MSME in India has been a trending topic of debate in the current socio-economic context. From the finance ministry’s announcement of three trillion rupees of relief package to the World Bank lending 750 million dollars to India, the topic has been well talked lately. Although many of us might be curious about the significance this sector of production possesses and why does it need to be taken care of.
Micro, Small, and Medium enterprises, commonly called as MSME, can be considered as the backbone of any developing country’s economy. In the context of India, MSME contributes to almost 8% of GDP in the manufacturing sector and 30% of GDP in the service sector. It contributes to almost 40% of the exports and creates 11 crores of employment per year making it, the 2nd largest sector regarding employment generation.
It is probably established that to reinstate the economic condition of India post-pandemic, India needs to strengthen its MSME sector. As of now, India’s MSME, already weakened previously by the ill effects of Demonetization and GST, is collapsing with more than 50% of its units being on the verge to be shut amid the pandemic.
Here are some possible reforms and developments, which may help India to reinstate its MSMEs:
- Banking reforms: Despite the government’s several policies earlier, which stressed on providing low-interest credit to MSME, more than 50% of MSME units suffer from the problem of liquidity crunch, which is the lack of formal credit. The suggestion would be to create liquidity infusion as well as to digitalize the credit obtaining procedures. More SFBs and NBFCs should be promoted in order to make the credit more accessible to the masses. (Source: financial express)
- Labor reforms: The labor laws implemented just after independence had its own significance. But today, after 73 years, these labor laws are proving to be a hurdle both for workers and enterprises, in terms of productivity and innovation. With the recent wake of the pandemic, the reform in labor laws will promote investment and establishment of MSMEs as well as put forward India as an alternative of China as far as Global Supply Chain is concerned. This will ultimately sort out the unemployment issue for migrant workers.
- Educational reform: With the population of 287 million illiterate adults, which sums up to 37% of the whole world, India still has a long way to go, to achieve the global status it aspires for. In an already impoverished population, illiteracy piles on the pain, and ignorance don’t allow the masses to seek out for an innovative way to cash in their skills. The situation of public schools should be fixed in order to make education more qualitative and accessible.
In the post-pandemic world, mediocrity will collapse and the fittest will survive. In order to reinstate peace and continue the progress, India needs to efficiently bring these reforms to the surface.