How govt can help MSME sector grow

The micro, small and medium enterprise (MSME) sector is vital for the development of any economy. While Indian MSMEs have, in past years, grown thanks to Indian entrepreneurs known for their dedication and innovation, it may need more than that for the sector to make a real impact on the industrial coming-of-age in the country.

A recent study by Milagrow in collaboration with IMT faculty outlines the various challenges Indian MSMEs faces, highlights practices of countries across the globe and comes up with a list of recommendations for policymakers to help the sector.

Indian MSMEs, the study finds, face challenges from various fronts. Here are the issues:

• Inadequate financial support
• Inability to promote their products and services in domestic and international markets
• Lack of support from government organisations, large enterprises, etc.
• Lack of appropriate need-based training and development programmes
• Lack of knowledge about low-cost brand communication solutions
• Unavailability of latest news, trends and technologies
• Lack of adequate networking opportunities
• Poor knowledge management

"After analyzing the challenges of the Indian MSME sector, 12 countries were studied from Europe, North America and Latin America: Germany, Finland, Italy, Spain, Sweden, United Kingdom, Canada, Mexico, USA, Argentina, Brazil and Venezuela," the study says. "The European Union, through its several initiatives, has enhanced the productivity and competence levels of the MSMEs in its member countries."

Here are the key recommendations for Indian policymakers at a glance:

• Reserve 20% as priority sector lending to MSMEs
• Provide 20% reservation for procurement from the MSME sector
• Collateral free loans of up to Rs 1 crore for highest credit-rated MSMEs
• Loans from the Credit Guarantee Fund Trust For Micro And Small Enterprises (CGTMSE) must incentivise lending institutions by faster feedback mechanism
• The CGTMSE must facilitate access to international capital bond markets
• Involve large enterprises in development of MSMEs clusters on private-public partnerships (PPPs)
• Develop integrated cluster competitiveness programmes
• Promote low-cost information and communication technologies (ICT) solutions for MSMEs
• Provide best in-class training and have an industry and 'management function' wise plan through PPP
• Mentor and hand-hold MSMEs with PPP model
• Facilitate international partnerships for MSMEs
• Incentivise innovation and R&D culture in MSMEs
• Encourage incubation with best in-class practices
• Encourage environmental compliance at an early stage

To read the complete paper on how the government can help MSMEs on these measures, click on the attached document.