• In Conversation

E: What policy decisions can be taken to spur further growth in the MSME sector?
DP: To generate employment opportunities by setting up micro enterprises, the government would emphasize on expanding the Prime Minister’s Employment Generation Programme across the country—with a special focus on rural areas. To enhance the competitiveness of the sector, the government would also take measures to operationalize all 10 components of the National Manufacturing Competitiveness Programme (NMCP) in the current year. Another high priority area would be skill development. In order to promote the establishment of new enterprises and create new entrepreneurs, the government would significantly upscale skill development programs by strengthening the existing infrastructure.

E: Are the Entrepreneurship Development Institutes (EDIs) and Micro, Small and Medium Enterprises Development Institutes (MSMEDIs) succeeding in developing first generation entrepreneurs?
DP: Three national-level EDIs—the National Institute for Entrepreneurship and Small Busines (NIESBUD), Noida, the National Institute of Micro, Small & Medium Enterprises (NiMSME), Hyderabad, and the Indian Institute of Entrepreneurship (IIE), Guwahati—along with some MSMEDIs organize various training programs to promote entrepreneurship. According to me, these EDIs and MSMEDIs are, to a large extent, succeeding in achieving their goals: they are providing training to people with no prior entrepreneurial skills, turning them into first generation entrepreneurs.

E: EDP/SDP/EDSP trained entrepreneurs may successfully set up enterprises, but many are not as successful at running them. Why is that?
DP: New entrepreneurs tend to face difficulties in availing the benefits provided to them from government/financial institutions, and also in completing and complying with various formalities and legal requirements. According to me, other problem areas are selecting the appropriate technology and tying up with buyers and sellers. In order to bridge the gap between the aspirations of potential entrepreneurs and ground realities, the ministry has launched the Rajiv Gandhi Udyami Mitra Yojana (RGUMY) to provide mentoring and support to EDP/SDP/EDSP trained, first generation entrepreneurs.

E: How has the RGUMY performed so far?
DP: Since its launch in February 2008, RGUMY has till date has empanelled 245 udyami mitras under the scheme. These udyami mitras are successfully mentoring 3,128 entrepreneurs who are registered under them.

E: The implementation of many of the schemes depend on the state governments. Are you satisfied with their achievements in this regard?
DP: Several of the schemes implemented by the Ministry of MSME depend on the initiatives of the state governments. While some states have been taking proactive measures in availing the benefits under these schemes, more initiatives need to be taken by the states. The Ministry of MSME is taking the necessary steps to encourage states that aren’t availing many of the benefits offered to them under the schemes of the ministry to do so.

E: What does the new trade policy have in store for the MSME sector?
DP: The government recently announced the Foreign Trade Policy 2009-14. This policy provides higher support for market and product diversification, flexibility to exporters, simplifications of procedures, etc. In this policy, provisions have also been made for promoting sectors such as gems & jewelry, leather and pharmaceuticals, which have a large MSME presence.

E: What roadblocks do MSMEs face and how does the Ministry plan to overcome them?
DP: It is necessary to recognize that Indian MSMEs would face more challenges in the future on account of the accelerating pace of globalization. Globalization brings in its wake both challenges and opportunities for the Indian MSMEs. Improvement in their competitiveness with global benchmarking is, thus, crucial for harnessing opportunities. For this purpose, it is necessary to provide an environment of policies and support measures that explicitly recognize the areas of potential. Based on such recognition, promote technological upgradation, improve the infrastructure, reduce transaction and compliance costs, build capacity and upgrade skills, both for individual firms and clusters.

E: Which sectors hold the most promise for MSMEs in a country like India?
DP: Some specific sectors where MSMEs are playing an important role are textiles and garments, leather and leather products, auto components, drugs and pharmaceuticals, food processing, IT hardware, petrochemicals and handicrafts.

E: How big is the issue of labor for MSMEs?
DP: Multiplicity of labor laws and their complicated procedures are a source of concern to the MSME sector. MSMEs, particularly micro enterprises, are mostly run by single entrepreneurs with a few workers; hence, they do not have enough employees to handle a lot of paperwork or maintain huge volumes of records and reports, as is required under labor laws. There is, therefore, an urgent need to take measures to simplify the labor laws pertaining to MSME sector, particularly with reference to reducing the number of inspections and registers to be maintained, so as to reduce compliance costs.

E: Will it be viable and beneficial to have a different SME exchange?
DP: To facilitate the raising of equity funds by the MSMEs, the issue of setting up of SME Exchange has been under consideration of the government. The Securities and Exchange Board of India (SEBI) has already issued a framework for recognition and supervision of Stock Exchanges/Platforms of Stock Exchanges for SMEs and has received proposals in this regard. We are pursuing this matter with all concerned to expedite the setting up of the SME Exchange.

E: We have recovered from a very serious economic crisis. How did the sector fare according to you, and did the government’s stimulus package make its mark?
DP: The problem was not limited to India, being a worldwide phenomenon. Developed countries like the U.K. and other European countries witnessed a lot of pain, which isn’t over yet. We expect India’s growth to be about 7 percent this fiscal, and I think much of it has to do with the steps the government took in light of the crisis. Around 8 lakh people in the sector lost their jobs during the crisis, but around 2.5 lakh people have been reemployed. We would like to provide employment to all those who lost their jobs. I think the Prime Minister’s efforts in this direction will bear results.

We have tweaked bank loan rates, ensured speedier disposal of paperwork, and have liaised with the state governments in this regard. Our focus, now, will be on the rural areas, where I see the need for government intervention to stimulate jobs and productivity. A high-powered committee, constituted by the Prime Minister’s office, has been deployed to study the bottlenecks inhibiting the development of micro and small enterprises. It will be drafting recommendations for implementation by various departments to put MSEs on a higher trajectory of growth. The committee has already met and subcommittees have been formed to review the situation. The report will be ready by December 1, 2009.  Within the scheme of things, we plan to train 50 crore people by 2022 and make them skilled workers. We have also proposed earmarking 6 percent of the net bank credit for micro enterprises under priority-sector lending to enhance fund availability. This will translate into additional funding to the tune of Rs. 17,000 crore.

©Entrepreneur November 2009

Tags:
Dinsha Patel, Foreign Trade Policy 2009-14, Ministry of MSME, National Manufacturing Competitiveness Programme, NIESBUD, Prime Minister’s Employment Generation Programme