Currently, the Indian economy is heavily dependent on micro, small, and medium-sized enterprises (MSMEs), which act as engines for both its expansion and progress. These businesses or enterprises are powering the engine of inclusive economic progress, innovation and job creation. Understanding the importance of MSMEs in the Indian economy becomes very important in this scenario.
Because of its size and diversity, India relies primarily on MSMEs to stimulate economic activity in a variety of industries. These businesses play an important role in the country's economic landscape due to their significant contribution to the country's GDP, employment, and export earnings. It goes without saying that MSMEs play an important role in the internal development of the economic sector in India.
Moreover, I speak to India's foremost industrialist and renowned businessman Mr. Vishal Prakash Shah, CEO and founder of Synersoft Technologies, to get a positive outlook on the sector. Vishal Prakash has created an indomitable success mark in the corporate world.
Recently had a face-to-face detailed discussion with him about the respective sectors in Kolkata. In that interview-based discussion, apart from India's economic position, he highlighted the advantages and benefits of using the Indian rupee to conduct cross-border transactions in India-Bangladesh trade, and how MSMEs can exploit the potential of Bangladesh-India trade relations to increase their export and import opportunities. He pointed out in the interview. The full interview text of industrialist Vishal Prakash Shah is given below :
My first question to Mr. Vishal Prakash was, What is the significance of MSMEs in terms of their contribution to the Gross Domestic Product (GDP) of India?
MSMEs are vital for India's GDP, as they contribute significantly to industrial output, forex earnings, and employment. They promote inclusive growth, foster entrepreneurship, and support larger industries through supply chains. Their agility, innovation, and export activities also enhance economic competitiveness. Moreover, MSMEs strengthen local economies by sourcing inputs and labor from nearby communities, fostering regional development. Overall, MSMEs play a crucial role in India's economic growth and sustainability.
Vishal Prakash Shah, CEO and founder of Synersoft Technologies
Second question: How do MSMEs impact employment generation in the country?
MSMEs play a pivotal role in India's economy by driving extensive employment generation. As labor-intensive enterprises, they create a plethora of job opportunities, particularly in rural and semi-urban regions. By fostering inclusive growth and reducing unemployment, MSMEs contribute significantly to improving livelihoods and strengthening the socio-economic fabric of the country. Their emphasis on local sourcing further bolsters employment prospects, making them indispensable for sustainable and inclusive economic growth.
Third: What role do MSMEs play in fostering entrepreneurship and supporting the growth of startups in India?
They serve as a breeding ground for aspiring entrepreneurs, encouraging innovation and self-reliance. Many successful startups emerge from the MSME sector, benefiting from its flexible and adaptable environment. Additionally, MSMEs often act as suppliers and mentors for startups, providing them with essential resources, guidance, and access to markets, thus nurturing the startup ecosystem and developing India's entrepreneurial landscape.
The fourth Question was: Can you highlight some key sectors where MSMEs have a strong presence and how they contribute to the growth of those industries?
Certainly! Traditionally MSMEs have immensely contributed to the following industries:
Auto-ancillaries: MSMEs in the auto-ancillary sector play a vital role in supporting the automotive industry. They provide essential components and parts to larger automobile manufacturers, fostering entrepreneurship through innovation in manufacturing and technology. Many startups emerge as suppliers or collaborators in this sector, benefiting from the vast opportunities within the automotive ecosystem.
Biotech: MSMEs in the biotech sector contribute significantly to India's biotechnology industry. They engage in research, development, and manufacturing of biotechnological products. They develop expertise, facilities, and resources that are crucial for their growth and commercialization of biotech innovations.
Pharma: The pharmaceutical industry heavily relies on MSMEs for the supply of active pharmaceutical ingredients (APIs) and other raw materials. MSMEs foster entrepreneurship by providing a platform for aspiring pharmaceutical startups to establish themselves as suppliers or niche players, thereby contributing to the growth of the Indian pharma sector.
Engineering: MSMEs in the engineering sector serve as essential contributors to India's manufacturing prowess. They demonstrated their ability to innovate in product design, prototyping, and engineering services.
Aerospace: MSMEs in the aerospace sector are vital in supporting India's ambitions in the aerospace and defense industries, especially after the decision of privatizing the Indian defense industry. They contribute to manufacturing, maintenance, and supply chain activities strengthening India's position in the global aerospace domain.
Chip Manufacturing: With India's increasing focus on semiconductor manufacturing, MSMEs in the chip sector can play a significant role. They provide specialized services, components, and expertise required for chip design and fabrication. Prototyping, fabrication, and testing can be very well done by MSMEs.
IoT (Internet of Things): MSMEs in the IoT domain contribute to the development of smart devices, connectivity solutions, and IoT platforms. By doing so, MSMEs can drive smart manufacturing and industry 4.0 initiatives.
Automation: MSMEs in the automation sector play a critical role in India's industrial growth. They provide automation solutions, robotics, and machinery to various industries.
Chemicals: MSMEs in the chemical sector form the backbone of India's chemical industry, encompassing various segments like specialty chemicals, agrochemicals, and pharmaceutical intermediates. They play a crucial role in providing raw materials, intermediate products, and services to larger chemical manufacturers.
What is the role of MSMEs in promoting inclusive growth and ensuring that the benefits of economic development reach all sections of society?
MSMEs play a crucial role in promoting inclusive growth by generating employment and fostering entrepreneurship in diverse sectors. Their presence in regional economies ensures equitable distribution of benefits, helping to uplift all sections of society and ensuring that the advantages of economic development reach broader segments of the population.
What impact did the COVID-19 pandemic have on MSMEs in India, and how have they been crucial in the recovery and revival of the economy post-pandemic?
The COVID-19 pandemic had a severe impact on MSMEs in India, disrupting their operations, supply chains, and cash flow. Many faced financial challenges, closures, and job losses, leading to economic distress. However, the government introduced various schemes to support MSMEs during the crisis.
Schemes like the Emergency Credit Line Guarantee Scheme (ECLGS) provided financial assistance and credit support to ensure liquidity for MSMEs. Additionally, the Atmanirbhar Bharat Package offered collateral-free loans and extended deadlines for compliance, easing the burden on these enterprises.
Post-pandemic, MSMEs played a crucial role in the recovery and revival of the economy. Their resilience, adaptability, and local presence helped restore economic activities and employment generation. Government support enabled MSMEs to invest in technology and adapt to changing market demands, making them key contributors to India's economic rebound during the post-pandemic phase.
Considering the changing economic landscape, how do you envision the future role and importance of MSMEs in India's economic growth?
In the changing economic landscape, MSMEs' role in India's economic growth will be pivotal. They will drive innovation and technology adoption, creating employment opportunities and supporting skill development. With government support and policies, MSMEs will play a crucial role in diversifying supply chains and increasing India's export potential. Their agility will enable them to cater to niche markets and emerging trends. Moreover, MSMEs will embrace sustainability practices, contributing to a greener and more inclusive economy. As key contributors to India's economic growth, MSMEs' continued development and support will be essential for the country's overall prosperity.
How do MSMEs contribute to technological advancement and innovation in India across different industries?
MSMEs' contribution to technological advancement and innovation has just started. It has a long way to go. It needs to change its mindset and embrace a willingness to invest part of its profits in Research and Development.
How do MSMEs adapt to the changing technological landscape to stay competitive in their respective markets?
They need to continuously reskill and upskill their human resources. They need to evaluate investment in technology and modernization with a long-term perspective. They need to adopt information technology and digitalization to their fullest and consider it as in investment instead of an expense. In today's times, technological advancements happen rapidly and MSMEs need to catch up with them to survive and thrive.
How do government initiatives and policies support MSMEs in adopting and implementing new technologies?
The government is doing its part. There are many subsidies for MSMEs on the adoption of technology. Atal Innovation Centers are also playing a pivotal role to help MSMEs optimize their operations and look forward to new technologies. The government has taken a multi-faceted approach to help MSMEs which can be summarized by its initiatives of Policy Reforms, Digital India, Technology Clusters, and Technology Incubation Centers.
)What challenges do MSMEs face in adopting new technologies, and how can these challenges be addressed to further enhance their role in technological improvement?
MSMEs face and will face challenges in terms of finance for high CAPEX, skilling the workforce, cybersecurity, compliance, and resistance to change. These challenges can be dealt with by innovative fintech solutions, the sophistication of ITIs, development of simple IT products for data protection and information security.
How can larger corporations benefit from collaborating with innovative MSMEs in terms of technology adoption and R&D?
Currently, MSMEs drive innovations and technology adoption to serve their larger customers. However, larger customers tend to outsource certain operations, supplies, and services from MSMEs to save costs. In current times, larger enterprises inspire MSMEs to innovate and embrace technology. In the current scenario, it is not evident that larger enterprises derive significant benefits by collaborating with MSMEs in terms of technology adoption and R&D. It is the other way around.
How do MSMEs contribute to promoting sustainable and environmentally friendly technologies in India?
It is always on the wishlist. MSMEs face fierce competition and they operate on thin margins. In today's scenario, while MSMEs are recovering from post-covid effects, promoting sustainable and environmentally friendly technologies are difficult to contemplate by their perspective. However, such promotion should be driven through vendor empanelment programs of larger enterprises to whom MSMEs supply.
If it is part of compliance, MSMEs will be naturally inclined to promote sustainable and environmentally friendly technologies which in turn would give a level playing field for all MSMEs.
The use of the Indian rupee in India-Bangladesh trade provides a convenient and cost-effective mechanism for conducting cross-border transactions. That will reduce the exchange cost and the cost of doing business." - What do you think of this statement?
The proportion of India-Bangladesh trade in relation to the overall current account deficit of India is relatively insignificant. Consequently, this trading arrangement may not offer a substantial advantage from the Indian standpoint. The potential effects of adopting the Indian rupee as the trading currency might not yield a significant discernible impact. However, it is important to acknowledge that from the standpoint of streamlining business operations, there could be some simplification of statutory procedures and regulatory reporting. This could be a tangible benefit arising from this initiative.
How can MSMEs leverage the potential of the Bangladesh-India trade relationship to enhance their export and import opportunities?
There appears to be limited scope for maximizing the potential of Micro, Small, and Medium Enterprises (MSMEs) on both sides. Both the Indian and Bangladeshi economies heavily rely on MSMEs as a crucial foundation. It is noteworthy that these MSMEs from India and Bangladesh often find themselves in global competition with each other. Additionally, there seems to be a lack of significant exchange in terms of technology or labor between the two countries MSME sectors.
Unfortunately, the existing circumstances do not present substantial opportunities for leveraging exports and imports, apart from certain commodities. The potential for differential value creation through such exchange remains constrained.
