If the Micro, Small and Medium Enterprises (MSMEs) sector is the growth engine of India, the service sector is the oil that keeps it running.
The service industry, which covers a host of services including but not limited to banking, IT & ITeS, business management and consulting, tourism and education, has been the frontrunner of economic development for decades. It is one of the main pillars of economic growth owing to its massive contribution to the GDP and employment numbers. As per a report by the Reserve Bank of India, the service sector is the biggest employer with a share of 44.4 per cent in measured employment. It contributed around 54.3 per cent to the Indian GDP in 2018-19.
Both large conglomerates and the MSMEs are involved in delivering a variety of services crucial to the socio-economic machinery of the State, but the latter have run into certain challenges in the wake of the COVID-19 crisis. Owing to a deficit of funding, technical expertise and other resources, MSMEs in the service sector find themselves on the back foot in competing with large businesses operating in the same domain.
For instance, a consumer will readily recall names of big businesses in the IT solutions domain but will strain to name an MSME working in the same space. The former’s aggressive marketing strategy and bigger budget overshadows the offerings of the latter, affecting business generation for MSMEs in the tertiary sector.
Such a scenario necessitates relevant and timely support that the MSMEs can lean on if they are to make a bounce back from the lockdown slump. Even as curated initiatives such as YES MSME by Yes Bank have been a stepping stone for small service providers to access working capital, marketing, advisory, payroll management and forex assistance, there is scope for more propositions along similar lines.
More so because non-large service providers have limited reach in terms of digital marketing, networking and skilled workforce, and face obstacles in availing loans (since lending remains a perception-driven industry). As such, most MSMEs either get merged into big companies or have to compromise on their growth.
The Indian economy has been riding on the shoulders of the service sector. As per a report by the Reserve Bank of India (RBI), the service industry, over the two decades until COVID-19 disrupted its run, has been the largest contributor to the Indian economy.
Given the colossal contribution of the service sector, it becomes crucial to help MSMEs in this space build tech-led sustainable business models that are less vulnerable to crises such as the one created by COVID-19. Since the sector is labour intensive and driven by perception, it is also important to protect its stakeholders from external factors and unpredictable situations.
Acknowledging the gaps in the service sector, it is vital to come up with tangible solutions in order to help MSMEs increase their contribution to the service economy.
This a partnered post.