Home Blog Government should take care of MSME sector

Government should take care of MSME sector

It’s not an exaggeration if we say that Micro, Small and Medium Enterprises (MSMEs) sector is the backbone of our economy. Its significance is nothing less than that of agriculture sector as it helps in not only creating demand but also complements the large industries in various ways. According to some estimates, it contributes as much as 40% to Gross Domestic Product (GDP) of India. The sector makes the engine of incessant growth, provides livelihood to millions of people and creates value for the economy. In fact, health of MSME sector indicates the health of the economy.

Let’s not forget the fact that MSME sector in India creates largest employment opportunities for the Indian populace, next only to Agriculture. MSME sector provides maximum opportunities for both self-employment and wage-employment, outside agriculture sector. It’s also true that MSME sector creates job opportunities at comparatively lesser investment than the large industries. It has been estimated that a lakh rupees of investment in fixed assets in the MSME sector generates employment for four persons.  Apart from providing employment opportunities MSME sector also helps in industrialization of rural & backward areas, thereby, reducing regional imbalances, assuring more equitable distribution of national income and wealth.

Large industries should see MSME sector as a segment that complements their efforts and not as their competitor. In fact, large industries are also dependent upon MSME sector for their demand creation. For example, decorative paints industry has suffered demand loss during post lockdown period partly because of the non-availability of painters in major cities. Similarly, wood panel industry has seen its demand erosion in post lockdown period  as the carpenters, mostly migrants, had gone back to native villages. Dealers of industries like paints, wood panel and pipes are self employed people covered under MSME sector and if they are in trouble (in fact, most of them are facing liquidity crisis in post lockdown period) you cannot expect large industries to do well. All these factors finally will lead to GDP degrowth.

Apart from providing the support to the large industries, today, the sector produces a wide range of products, from simple consumer goods to high-precision, sophisticated finished products. It has emerged as a major supplier of mass consumption goods as well as a producer of electronic and electrical equipment and drugs and pharmaceuticals.

Recent lockdown has however thrown the sector into chaos kind of situation. Many of the enterprises in the sector are finding it difficult to continue throwing lakhs of employees out of job. Lack of demand in post lockdown period is adding to their cup of woes which is already full with the problems like liquidity crunch and labour shortage due to reverse migration of migrant workers. Stricter norms of social distancing have only compounded their problems. Government’s move to provide bank loan to the MSME sector on easier terms is good move but some banks are still hesitant to provide loans to the sector fearing them turning into bad. Also, MSME sector is finding the demand hard to come by in post lockdown period. Under such circumstances sustainability of the sector for longer duration is suspect.  Therefore, MSME sector needs to be prioritised in government procurements even at the state and local body level. Though the digitised marketing platforms are welcome move, the government needs to create proper awareness about these opportunities in the MSME sector. Also, the government should make more efforts to find markets for the products of MSME sector in the global arena.

All these measures should be taken on priority basis as the MSME sector contributes not only to higher rate of economic growth but also in building an inclusive and sustainable society in innumerable ways through creation of non-farm livelihood at low cost, balanced regional development, gender & social balance, environmentally sustainable development. Therefore, ensuring good health of the sector should be government’s priority now.

Subscribe to our newsletter

To be updated with all the latest news from Sawdust

reports

moves

tenders

latest news