hiring, and simplification of labor laws like being done by Vietnamese government, port signing of EU-Vietnam Free Trade Agreement (FTA) could be a role model. But there is also concern about forwarding and backward linkages for MSME.

 MSMEs are not self-efficient or autonomous in working rather they are part of the supply chain of the sort, like take the example of Katha industry of HP, there are many MSMEs producing Katha in the lower hill region of HP, which then is to be sent to pharmaceuticals, pan masala, and paint industry which are situated in Parwanoo and Delhi, it would be beneficial for them if they have robust road infrastructure which will enhance their efficiency, generate more profit.

Last but not least we have the systematic problem of Red tapism and corruption, let us clear the air about what makes MSMEs different from big enterprises- it’s their efficiency, flexible working conditions and direct involvement of the individual owner in its working. But they also lack the knowledge about various exemptions and legal team to deal with if in any case, the law is broken. Here comes the role of govt.

Govt. machinery should act as a friend, mentor, and guide. Whenever such a situation arises, the bureaucracy instead of harassing the owners shall help them to pass through red-tapism. While it doesn’t mean that the laws when broken should not be penalized, it means the administration should know the difference between bonafide mistakes and deliberate mistakes.

Out of nowhere, Ruchika decided to call her lawyer friend to enquire about any possible legal solutions, lawyer friend gave her advice to take the matter to court as the government has eased guidelines for contract enforcement. Ruchika in few months got justice but just because of the advice of her lawyer friend. What we need now is the govt. to be that friend and help those who are in due need of solutions to excel their enterprise. This time is important as govt. is giving importance to job creators and wealth creators to lead the economy, which in the case of India is being done by MSMEs.