MSME Sector in India- Road Ahead

MSME Sector in India

Micro Small and Medium Enterprises ( MSME) have always played a vital role in the Indian Economy. Not only do the 6.3 Crores MSME’s in India contribute one third to the GDP of the country but also provide employment to large sections of society.

Acknowledging the importance of the section, the Government of India ( in 2019) envisioned that the sector would account for half of India’s GDP and add 50 million fresh jobs over the next five years.

However, there were significant signs of a slowdown due to COVID19 (on the demand side) and structural reforms (on the supply side) like GST rollout and demonetisation also haad adverse effects on MSME sector.

Way Forward :

Developing Bond Market

With India’s Bond Markets starting to take shape , promotion of MSME Bond issuances can provide a fillip to debt capital markets participation of MSME;s.

While such issuance will provide lower interest rates for MSME’s than other financial institutions/ intermediaries charge , they will also be a viable high-yield instrument for informed and educated investors operating in the bond market.

Creation of Independent Regulator:

Given the growing importance of the data economy , it is paramount that the Government creates an independent body which can advise and provide consultancy to MSMEs and enable them to win in this new digital world.

Reforming Labour Laws:

Labour laws are not very conducive to MSME growth. They must strike the right balance providing a growth oriented framework for MSME’s to run and providing sufficient protection for the rights of workers.

Improving Regulation:

While ease of doing business has been a focus area , the reporting , approval and compliance requirements for small businesses continue to border on the higher side.

If we truly want to create a country where MSMEs can influence our economic destiny , it is imperative that they are provided with a hassle-free regulatory framework which works for them and not function as an impediment for growth.

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