India’s Micro, Small & Medium Enterprises (MSME) sector, which accounts for 38 per cent of the country’s total manufacturing output, needs urgent support from the government to overcome the hurdles hampering its growth. The sector, which is struggling to come out of the jolt suffered during the COVID-19 pandemic, requires help from the government to maintain the capital inflow, introduction of new technology and opening up of new vistas to expand business. Such an approach from the government will definitely provide additional impetus to the Indian economy. A healthy MSME sector is vital for providing the much-needed fillip to Indian exports, as it is responsible for 45 per cent of the country’s export, and makes the country a major manufacturing hub. It will also ease the unemployment problem considerably, as the sector currently generates 60 per cent of all employment.
Among the areas posing challenge to the growth of MSME is shortage of capital inflow. This issue should be tackled earnestly. Many units in this sector are not eligible to get loans from nationalised and commercial banks as they belong to the unorganized sector. So, in absence of institutional facilities for loans, such units are left with no other options but to take loans from private parties on higher interest rate, which subsequently reduces their profit margin considerably. On its part, the government has taken a couple of steps including the ‘Udyam’ scheme, which has eased the loan facilities considerably; few more measures like easy availability of permanent account number (PAN) and GST registration, two important prerequisite for getting formal loans, are still awaiting the government’s nod. A positive and prompt move from the government will ensure increased and uninterrupted capital flow to the MSME sector.
To expand the market for the MSME abroad, new technologies should be introduced. Many such units in the country still use primitive technologies, which is why it is difficult to bring down the production cost. But to acquire capital intensive technologies, government’s intervention in the form of providing a long-term low interest loans, is a must. The government also can procure orders for MSME with the objective of lowering the trade deficit. This is pertinent, as it is clear that small businesses that use modern technology outperform those that do not, be it employment opportunities or revenue generation.