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| Q&A: Gaurav Marya, President, Franchise India Holding Limited | | 'Govt should shift focus to service providers among MSMEs' |
| Vinit Koneru / Sep 13, 2011, 00:26 IST |
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 The MSME sector provides livelihood to more than 60 million people, adds 1.3 million jobs every year and contributes 17 per cent of our GDP. Yet, the government does not give this sector high priority, and a policy shift is needed, says Gaurav Marya, president of Franchise India Holding Limited, an integrated franchisee solution provider company. In an interview with Vinit Koneru, he explains that SMEs in retail should get into franchising to avoid the risk of being hurt by the entry of big players into retail.
What, apart from bank finance and government support, is the challenge for SMEs?
The biggest threat to their survival is FDI in multi-brand retail. I don’t know why some people say big players will not be a threat to local stores, but this is going to change the rules of shopping in India. And the little awareness about patenting laws and intellectual property issues with small enterprises is also holding them back.
How will FDI in multi-brand retail impact SMEs in retail?
This will have a huge impact on them. Even if the stores come up only on the outskirts of a city, consumers’ shopping pattern will change. The buyer will do weekend shopping. Ten miles will not be a problem, if he is getting enough offers and discounts. We have the classic example of multiplexes. It was said traditional theatres will survive, but there is no sign of them in cities now.
Are you saying that allowing FDI in multi-brand retail is not good?
No, it is good in many ways, but at the same time the local kirana stores shouldn’t be left in isolation. They should be given a security net and a platform to enhance their capabilities. One such step would be allowing FDI restrictively, like allowing retailing in the white goods category for the first four to five years. Then allow them in other categories later.
What should SMEs do at their end?
One of the best strategies they can adopt is to go in for franchising and elevate themselves to the high standards of big players. With franchising, the locals’ livelihood would be intact and the brands will give them enough skills to run the store. It’s a win-win for both -- the entrepreneur only has to buy the already established brand name and sell his product. There can also be vocational training centres for small enterprises, to educate them about how to make the maximum out of given resources and market their products effectively. Apart from this, the government should start revising its policies to support SMEs.
What policy shifts are required boost this sector?
The policies by which MSMEs are governed are of the 1970s and are essentially targeted only at manufacturing units. Today, the need is for a shift of policy focus towards the service sector. For example, if you are an entrepreneur planning to start an e-publishing firm, you may not get a loan, though you may target a global audience, only because you do not require machinery and land to start one. Instead, someone who is planning to start a small printing press would get a loan, though he is catering to a small section. This is where the flaw lies. Banks do only asset financing but don’t finance ideas. And raising finance through the private equity or venture funding route is difficult and costly for a start-up.
Will the separate stock exchange for SMEs help?
Absolutely. I am looking forward to it. It would change the current investment pattern. But a lot is said and very little is done. It is high time people stuck to their deadlines. When a separate index for commodities can be created, there is no point delaying in creating a separate index for SMEs.
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