The MSME sector is one of the biggest contributors to the Indian economy. It acts as a growth accelerator and helps in overcoming the two biggest loopholes for growth i.e. poverty and unemployment. But despite being so effective, the Micro, Small, and Medium Enterprises (MSME) have their problems and challenges that act as obstacles for their growth. In this write-up, we have listed down some common challenges faced by the MSME in India.
How MSME plays Vital Role in Contributing to the GDP?
MSME is regarded as a prominent contributor to the GDP of our country. It has imparted resilience to the economic infrastructure by boosting the employment rate and volume of production to meet domestic as well as international demands. The MSME sector is dominated by micro-enterprises. At present, our country has around 6.33 crore MSMEs out of which 6.30 crore are working as micro-enterprises.
In FY 2020, the number of registered MSMEs has increased by approx. 18.5% as compared to the preceding year. But the growth rate declined from 40% in the preceding FY that has increased from 15 lakhs MSMEs registered in 2018. Overall the number of MSMEs in the country in the past 5 years stood at 90 lakh.
Prevalent Challenges faced by the MSME at Present
Despite good prospects & a high growth rate, the MSMEs have been restrained by too many loopholes that hinder its true potential. The following section will provide explanatory insight on challenges faces by the MSME.
Inadequate Access to Latest Technology
This is one of the leading issues encountered by MSMEs to date. Truth be told, MSMEs don’t have proper access to the latest information which makes them unfamiliar with the latest technological developments. Oftentimes, they lack knowledge, skills, tech-oriented education to execute a competent MSME. This obstacle is quite prevalent in the rural part of the country. It is believed that the technology could be a driving force for those
MSMEs who has been lacking on account of quality and production volume. Technological up-gradation can provide resilience and a much-needed edge which is required to counter the global competition. It is one of the primary challenges faced by the MSME at present.
Measures Taken: Launching an Initiative “Zero Defect and Zero Effect
Government has inculcated an amicable solution for this particular problem by launching an initiative “Zero Defect and Zero Effect” (ZED) in association with ministry of MSME and Quality Council of India. The primary objective of this initiative is to develop an ecosystem of Zero Defect Manufacturing among the existing MSMEs.
Under this initiative, ZED certification will be granted to the eligible MSMEs after in-depth assessment of their manufacturing facilities. Fortunately, the scheme is accessible to all the existing MSMEs and they can also avail fiscal assistance from the government for the same.
Unavailability of Credit
Another hindrance that limits the potential of this sector is their inability to obtain timely credit at a nominal rate of interest. According to some experts, MSMEs operating pan India lacks the convenience of obtaining easy credit from financial institutions. Now, this mitigates their urge for expansion and long-term growth. Also, the COVID 19 pandemic have had impacted MSMEs to a great deal. The outbreak has left them disturbed by eroding their existing resources. As a result, the majority of companies are now out of manpower adequate resources. Liquidity crunch is one the pressing challenges faced by the MSME at present.
Measures Taken: Schemes under Aatmanirbhar Bharart Abhiyan
Fortunately, Government has addressed this problem aggressively by launching plenty of schemes under Aatmanirbhar Bharart Abhiyan. With majority of schemes launched as the counter mechanism against the loss incurred by the pandemic, MSMEs found them extremely helpful on account of handling the ongoing fiscal crisis.
Procurement of Raw Materials
It’s impossible to stimulate the growth of the business in the absence of ample economic resources. It has been one of the primary issues of this sector. Due to financial constraints, most of the small industries are bound to procure the low-quality raw material from the local region.
Measures Taken: Launched Raw Material Assistance Scheme
Indian Government in association with National Small Industries Corporation (NSIC) has launched “Raw Material Assistance Scheme” to curb the aforesaid problem. Under this scheme, distressed MSMEs can avail financial credit from the designated sources for the purchase of raw material (both import and indigenous).
Scarcity of Adequate Infrastructure Resources
The scarcity of infrastructure facilities can erode the productivity and profitability of the manufacturing SMEs. The availability of skilled manpower, electricity, and other basic resources plays a vital role in ensuring the competitiveness of MSMEs. The MSMEs are either operating in urban areas or rural region or industrial estates suffers from this specific problem.
Measures Taken: Establishing Common Facility Centers (CFCs)
The Ministry of MSME has opted for collective approach for improving productivity as well as capacity building of MSEs (Micro and Small Enterprises). The Scheme aims at establishing Common Facility Centers (CFCs) for testing, raw material depot, training, and effluent treatment, etc. The primary objective of this scheme is to support the growth & sustainability of Medium and Small enterprises by undermining key problems as improvement of technology, market access, skill & quality, etc.
Absence of Skilled Manpower
Even though our country is blessed with a vast pool of human resources, the MSMEs still encounter the scarcity of quality manpower capable of performing the skilled-oriented task. At present, MSMEs are in desperate need of hiring skilled manpower to boost the quality and volume of manufacturing goods.
Measures taken: Skill Mapping
Indian Government in collaboration with ministry of MSMEs has introduced an initiative namely “Skill Mapping” for the identification of skilled individuals. To serve this purpose, the ministry has formulated district-wise skill development requirement (also known as Skill map) for 652 districts.
Poor Access to the Potential Market
In our country, MSMEs are finding it difficult to get access to potential markets due to inadequate capital and unavailability of the marketing tools. Therefore; it creates obstacles for MSMEs to sell out their offering to government-based agencies. Also, this could narrow their reach in the market and let their counterpart to take advantage.
Measures taken: Marketing Promotion Schemes
Marketing Promotion Schemes has been already launched by the ministry of the MSMEs to undermine this severe issue. This scheme aims to educates and promote the existing MSMEs by organizing awareness programs/ Trade fair about Government e-Marketplace portal, and online services.
Prospects in India to Stimulate the Growth of MSME’s
The government needs to take some required measures to stimulate the growth of MSMEs. The Indian government is planning to create domestic manufacturing capabilities by leveraging the proposed public projects and procurements. The projects like Sagarmala, Bharatmala are already in effect and aim to bridge the urban and rural divide, thereby ensuring the growth of the industrial sector.
Right now, the economy desperately needs a solid bonding between government industry-academia to track down the evolving requirement in manufacturing to boost the industrial supply chains in the country.
To overcome the aforesaid obstacles, adoption of the latest technology is one of the feasible solutions in the upcoming time. The Government of India has taken various steps to ensure the technological development of Indian MSMEs on account of the competition level that exists in the international market. Apart from this extremely important aspect, the Government needs to address other key areas of challenges to accelerate growth.
A fore said challenges faced by the MSME are practically drastic and need prompt resolution. The government is trying to pave down the roadmap for this sector that overcomes all the obstacles and stimulates the growth for this sector. Recently, the Indian government has introduced a stimulus package of 3 lakh crore under which MSMEs can obtain collateral-free loans from the designated banks. However, the said schemes suffer from pressing challenges that seek prompt resolution from the government.