December , 2018
MSME sector faces challenges
18:06 pm

B.E. Bureau

Micro, small and medium (MSME) enterprises have contributed significantly to the industrial development of India, particularly in the rural sphere. They have added significantly to the output and also to the employment generation process in our country. The country is endowed with abundant natural, mineral, and agro-based resources, which have potential for industrial development, particularly small scale industrial development. In the MSME sector, a majority of the small units are facing sickness. In spite of many efforts made to boost industrial development, there has not been the desired level of industrialisation. Changing the mindset and attitude of the youth for taking up various entrepreneurial ventures is required to push the MSME sector.

The MSMEs have been contributing significantly to the expansion of entrepreneurial endeavours through business innovations. The MSMEs are widening their domain across sectors of the economy, producing diverse range of products and services to meet demands of domestic as well as global markets. The contribution of manufacturing MSMEs in the country’s total manufacturing GVO4 (Gross Value of Output) at current prices has also remained consistent at about 33%.

Challenges and Conclusion

There are a number of challenges facing the Indian MSMEs. High cost of credit, difficulty of procurement of raw materials at a competitive prices, inadequate infrastructural facilities and lack of skilled manpower are some of the challenges.

From a published case study of the Indian coir industry, it is revealed that although exports have increased in the global market, the export earnings have not increased much over the last years. The coir industry is facing stiff competition from the synthetic exporters (especially China). To overcome such problems, investment in better technology is a viable solution. The study also notes that technological development helps to differentiate a product from its competitors. It is known that the Union government has taken several measures for technological development of the Indian MSMEs. To counter the other challenges, new schemes and programmes such as Make-In India, Skill India and Digital India have been launched recently.

Other challenges include access to credit, development of adequate infrastructure (power, electricity), supply of raw materials and training of labourers to be hired by the MSMEs.

To remain competitive and increase its share in the global economy, the Indian MSMEs need to consistently upgrade their technology The Indian MSMEs may employ external consultants or resort to other measures on a continuous basis. Indian MSMEs can also opt for technology transfer. India should increasingly embrace a network of innovations and MSMEs should expand partnership with other research institutions, universities and other organisations. The Indian MSME sector needs more information, orientation and facilities for protecting their intellectual powers and show a positive approach towards creation, protection and management of IPR to compete in the global market and experience a business growth.

The ability of MSMEs (especially those involving innovations and new technologies) to access alternative sources of capital like angel funds/risk capital needs to be enhanced considerably to encourage entrepreneurship.

Developing countries are investigating significantly in their education (mainly basic) and training systems. However, linkages between education and training strategies and SME enterprise development strategies are still weak. According to the resource based view of management, irrespective of the firm size, employees are strategically important and indispensable resources to achieve an organisation’s objective.

Lack of critical infrastructure and poor supporting facilities and inadequate access to important services like water, power supply, and road and rail connectivity have increased the operational costs of MSMEs making them less competitive. Use of solar or renewable energy needs to be encouraged in rural areas. To upgrade infrastructural facilities, the Indian government (MSME) has adopted the cluster development approach as a key strategy for improving competitiveness of Indian MSMEs. Lastly, the Indian government is aware of the challenges of globalisation and has taken appropriate measures for preparing the MSMEs to meet the challenges of liberalisation and globalisation.


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