A recent report by The Institute of Small Enterprises and Development (ISED) has stated that there is a sharp decline in entrepreneurs' confidence across the country. While calling for urgent action from the government, the report noted that both external factors and structural weaknesses specific to MSMEs are impacting the sector.
The report, titled Deepening Economic Crisis and its Impact on MSME Development, noted that while external factors are beyond one's control, the structural factors are manageable. Though the government has recognised some of these aspects, it has not come up with a specific policy approach and commitments, it said.
The institute stated that this is a must to salvage the MSME sector from its current problems, as confidence-building is an essential component of an anti-recession package. ISED also cautioned that a major relief package announced by China early this month for its own SMEs poses a potential threat to Indian MSMEs, as the country is already facing a major threat from Chinese imports.
The ISED analysis says that MSMEs are sidelined in the competitive wooing of investments and the thrust of state governments' is on the IT sector. The start-up scene is grim; what remains largely is the phenomenon of 'distress entrepreneurship'. MSME health issues have been dealt with only in a partial manner; which compounds the structural problems, rather than reducing them, it said.
"While there is an official thrust on innovation, it is confined to the realm of technology only. As a result, the manufacturing edge of the MSMEs is getting eroded significantly," the report said.
The report underscored the need to boost public procurement, restructure non-farm sector capability-building, develop entrepreneurship, boost exports further, develop alternate financing models, develop industrial clusters into centres of excellence, and develop relevant knowledge systems and advocacy.
Major suggestions made in the report include a White Paper on the state of MSMEs, and a case for the 'right to entrepreneurship' on the same lines as the right to work, the right to food, the right to information, and the right to education. It argues in favour of 'enterprise security', on the lines of the food security system.
Besides, it also called for restructuring of the MSE Cluster Development Programme, establishment of a SME Challenge Fund, initiation of a Business Development Services (BDS) Scheme and announcement of a relief-cum-stimulus package for MSMEs, taking into consideration the impacts of such packages in neighbouring countries.
The ISED report also stressed the need for a 'Focus States Initiative' as a cost-effective development strategy in the context of the current crisis, creation of demand-driven insurance protection, setting up of a Working Group to study the recent Chinese stimulus package and its impact, a redefinition of the role of MSME associations and enhancing their capacity to deliver demand-driven services.
The report has asked for reconstitution of the MSME ministry as the 'ministry for enterprise development and manufacturing', under the independent charge of a Cabinet minister.
