Introduction
Over a dozen Members of Parliament cutting across party lines have come forward and formed a group named ‘Friends of MSMEs in Parliament’. A senior Lok Sabha Member Meerut Rajendra Agrawal has been chosen Chairman of the group. The group intends to study and focus on resolving some of the binding constraints that impede and shackle MSME sector in India. The group plans to hold consultations with MSMEs before each session of the Parliament to identify the major issues and raise their concerns at various Parliamentary fora and the Government. Federation of Indian Micro and Small & Medium Enterprises (FISME)- the national MSME body, is to function as Secretariat of Friends of MSMEs. The key objectives of the Forum are Ensuring that Legislation incorporates MSME perspective, Leveraging Parliamentary institutions for the benefit of MSMEs, Facilitating dialogue among Govt., institutions and MSMEs.
Brief Background
One of the biggest challenges for Indian economy is to provide gainful employment for 10~12 million people every year. Only 10-15 % of the persons can be absorbed in Government and Corporates put together. The rest of them have to find avenues for self-employment or find work with a self-employed. The latter forms the universe of Micro, Small and Medium Enterprises (MSMEs).
Sector Overview
Structural composition of India’s GDP indicates an imbalance between sectoral contribution to GDP and employment generated. The agriculture sector which contributes 15% to the GDP accounts for 44% of the workforce. A study of employment trends in the macro sectors of economy since 2010 also reveals non-farm jobs have surpassed farm based jobs. The 60 million strong MSME sector, contributing to over one third to GDP, over 40% to industrial production and exports, provides direct employment to 120 million people.
| Activity Category | Rural | Urban | Total | Share (%) |
|---|---|---|---|---|
| Manufacturing | 114.14 | 82.50 | 196.65 | 31 |
| Electricity* | 0.03 | 0.01 | 0.03 | 0 |
| Trade | 108.71 | 121.64 | 230.35 | 36 |
| Other Services | 102.00 | 104.85 | 206.85 | 33 |
| All | 324.88 | 309.00 | 633.88 | 100 |
But the sector is predominantly informalbarely 10% MSMEs are registered with respective authorities. The informality is largely due to compulsions born out of regulatory and policy rigidities but manifests itself for majority entities into sub-optimal scale, challenging working conditions, stunted growth and vulnerability to external shocks.
Potential
Though not to its full potential, the sector did grow post liberalization at a moderate pace. However, a new set of challenges confront MSMEs today. The troika of COVID pandemic, Russia-Ukraine War and Chinese de-link with Western markets has disrupted and transformed global supply chains.
It has been further exacerbated by rise of digital technologies and a realignment of global currency markets including ‘de-Dollarization. The pace of change is becoming unfathomable for most of the MSMEs.
Distribution of Enterprise
The flux of change is set for destruction of employment while we need to create more employment. Sector needs a different kind of support in this fast changing business environment and calls for new partnership with public representatives, the creator employment the MSMEs and Governments.